Deep rate cuts afoot as carriers plead for cargo in downturn

SHIPPERS entering transpacific rate negotiations this year are reportedly smelling the weakness of carriers whose ships are laid up and trade demand is down. For their part, carriers appear to be willing to cut agreed rates by a third to get the cargo.

This is what Neptune Orient Line CEO Ron Widdows has observed in the market. He sees rates being cut to the bone and all lines following the trend despite much recent talk of rate restoration.

Mr Widdows said several major carriers have been slashing rates on the Asia-Europe trade in order to gain market share, reported Newark's Journal of Commerce.

He was attending the Journal's 9th Annual Trans-Pacific Maritime Conference in Los Angeles, where he said shippers are asking for low rates regardless of service quality. If carriers go along with this, he said, the transpacific could become as bad as the Asia-Europe trade where spot rates went to zero.

With US west coast ports suffering a massive container slump, importers say that carriers are conceding big rate concessions despite having firm contracts in place.

Most cargo shipped eastbound across the Pacific is covered by 12-month agreements that run from May 1, under provisions of the US Ocean Shipping Reform Act. But carriers are cutting agreed rates by a third or more, according to some customers.

A mid-sized US importer said three container lines with which it has annual service contracts reduced rates 33 per cent, and are willing to make further cuts. That follows low-ball bids from rival lines wanting to lure away from competitors.
 

Source: Schednet