Far Eastern Freight Conference members raising freight rates

by Canadian Shipper

The member lines of the Far Eastern Freight Conference (FEFC) will be raising freight rates on both legs of the Asia-Europe trades next year, the South China Morning Post reported today.

Under the FEFC’s new Business Plan 2002, the lines will ask for westbound rate increases of US$300 per teu (20 ft equivalent unit) and US$600 per feu (40 ft equivalent unit) from April.

There also are plans for an identical increase in rates from October 1.

Eastbound, the lines will adopt a similar two-tier initiative by asking for US$250 per container regardless of size from March 1, and a further US$250 per container from October 1.

The FEFC said: “The lead time required in building large container vessels of over 5,000 teu meant lines forecast growth in demand of about 7 to 8 per cent during this year and next.

“However, the introduction of substantial new capacity this year and next now coincides with economic downturn on a worldwide basis.”

Lines in the FEFC, which move about 65 percent of the volume on Asia-Europe lanes, will be given more freedom to individually reduce capacity, instead of a conference initiative which could run foul of European anti-competition laws.

The European Union has approved a 10 percent capacity reduction on the Asia-Europe trades, but the lines now know that will not be enough to stabilise the market.
Instead, they will individually reduce capacity by about 25 per cent.

According to the South China Morning Post, Grand Alliance executives at the weekend said capacity on services would be reduced, but service connections and ports of call would not be affected.

This will be done by withdrawing one string and covering port calls with other services.

The Grand Alliance will soon remove one transpacific string, the South China Express, and cover its calls with other transpacific services.

Two 5,500-teu ships will be laid up.

Such moves will be mirrored on the Asia-Europe trades, although how much capacity will be mothballed is unconfirmed.

The New World Alliance, comprising Hyundai, APL and Mitsui-OSK, may drop its North China Express service, started in May, with coverage coming from the three remaining Asia-Europe links.

The service has already been reduced to fortnightly frequency.

The New World Alliance is considering options for its Asia- Mediterranean service, which is separate from the North Europe links.

This could include setting up a hub port in the Mediterranean as a feeder base on one of the North Europe services and operating a series of services to connect with it.

The moves could reduce capacity by up to 20 percent on the Asia- European trades.
Separately, Maersk Sealand is close to dropping one of its Asia- Europe services, reducing the four-loop network to three.

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