Hanjin get serious in attempt to raise rates
December 1, 2011
South Korea’s Hanjin Shipping has announced a rate restoration drive on its Asia-Europe trades, saying that current rates fail to cover basic operating costs, let alone rising fuel prices.
According to a report in IFW’s sister publication, Lloyd’s List, Hanjin plans to increase rates on its Asia to Northern Europe and West Africa route by $200 per teu and $400 per feu for both dry and reefer containers.
For routes from Asia to the Mediterranean, Hanjin will add $175 per teu and $350 per feu. The rates, which take effect on 23 December, do not cover voyages from Japan or Australia.
Hanjin takes its lead from cash-strapped French line CMA CGM, which will introduce surcharges of up to $600 per teu across a range of services, starting on 12 December. Unlike Hanjin, CMA CGM has not explained its rates rise.
Hanjin said it was “inevitable for us to restore rates in order to maintain service quality and schedule reliability that meet our customer needs”.
The line’s move reflects the dire conditions faced by carriers still active in the overtonnaged Asia-Europe trade as the global boxship fleet continues to grow.
According to Lloyd’s List Intelligence data, capacity on the route stands at around 3.7 million teu, compared with an average of 3.1 million teu in the fourth quarter of last year.
With newbuildings continuing to enter service and lines reluctant to lose market share, there are too many ships to carry cargo being consumed in Europe.
As a result, the Asia-Europe spot freight rate has fallen steadily this year, with the benchmark price from the Shanghai Containerised Freight Index (SCFI) down 60% from the start of the year to last week.
This is the lowest level reported since mid-2009, when the boxship market suffered the worst downturn in its history due to the financial crash in 2008 and subsequent decline in trade growth.
Rates for Asia-Mediterranean boxes have declined 40% the SCFI reported.
The falling prices have already led to a number of casualties on the Asia-Europe trade lane, with CKYH alliance members becoming the latest players to suspend a Far East-North Europe loop.
Alphaliner said this would remove 3.2% of capacity from the trade lane. However, the seven 8,200-9,000teu vessels that operate on the loop are likely to cascade down to its Far East-Mediterranean service, replacing 5,600-6,500teu ships.
Evergreen and CSCL have also pulled services and MSC has temporarily reduced capacity on its Silk service, replacing some 12,500-14,000teu ships with smaller 4,800-9,200teu vessels.
Container capacity on the Asia-Europe route at 3.7 million teu has fallen from a peak of 4.6 million teu in the second quarter of 2011, according to LLI data.
Hanjin’s announcement makes it the first Asian line to attempt rate restoration on routes to Europe, the worst-afflicted trade lane, amid capacity wars between industry giants Maersk Line, MSC and CMA CGM.
Courtesy of IFW
