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Tue, Nov 02, 2004 - Page 12 News List

Asian shipping firms decide to raise freight rates

TRANSPORT Shipping companies say they will hike prices to address rising demand and costs, marking the third rate increase in as many years

BLOOMBERG

Neptune Orient Lines Ltd, Mitsui OSK Lines Ltd and 12 other Asian shipping companies plan to boost freight rates to the US for a third straight year as demand for Chinese goods increases and fuel costs rise.

The 14-line Transpacific Stabilization Agreement will raise the cost of carrying a 12m container to the US West Coast from Asia by US$285, or as much as 7.6 percent, starting next May, the group said in an e-mail. Rates to the US East Coast and Persian Gulf via the Panama and Suez canals will rise by US$430.

"The rise in shipping rates won't have a significant impact on Asian exporters," said Robert Subbaraman, senior economist at Lehman Brothers Japan Inc in Tokyo. "Asian exporters might pass on to the US the rise in costs and how will that hurt the US demand? I don't think that'll reduce demand for Asian products. Asian exports are still very competitive."

About 80 percent of global trade is carried by sea.

Freight rate contracts for shipments to the US are signed in May every year. The shipping lines raised rates last year and this year.

"Carriers report that aggregate operating costs in the Pacific continue to rise and will increase next year by at least 11 percent to 12 percent," the group said in an Oct. 30 statement. "Port and inland congestion in the US and Asia and delays moving through the Panama Canal have only made the situation worse."

The cost of shipping a 40-foot container to the US West Coast from Asia may be US$4,011 next year, based on Bloomberg's calculation of rate increases and data from Containerisation International, which compiles freight rate data.

Shipping companies expect cargo shipments to the US from Asia to expand between 10 percent and 12 percent next year, helped by increasing demand for Chinese-made goods in the world's biggest economy. The shipping lines predicted the same growth rate to the US from Asia this year.

"Nominal increases in ship capacity as new and larger ships are delivered in 2005-06 will be sharply diminished by operating limitations due to congestion," the group said in the statement.

"That effective capacity is not expected to keep pace with steadily growing cargo demand."

Asian exports to the US rose 17 percent in the first eight months of this year to US$344.9 billion, according to the US International Trade Commission. Imports by Asia from the US rose 14 percent to US$149 billion.

Chinese exports contributed to the growth, increasing 29 percent to US$121.5 billion in the same period. Increasing cargo from Asia, especially China, has strained US ports, rail networks, highways and the Panama Canal, the group said.

"Shippers are experiencing average delays of three to seven days getting cargo delivered as vessels sit idle at anchor and as containers are delayed in transit or at harbor and inland terminals," the group said.

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