Carriers get in line to hike rates

10/2/2012

If the brave don’t lead, the meek won’t follow’ is how Andy Connell, business unit manager of shipping and logistics of Dole Foods South Africa, described Maersk Line’s decision to substantially ramp-up reefer freight rates.

And the mood among shippers, logistics companies and ocean carriers at the Cool Logistics conference, held in Antwerp last week, was that this action by Maersk would be followed by other carriers as lines grappled with poor returns in the sector.

Even before the conference, CMA CGM had announced large rises in its reefer rates on the transpacific trade, while the move by Maersk has also seen sister company Safmarine take action.

Moreover, Rick Kimura, the Hong Kong-based senior VP of global reefer management at Mitsui OSK Lines – also speaking at the conference – said: “We are also thinking of applying a significant rate increase, but it probably won’t be across the board with the north-south and east-west trades being treated differently.”

He admitted that the Japanese carrier needed to spend US$100-$120 million a year on its reefer business (for equipment) and that current returns from the sector did not support this.

Connell stressed: “I don’t think Maersk will be the last. In fact, I think we will now hear all of the lines saying that they will apply rate increases. If the brave don’t lead the meek won’t follow.”

While the logistics guru was not against rate increases in principle, he felt that service levels also needed to be improved and ocean carriers needed to “step up to the plate”.

He added: “If there is any rate restoration I want it to come with a massive commitment from the service providers to go make the shipping process work properly. Get back some of those wonderful people you let go with 20 years’ experience who actually know how to ship.”

Logistics giant Kuehne + Nagel was in favour of the Maersk directive, with its global director of reefers/perishables, Frank Ganse, suggesting that in several trades, the present situation could not continue.

In an executive panel discussion, Ganse said: “I am struggling to understand why the reefer business has become so unhealthy. How has it got to the stage where the rate from Rotterdam to Brazil for a 40ft high-cube is only $800 and with 25-30 days of free demurrage at the discharge port?

“Or take Asia-Europe where out of Qingdao, Asia’s largest reefer port, westbound rates have slipped to $1,400 per feu all-in, including five free days’ demurrage. That rate is cheaper than for dry boxes. It just doesn’t make sense.”

Reaction elsewhere was that active discussions would now ensue between beneficial cargo owners, logistics groups and Maersk in the run-up to the rate implementation date (1 January 2013) and that while the price of moving perishables would rise it probably would not be by $1,500/feu.