The Hindu Business Line : Market not hit by conference lines plan to hike freight rate

THE proposal of the India/Pakistan/Bangladesh/Ceylon/UK/Continent Conference to effect a hike in freight rates — $150/TEU and $300/FEU - from January 1, by way of Rate Restoration Initiative (RRI) has made little impact in the local market.

If anything, the market has reacted negatively, with the freight rates having dropped by $150/TEU and $250/FEU and benefiting the exporters, according to shipping sources here. There is now a virtual freight war among the conference and non-conference lines, with the latter having succeeded in cornering a large chunk of the trade, the sources added.

Till December, the minimum rates on the route were $1,500/TEU and $2,600/FEU. The RRI should have pushed up the floor rates to $1,650/TEU and $2,900/FEU. But that did not happen. Instead, the rates currently ruling in the market are $1,350/TEU and $2,350/FEU that, too, inclusive of the currency adjustment factor, the bunker adjustment factor and terminal handling charges.

Interestingly, the drop in rates is being witnessed when the market is experiencing a general shortage of equipment, particularly of 20-ft boxes.

The conference members have been badly hit as a result. The member-lines are supposed to go by the conference diktat and enforce the proposed RRI. But with such enforcement not being possible now, the lines are desperately trying to hold on to the December 2004 level rates, unsuccessfully though. They now hope to survive only on the captive cargo and also on shippers with whom they have long-standing relationships, but only at the expense of reduced throughput. A major conference member complains that its throughput has dropped from 100 TEUs a month to around 40 TEUs.This being the lean season, traditionally (with tea exports over and that of jute and engineering on a low), a section of the conference members feels that the proposal for RRI in January was untimely.

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