Monday, September 28, 2009

Container Giants Clamour To Be Heard On Rates

Return of Conference Line Agreements Sought by Shipping Groups
Shipping News Feature

CHINA – EUROPE - The much respected figure of Mr C C Tung, head of Orient Overseas International (OOIL), owners of OOCL has added his weight to the debate surrounding the parlous state of world wide container shipping.

Harking back to a theme he has propounded since he took over at OOIL, Mr Tung issued a statement warning of the dangers to the industry if rates do not markedly improve. He believes it is important to relax the restrictive covenants imposed on lines by the EU. Mr Tung made a major speech in 2002 warning of the dangers of a potential rate war in the container shipping industry and has now called for a rationalisation of rates. Under his leadership the OOIL group has been consistently in profit up to the latest downturn.

Other major figures concur with this opinion. We recently reported comments by Msieu. Jacques Saade, boss of CMA CGM, who put the blame for the current state of the industry squarely on the deregulation of the industry and the scrapping of the conference system.

As the recession bit and cargo levels dropped shipping lines have resorted to ever more desperate rate cuts to survive. Under the former system quality not price was the determining factor in the health of the lines. Pressure is mounting to reintroduce mutual tariff agreements, albeit temporarily, to enable lines to cover their fixed overheads. Free market enthusiasts will argue that these problems stem from a natural realignment of the status quo and interference in the system will merely push redundancies and bankruptcies into another industrial sector.