Shipping Lines Estimate Costs to Rise

Thursday, November 10, 2005
Bloomberg reported that Neptune Orient Lines Ltd. and 11 of the largest shipping companies plying the Pacific Ocean said costs of moving cargo to the U.S. in 2006 will rise 7 percent on higher fuel prices, which may spur them to raise freight rates. The cost of transporting containers by trucks and railways will increase as much as 25 percent, the 12-line Transpacific Stabilization Agreement, whose members ship about 70 percent of trans-Pacific trade, said in a statement today. Neptune Orient, Evergreen Marine Corp. and other Asian shipping companies are struggling with rising costs from higher fuel prices and port fees, amid increased demand for freight to the U.S. and Europe. Concern of a surplus of vessels may limit shipping lines in raising freight rates in 2006 for the fifth year. About 80 percent of the world's trade is carried by sea. Demand for cargo across the U.S. and Europe will grow between 10 percent and 12 percent this year to about 5.8 million 40-foot containers, the group has said. Fuel Bill The price of 380 Centistoke Bunker Fuel, used by ships, more than doubled this year to a record $337 per ton on Oct. 13, according to Bloomberg data. The price rose 0.3 percent to $305 a ton yesterday. Fuel costs make up as much as 15 percent of a shipping line's total expenses, analysts said. To recover part of higher fuel bills, shipping lines started imposing fuel surcharges as early as August on containers they move between the U.S. and Asia. Neptune Orient and other shipping lines levy $158 per container moved by trucks and railway in the U.S. The 12-member shipping lines estimated costs this year to rise 10 percent because of port congestion. Record Traffic The group said it expects cargo demand from Asia to the U.S. will grow next year, with traffic at ``record levels.'' Still, top executive officials at Hanjin Shipping Co. and Orient Overseas (International) Ltd. said last week container freight rates may fall in 2006 for the first time in five years as builders deliver a record number of ships and congestion eases at major harbors. The global container fleet will expand 13 percent in 2006, outpacing growth in global trade, R.S. Platou, an Oslo-based shipbroker said in June. Other members of the 12-member group include CMA CGM SA, Cosco Container Lines Ltd., Evergreen Marine, Hanjin Shipping, Hyundai Merchant Marine Co., Kawasaki Kisen Kaisha Ltd., Nippon Yusen K.K., Orient Overseas Container Lines and Yangming Marine Transport Corp. Shares of Evergreen Marine, operator of Asia's largest container shipping line gained as much as 3.2 percent and were trading 2.4 percent higher at NT$20.95 as of 10:40 a.m. in Taipei. Neptune Orient, operator of Asia's second-largest container shipping company, dropped as much as 3.3 percent to S$2.98 in Singapore. Hanjin Shipping, South Korea's largest shipping line, rose as much as 1.4 percent to 21,750 won in Seoul and shares of Nippon Yusen, Japan's largest, fell as much as 0.7 percent to 719 yen in Tokyo.

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