The current gap between demand and supply in the shipping business isn't wide enough to necessitate a rate war, but top industry leaders need to keep a tight rein on their sales staff to prevent market share envy from creating a disaster, the head of Mitsui O.S.K. Lines said in an interview.
"Cargo is very steady, therefore I don't think there's such a serious gap as you hear on the street," said Masaharu Ikuta, president of Japan's second- largest carrier, in his office overlooking downtown Tokyo. "We need to strongly appeal to (chief executives) not to create un- necessary disorder." The 60-year-old Mr. Ikuta leaves little doubt of his intent to control his own company.During his 18 months as head of MOL, he's taken the lead among normally muted Japanese executives in criticizing high local port costs. In the process - perhaps driven by Japan's high-cost problems - he's displayed a more direct style and greater willingness to question the status quo than past MOL executives.
Several major shipping lines have strong-enough leaders to prevent unbridled competition, Mr. Ikuta said. But a few others are less rigorous in their control, a factor that could badly damage the industry in the months ahead.
RATE GAP A KEY ISSUE
One of the biggest problems facing the industry today is the rate gap between conference and non-conference lines.
Conference carriers like MOL set rates collectively, while non-conference lines price their services independently and usually about 15 percent lower.
In recent months, the widening rate gap between the two groups has alarmed conference lines fearful of losing even more market share.
When Asian non-conference lines were small, Mr. Ikuta said, they had a right to ask for discounts because their service was inferior. However, now that many have grown stronger than conference lines, they need to assume more responsibility.
On a table to the left of his desk are several trophies won at golf, a personal passion of Mr. Ikuta's. As he considered the rate gap issue, he drew on a sports metaphor.
"It's like golf," Mr. Ikuta said. "At the beginning they asked for a handicap and we gave it. But then the young people improved and caught up and we said why don't you give back the handicap."
"The young people play much better, but they don't give back the handicap."
APL CAUSES SHOCK WAVES
In September, this widening rate gap - the golf handicap in Mr. Ikuta's example - prompted conference carrier American President Lines to cut its rates by $500 per 40-foot container for major commodities moving from Japan to the United States. Other lines quickly followed, sending shock waves through the industry.
Mr. Ikuta said he recognized some fundamental logic behind the APL move. The Japan trades, with their separate conference structure, have operated under their own rules and have been somewhat insulated from the broader Asia- to-North America market.
"As a result, we had to and still have seen a very peculiar rate phenomenon," he said. "There's an unbelievable rate gap between the conference and the independents - sometimes $1,000."
Mr. Ikuta - who comes out of a Japanese tradition in which consensus is essential - said it became apparent something had to be done as conference carriers lost more market share. Even so, he objects to having one line make the decision unilaterally instead of waiting for a group decision.
"We shouldn't move rates so fast because of one ship line's judgment," he said.
Yet some non-Japanese carriers in the trade said they waited for years for a consensus without much sign of action.
In the end, they said, Japanese carrier ambivalence was a factor. The high official rates on commodities like electronics serve to protect one of the Japanese carrier's most profitable cargoes - knocked-down automobile kits. For years the profit from CKD (cars knocked down) shipments offset losses and eroding market share in other areas, foreign lines said.
Would Japanese carriers really be willing to give up their special practices and merge the Japan conferences with the larger Asia North America Eastbound Rate Agreement?
Mr. Ikuta said his company remains flexible and would be willing to take such a step - provided non-conference carriers join the new industrywide group as well. Otherwise, there's no point in changing the existing structure, he said.
But an executive at another Japanese carrier said even if non-conference lines joined, it would be difficult for Japanese shippers and carriers to give up the control they enjoy in their home market through their own conference.
And an executive at one major electronics company said that it's important to preserve a forum where cultural "understanding" between large Japanese shippers and carriers can be nurtured.