FOREIGN INROADS INTO SHIP ROUTES IRK JAPANESE US CARRIERS OFFER DISCOUNTS

FOREIGN INROADS INTO SHIP ROUTES IRK JAPANESE US CARRIERS OFFER DISCOUNTS

Friction over rate discounts is building between ocean carriers that jointly set prices for moving goods from Japan to the United States.

Non-Japanese conference carriers are becoming more aggressive in the Japanese eastbound market, which is starting to annoy Japanese carriers that have traditionally dominated the trade."It's heating up," said one Western carrier official based in Japan. ''There's been some screaming."

Leading the charge are the two biggest U.S.-flag carriers, American President Lines and Sea-Land Service Inc. APL recently offered a discount of around $300 a container on tires moving from southern Japan to the U.S. Midwest, said two carrier-pricing officials. Sea-Land took a similar cut on knocked-down cars - car parts needing assembly, they said.

Other non-Japanese carriers aren't far behind. Smaller discounts are being offered by various lines in the conference on items related to automobile and motorcycle manufacturing, said pricing executives.

Those actions are cutting into traffic that Japanese lines typically carry. Auto traffic is coveted among carriers because it is fairly high in volume and commands a higher rate than many other types of cargoes.

An official at one Japanese line said the moves by APL and Sea-Land, especially on the trade's four mainstay cargoes - electronic goods, auto parts, knocked-down autos and tires - are being watched very closely.

"At this moment, there's not a real danger but there's always concern when these commodities are on the table for discussion," he said. "This tendency is not good for carriers," he said.

''Japan is very much a strategic market for us and Japanese customers are looking for the most value for their money," said Jim Barker, director of marketing for OOCL (USA) Inc. in Pleasanton, Calif. "That quest is taking them beyond their traditional transport partners."

Japan has been battered by a recession and skyrocketing exchange rates for the yen. As a result, Japanese manufacturers are becoming more concerned with costs.

Discounted rate offers from non-Japanese carriers are getting more attention, executives in the trade said. The carriers are hoping discounts on some types of traffic will allow them to demonstrate their service ability to Japanese customers, which, in turn, will allow them access to other, more lucrative traffic segments. A rate cut on tires, then, may lead to an annual contract for car parts in general.

Sources say such moves are disconcerting in a trade where the top three carriers are Japanese and rate activities are relatively sedate. Discounting moves have generally been limited to lower- value manufactured goods that appeal to consumers in the spring, like lawn furniture and barbecues.

"It's getting to be the beginning of the slack season," said Thomas McGoldrick, vice president of sales administration and logistics for Mitsui O.S.K. Lines in Jersey City, N.J. "It may be some people are making moves to protect market share and generate new business."

Still, the pricing moves in the Japanese inbound trade aren't as bad as the discounting problems in other trades, conference executives said. In large part, this reflects the importance Japanese shippers place on relationships and service. Japanese shippers - particularly those with high-value commodities - are turning first to their traditional partners for price reductions before going outside.

"Some (get) help, some don't," said one official.

Meanwhile, shipping lines aren't adjusting quickly enough to the fall in Japanese exports, a European carrier officials suggested.

"(The problem isn't that) the lines are more aggressive but because Japanese exports to the United States are not as good as expected," he said. ''And lines continue to do what they did in the past despite agreements, talking, negotiations."

An emergency owner's meeting late last week was called in Tokyo to discuss eastbound trade pricing issues. Among the points it covered were first-time implementation of a terminal handling charge on conference routes between Japan and the United States - a change bitterly opposed by Japanese shippers. The meeting also considered the pricing gap between conference and non-conference carriers in the trade and reaffirmed proposals made in Taipei last month to maintain industry discipline.

The three major Japanese carriers - Nippon Yusen Kaisha, Kawasaki Kisen Kaisha and Mitsui O.S.K. Line - each controlled nearly 10 percent of the eastbound trade in 1992, according to statistics from a conference carrier. But each of the Japanese carriers lost market share in the first half of 1993. They still remain the top three carriers in the trade, however,

APL and Sea-Land also lost market share in the first half of 1993. Other conference carriers and a majority of independent lines, meanwhile, added to their market shares.

Members of the Japanese eastbound conference, called the Transpacific Freight Conference of Japan, include APL; Sea-Land; Mitsui; "K" Line; NYK Line; Maersk Line; Neptune Orient Lines; Hapag-Lloyd BV and OOCL.