FREIGHT RATES TO RISE FOR EUROPE-ASIA TRADES

FREIGHT RATES TO RISE FOR EUROPE-ASIA TRADES

A recovery in waste paper shipments over the past few weeks has persuaded container lines operating services from Northern Europe to Asia to raise freight rates for all commodities early next year, despite some shipper resistance to the last round of increases three months ago.

Senior executives from the 12 members of the Eastbound Management Agreement decided during a meeting in Kobe last week to lift rates by $100 for both 20- foot and 40-foot containers, effective Jan. 1The EMA is a regional unit of the Far Eastern Freight Conference whose members account for around 55 percent of container traffic between Europe and Asia.

The planned rate increases will be the sixth since conference carriers embarked on a rate restoration program mid-1993 in an effort to reach the target freight levels set out in the 1991 tariff.

The lines have been able to steadily raise rates because of double-digit growth in cargo volumes over the past couple of years. But an increase of $100 for both 20-foot and 40-foot containers on July 1 was not a wholehearted success, industry officials acknowledge. European exports of wastepaper, which account for around 3 percent to 4 percent of containerized shipments to the Far East, dipped mid-year when Asian importers switched to cheaper North American suppliers as the dollar weakened.

Although the cargo volumes still expanded by about 5 percent during the first seven months of this year, the slowdown in growth created some difficulty in applying the mid-year rate increases.

August was also a slack month for eastbound traffic, but with every sign that the trade is picking up again, the lines agreed last week on another rate increase in January.

The $100 rise will bring the cost of shipping a 20-foot container of milk powder or similar low value commodity to around $975, according to Vernon Rolls, chief executive of the EMA. This compares with the target tariff rate set in 1991 for milk powder of $1,275. This is the rate that shipping lines decided at the time was the minimum to earn a satisfactory rate of return.

While growth in eastbound container traffic between Europe and the Far East has slowed this year, westbound trades are booming. Container shipments from areas other than Japan to Northern Europe grew by around 22 percent in the first half of the year. Conference lines raised freight rates by $100 for a 20-foot container and $200 for a 40-footer on July 1, and will increase their prices by the same amount again on Monday, Oct. 1.