OCEAN RATES ON NEW ZEALAND MEAT JUMP SHIP LINES HOPE TO IMPROVE PROFITS

OCEAN RATES ON NEW ZEALAND MEAT JUMP SHIP LINES HOPE TO IMPROVE PROFITS

Ocean freight rates for meat imports from New Zealand through ports on the West Coast soared 26.9 percent last week as containership lines and breakbulk ship operators agreed to end a year-long rate war.

The rate increase could improve the profits of the carriers but might not affect the volume of meat shipments from New Zealand.The rate increased to about $200 a ton for meat shipped through the U.S. West Coast. Rates to the East Coast increased 7 percent to about $221 a ton.

According to PIERS, the Port Import-Export Reporting Service of The Journal of Commerce, U.S. meat from New Zealand in 1991 filled the equivalent of 11,556 20-foot containers, or TEUs, down from 13,467 TEUs in 1990.

Freight rates plummeted 40 percent in early 1991 when two breakbulk operators entered what had been primarily a containerized trade. Lauritzen Reefers began carrying meat to the U.S. West Coast, and Kyokuyo Co. Ltd. began serving the East and Gulf coasts.

Rates from Australia, another important meat supplier to the United States, didn't drop much. A different breakbulk carrier operates there.

Shipping executives traded blame as to why the rates plunged last year. ''These guys (the breakbulk operators) took a major loss leader," said Alex Knowles, executive vice president in Long Beach at Australia-New Zealand Direct Line. "At the end of 1991, they said, 'I carried a lot of meat, but I didn't make any money,' " Mr. Knowles surmised.

"Actually, the container lines dropped their rates even further than the independent carriers," said Palle Mathiesen, general manager at Lauritzen Reefers in Long Beach.

Mr. Mathiesen explained that Lauritzen, a breakbulk carrier, has contracts with two large shippers in New Zealand that account for approximately 65 percent of the carrier's meat cargo. As large, steady customers, they naturally get a favorable rate, he noted.

This reliance on contract shippers contributed to the lack of predictability in the overall rate structure. "We didn't know what they (Lauritzen) were charging, so we took a stab at it, and the whole rate structure came tumbling down," said an executive at a container line.

Last week's large rate increase should not affect the volume of meat shipments from New Zealand. "What we expect will happen is that it will improve the bottom line of the carriers - hopefully by 26.9 percent," Mr. Mathiesen said.

Laurie Bryant, director of trade policy at the New Zealand Meat Producers Board in Arlington, Va., agreed. He said the rate increase probably would be absorbed by the exporters.

"It's usually the exporter who pays the freight," he said.

Carriers in the New Zealand trade are watching two outsiders, Mitsui O.S.K. Lines Ltd. and Nippon Yusen Kaisha of Japan. Both containership lines have been designated as eligible carriers by the New Zealand government.

Last year, both carriers were reportedly interested in shipping New Zealand meat to the United States by way of Japan, but they stayed out of the trade when rates plummeted.

George Marshall, vice president in Long Beach at Mitsui O.S.K. Lines (America) Inc., said his company sends a number of empty refrigerated containers from Japan to the U.S. West Coast to pick up exports.

"If we could get the equipment back to the United States with a working load, it would be a real bonus for us," he said.

But Don McCallian, general manager and assistant to the senior corporate executives at NYK Line (North America) Inc. in Secaucus, N.J., questioned the economics of such a relay operation, which ties up equipment and costs money.

At $200 a ton, or about $4,000 a container, the revenues might not be worth the costs. Also, Mr. McCallian noted, shippers might be unwilling to pay the full rate for a longer transit time.

"If they're transshipping, people are looking for a deal," he said.