SHIP LINES SHOULD DECIDE THEIR OWN CAPACITY RESTRICTIONS TO BOOST RATES, LINE EXECUTIVE SAYS

SHIP LINES SHOULD DECIDE THEIR OWN CAPACITY RESTRICTIONS TO BOOST RATES, LINE EXECUTIVE SAYS

Ship lines should be allowed to decide among themselves to restrict capacity in order to boost rates, the top executive of Mitsui O.S.K. Lines told an industry conference in London on Tuesday.

'All the carriers concerned with (a given trade) should enter into an agreement...to undertake the artificial adjustment of space supply 'within certain limits,'' said Makoto Ishii, senior managing director and chief of liner division of Mitsui OSK Lines Ltd.The practice of capacity management, which Mr. Ishii now calls 'space freezing' has been outlawed by European Competition authorities. In the United States, the Federal Maritime Commission last January rejected a bid by Pacific lines to withhold 18 percent of capacity in an effort to halt a severe slide in freight rates. The carrier group, called the Transpacific Stabilization Agreement, had a capacity management program in place between 1989 and 1995.

Mr. Ishii told a conference organized by Containerisation International that shippers would not accept the practice of eliminating certain sailings entirely. Instead, he said, carriers should restrict the space available on existing sailings by roughly 15 percent to reduce the pressure on their rates.

In recent weeks, two major alliances, including the New World Alliance of which Mitsui is a member, have withdrawn entire vessel strings from the Pacific trades. The New World Alliance, which also includes APL and Hyundai Merchant Marine, said it might reintroduce the string during the peak season this summer. Sea-Land Service Inc. and Maersk Inc. withdrew a Pacific Northwest string.

If alliance members cut capacity at certain peak times by 15 percent, 'competition among alliance members is bound to become more harmonized,' he said. 'Since alliance members share many mutual benefits, out and out competition for survival by defeat of the rival is out of the competition.'

Mitsui's alliance partner Hyundai built itself into one of the world's largest container lines by pricing its services 10 percent to 15 percent below conference lines like Mitsui and APL.