China Shipping Container Lines Co, the country's second-biggest box carrier, plans to almost double rates on Asia-Europe routes next month to help offset possible losses on weakening demand.
"Companies will raise rates, not because the market has recovered, but because the shipping lines have the resolution to do this," managing director Huang Xiaowen said. "We have found that if we cut rates, load factors don't increase." The company's Hong Kong-listed stock rose the most in almost a month.
The busiest season for sea-cargo box carriers traditionally starts July 1, when rates go up as European and US retailers stock up for the back-to-school and holiday shopping periods. Costs for shipping goods have fallen in the past year, partly because retailers are paring orders on weak consumer spending. China Shipping will increase rates to as much as US$650 (US$1 = RM3.54) per 20-foot container, Huang said.
"It's the only period when they have any chance of making money this year," said Jack Xu, an analyst at Sinopac Securities Asia Co in Shanghai. "Still, rates are so low, I doubt that's going to happen."
China Shipping will raise prices by as much as US$300 per 20-foot container from July 1, Huang said in Shanghai on Thursday.
"This peak season is going to be very short," China Shipping chairman Li Shaode said in an interview in Shanghai on Thursday. Analysts tracked by Bloomberg covering the shipping line expect it to make a full-year loss. The median estimate is a 2.4 billion yuan deficit.
The container line's stock jumped 9 per cent to HK$2.10 (HK$100 = RM45.64) in Hong Kong trading, boosting its gain this year to 79 per cent, compared with a 29 per cent increase for the benchmark Hang Seng Index.
China Shipping will also raise rates on its Asia-South America routes by US$300 per 20-foot equivalent unit, or TEU, Huang said. Rates on Middle East, Australia and Mediterranean routes will also go up, he added.
MISC Bhd, Asia's second-biggest shipping company market value, last month said it would stop operating Asia-Europe container shipping services from next year to focus on intra-Asian and Asia-Middle East services.
Container lines have parked ships and delayed deliveries of new vessels to curb excess capacity. Shipping lines are also trying to delay deliveries of new vessels to ease a capacity glut.
"Overcapacity damps the industry's overall recovery," said Li, China Shipping's chairman. "The industry will continue to suffer from overcapacity in the coming two to three years."
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