Nippon Yusen hikes shipping fees

Bloomberg

Shipping line Nippon Yusen K.K. has raised rates on container services to the United States from Asia after slashing its supply of ships.

The carrier reduced service on the routes by about 25 percent in the past year and is filling about 90 percent of its capacity on routes to North America, said Mikitoshi Kai, head of investor relations at the company, Japan’s largest shipping line.

Nippon Yusen started boosting rates last month, he said.

“We’ve been able to raise rates by a certain amount,” he said, declining to give detailed figures. “We currently have about the right amount of ships. Still, we need to increase rates by a lot more to make a profit.”

Nippon Yusen is forecasting its first loss in 23 years as the global recession cuts demand for containers carrying construction materials, furniture, electronics and other goods to the U.S. and Europe.

The shipping line, along with Evergreen Marine Corp., Neptune Orient Lines Ltd.’s APL Ltd. and 11 others, agreed to try to raise Asia-U.S. container rates by $500 per 40-foot box from last month.

Nippon Yusen is also trying to raise rates on containers to Asia from North America, Kai said.

Nippon Yusen is predicting a loss of ¥5 billion for the year ending March 31, including a pretax loss of ¥34 billion in its container shipping business.

The shipping line is cutting costs to compensate for the drop in demand. Nippon Yusen will reduce ¥100 billion in costs this fiscal year, with ¥80 billion in reductions in the container business, Kai said.

“It’s our biggest cost-cutting plan ever,” he said. “We’re negotiating lower loading fees, cheaper rates for transporting cargo inland by train, and reducing costs by mooring ships.”

The Transpacific Stabilization Agreement, a group of 14 shipping lines that operate half of the world’s container vessels, issued a “voluntary guideline” in July to raise rates on Asia- U.S. services by $500 per 40-foot container. Even that increase would leave rates at unprofitable levels and 30 percent lower than a year earlier, according to CMA CGM SA, one of the members and the world’s third-biggest container carrier.

A similar attempt in April failed as lines competed for volume to avoid costly ship lay ups amid a roughly 20 percent drop in Asia-U.S. volume.

Container shipments to the U.S. from Asia fell for the 21st straight month in June, tumbling 18 percent to 900,600 boxes, according to the Japan Maritime Center. Shipments are down 20 percent this year.