Asia-Hawaii
shipping rates
jump 50%

A Sea-Land Service official
says the gains are intended to
make up for previous
rate decreases

From staff and wire reports

Shipping companies bringing goods from Asia to Hawaii and the West Coast have boosted their rates almost 50 percent, the second big hike in the past year.

The two lines making regular calls in Hawaii, Nippon Yusen KK and Sea-Land Service, increased cargo rates by about $1,000 per container, effective May 1.

The rate increase, pushing the cost of a 40-foot container to more than $2,500 for Japan-U.S. service, could raise the price of a pair of sneakers by 16 cents in the United States, analysts said. Also raising rates were Mitsui O.S.K. Lines Ltd. and Kawasaki Kisen Kaisha Ltd., the other major shipping lines in Japan.

Sea-Land spokesman Jack Sutherland said today the hikes are aimed at recouping from sharp decreases in shipping rates in recent years. "All eastbound carriers in the Asian trade are trying to recover from tremendous rate declines over the past three years, and from the Asian financial crisis," Sutherland said.

Even with the recent increase, rates remain lower than they were several years ago when they were dropped to boost exports from ailing Asian countries, he said.

Japanese shipping companies raised rates to the United States in May 1998 by an average $300 per 40-ft container to about $1,400. In July they raised fees to Europe by an average $150 per 20-ft container to $1,200.

The rate increases could return the three Japanese shippers' loss-making container operations to profit for the year ending next March by giving them each an additional 10 billion yen ($81 million) to 15 billion yen in profits. It could also lead to increased prices for cars, sneakers and other goods sold in the United States, analysts said.

"We think of it as a restoration of rates," said Mitsui O.S.K. spokesman Hiroshi Asano. The new prices are similar to what the companies charged in late 1995, he said.

Demand for shipping from Japan to the United States increased after the economic crisis in Asia began in 1997, which drove down prices of Asian goods and boosted demand for them in the West, analysts and the companies said. Container shipping is expected to increase by 7.2 percent to 3.7 million 20-foot containers from 2.8 million from Asia to the United States during the four years until 2002, according to figures from Standard & Poor's.

The shipping rate increase was set by the Japan United States Eastbound Freight Conference (JUEFC), an organization that sets rates between Asia and the U.S., the officials said. Other members of JUEFC include Peninsular & Oriental Steam Navigation Co., Royal Nedlloyd Groep NV, Neptune Orient Lines Ltd., Orient Overseas International Ltd., Hapag-Lloyd AG, A.P. Moeller's Maersk, and Wilh. Wilhelmsen Ltd. of Norway.

"The raise is necessary for the shipping companies to become profitable" on container operations, said Osuke Itazaki, a senior analyst at Okasan Economic Research Institute.

All 11 Japanese shipping companies have been making losses on their container operations for the last 18 years, losing more than about 30 billion yen ($250 million) a year in total, analysts said.

Containers, which carry items such as auto parts, machinery, clothing, food, wine and building equipment, account for almost half of the three shipping companies' total parent revenue.

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Star-Bulletin reporter Peter Wagner and
Bloomberg News contributed to this report.