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APL renegotiates big shipper contracts, seeks relief from rate abyss

SINGAPORE's Neptune Orient Lines (NOL), parent of APL container line, has announced that it has been compelled to scrap contracts made with big shippers earlier this year.

APL president Kenneth Glenn said Asia-Europe rates have been abysmal. "As everyone knows, and that has had an impact on rates we negotiated earlier this year," he told a conference call with investors on second quarter results.

Some contracted shippers come back seeking relief if spot rates drop well below contract rates. In that case carriers face the prospect of putting an account in jeopardy if they don't agree to drop the rates, he said.

Mr Glenn stressed that big shippers, the beneficial cargo owner (BCO) contract rates are a minor share of APL's Asia-Europe business, accounting for about 20 per cent, reflecting the dominance of forwarders on the Asia-Europe trade lane.

The recent downturn in transpacific spot rates hasn't impacted its BCO contracts, which account for between 65 and 70 per cent of the carrier's American business, showing the dominance of big shippers doing their own forwarding on the North America routes.

Thus, APL is content with the state of transpacific contacts for 2015-2016, Mr Glenn said.

China-US west coast volume is down 0.1 per cent year-to-date, while volume to the US east coast is up 8.9 per cent.

NOL has done less Panama volume to the US east coast in the past, having found it unprofitable, but is now considering greater throughput when 13,000-TEUers can transit the expanded canal next year.