COSCO sees this year’s contract negotiations in trans-Pacific as critical

By: | at 07:00 PM | Liner Shipping  

COSCO like most carriers in the trans-Pacific had a pretty good year volume wise; the same could not be said unfortunately for revenue. Howard Finkel, COSCO’s, Executive Vice President of trade said, ‘Volumes were good overall but the tremendous increase in bunker along with very significant intermodal increases, have most carriers seeing red, despite a strong market and a balanced supply and demand scenario.’ COSCO is determined not to repeat the mistakes of the past in the 2008 contract negotiation season. ‘This is not business as usual’, Finkel said, ‘We cannot accept non-compensatory rate levels, along with rates that don’t allow for a floating bunker surcharge. A damaging trend in our industry is that larger shippers ask for deeply discounted rates that include bunker.’ Larger volume shippers asking for discounts and special terms seem like a common business practice; Finkel said, ‘It certainly is, but when you move a container at a loss or, negligible revenue because the total rate can’t cover the rising intermodal and bunker costs, you’re in trouble. Despite rumors to the contrary, you don’t make up negative revenue with volume’.
COSCO intends to negotiate with the largest to the smallest shippers in 2008 and explain that compensatory rates along with floating bunker are an absolute must. ‘The theory that small and medium size shippers will make up for the lack of bunker and revenue is an extremely flawed one,’ Finkel said, ‘The proof is in the numbers and the numbers don’t look good.’

COSCO is doing everything possible to operate efficiently and keep their costs under control. Most carriers today are paying very serious attention to cost control; there is a point however where controlling costs too severely can affect the level of service a carrier can offer and in a service industry that can spell trouble. ‘We have cost control meetings every week,’ said Finkel, where we can cut and still offer a viable service we will.’

Shippers have repeatedly said that they will consider paying more but want to know what they will get in return. ‘That’s not an easy question to answer, when the current rates aren’t keeping up with costs. Shippers demand excellence in their carriers along with the latest technology to make sure their cargo arrives safely, expeditiously and can be tracked at all times; you just can’t afford to keep up with those kind of sophisticated demands if you’re operating in the red.’ COSCO actually does have something, ‘new and improved’ to offer the shippers this year, their new Prince Rupert service. This new port in British Columbia is one of the shortest gateways from Asia to North America. COSCO is the first carrier to offer this express service and are very excited to offer this new service to the trade. ‘All you need to do to get on board is pay a fair rate along with a floating bunker,’ Finkel said.


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