Intra-Asia rate
restoration not as successful as in other trades
THE implementation of the rate
restoration program in the intra-Asian trade is
relatively "weak" compared with those
in other markets such as the United States, Europe
and Japan.
Some shipping lines - mostly members
of the Intra-Asia Discussion Agreement (IADA),
a group representing shipping lines trading within
Asia - have expressed disappointment over some
carriers' refusal to apply the agreed-upon restored
rates in the intra-Asian trade.
Approximately 80% of the carriers
which have operations in the Philippines are IADA
members.
In a recent dialogue with freight
forwarders, RCL Feeders Philippines, Inc. marketing
manager Nestor del Rosario said the rate restoration
is 100% successful in all areas except Asia.
"While majority of the shipping
lines in other trade routes are currently enjoying
rate recoveries, the Intra-Asian carriers are...
struggling," he said, noting a number of
carriers have opted not to implement increased
rates despite the agreement. This, he stressed,
has resulted in unfair competition.
IADA started implementing this
year's rate restoration program in April, allowing
for a $25 per twenty-foot equivalent unit (TEU)
and $50 per forty-foot equivalent unit (FEU) additional
rate to the carriers' base.
In June, the conference once again
agreed to impose an additional rate of $50 per
TEU and $100 per FEU. The same rates applied in
the agreement approved in September.
Del Rosario said the total rate
restoration for the entire 2004 was supposed to
be from $150 to $300. However, only 50% of the
carriers are currently imposing the rate increases,
he noted.
In an interview, China Shipping
Manila Agency, Inc. general manager Wilfredo M.
Monillas confirmed his company, although not an
IADA member, has already implemented about $50-$100
rate increase this year.
"There are certain carriers
that, despite the agreement, reduce their rates
even more. But I think rate restoration is really
needed. Rates have been down for a very long time
already," he pointed out.
Hanjin Shipping senior vice president
for Sales Modesto F. Ramos attributed the reluctance
of some shipping lines to adhere to the rate restoration
program to a number of factors, including the
difference in costing and service capacity.
"The intra-Asian trade is
being served by global, regional and even small
flag carriers. It is very difficult to unify when
those involved have varied interests. In some
cases, a shipping line refuses to increase their
rates for fear of facing stiffer competition,"
he said.
Ramos said the intra-Asian market
is the most complex of all trade areas that is
why carriers prefer to impose increased rates
"corridor by corridor". Compared with
the previous years, the attempt to restore rates
this year is more apparent, he said.
"I think we are well on our
way to recovery, especially now that communication
among shipping lines are much open," he said.
The carriers expressed optimism
that the rate restoration will continue up to
the first quarter of next year.
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New DSDA IRR to promote liberalization
The Maritime Industry Authority (MARINA) said
the implementing rules and regulations (IRR) of
the Domestic Shipping Development Act (DSDA) were
drafted with the view to creating a liberalized
shipping environment.
Expected to come out by end-October, the draft
IRR has provisions that will address concerns
raised by shipowners on the reduction of requirements
and additional incentives to allow for new investments,
MARINA administrator Vicente T. Suazo, Jr. said
in an interview.
"We already got rid of restrictive policies.
In other words, MARINA will not be meddling with
their businesses anymore," he said.
Suazo dismissed the possibility of a cartel
that would control rates, noting such would be
counterproductive since there are other transport
modes such as air, which also offer competitive
rates.
Also, he said some sectors and agencies, including
the Distribution Management Association of the
Philippines and the Price Control Council, have
committed to helping MARINA monitor shipping operators
that abuse the liberalization policy. "We
will immediately take charge once it is proven
that public interest is not being served,"
he stressed.
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Metro Pacific to provide P127M
for NENACO
NEGROS NAVIGATION COMPANY (NENACO) does not
have to scout for a third party to obtain the
remaining P127-million funding required for rehabilitation,
according to Metro Pacific Corporation.
In a disclosure to the Philippine Stock Exchange
(PSE), Metro Pacific vice president David Nugent
said the parent company will provide the needed
funds that will enable its cash-strapped subsidiary
to return to profit.
He said half of the amount has already been
turned over to NENACO, with the balance to be
given this month.
"Metro Pacific has already begun providing
such funding to NENACO. As of last week, Metro
Pacific had already provided P63.5 million to
NENACO and is on schedule to provide a second
tranche of an additional P63.5 million to NENACO
in November," he said.
Nugent disclosed the money was given as an "inter
company advance," and will be repaid under
commercial terms and in line with the shipping
firm's rehabilitation program.
He added the P127 million will be sourced from
funds obtained from the sale of Metro Pacific
shares by parent, Hong Kong-listed First Pacific
Co. Ltd.
The mother firm recently sold approximately
5% of the total issued common share capital of
Metro Pacific, primarily to support the corporate
rehabilitation of NENACO.
The shipping firm, soon to be delisted from
PSE, needs the P250-million fresh cash based on
the recovery blueprint approved by the Manila
Regional Trial Court.
The amount will be infused into NENACO periodically
beginning this year until mid-2005 to pay the
shipping firm's tax liabilities, repair M/V St.
Ezekiel Moreno, and for drydocking costs of two
of its vessels.
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COSCON expands
fleet
CHINA OCEAN SHIPPING COMPANY (COSCO)
Container Lines Co., Ltd. (COSCON) is investing
on a fleet expansion program to better serve its
major markets and accommodate the continuously
swelling volume in these areas.
COSCO Philippines Shipping Inc.,
the shipping line's agent in the country, said
that in August and September, the company deployed
two mega-ships with a capacity of 8,000 twenty-foot
equivalent units (TEU) to serve its Asia and the
US West Coast trade.
The new vessels will add space
to better serve the growing container traffic
between Asia and America, COSCO Philippines senior
marketing manager Arnie de Guzman told participants
of the recently concluded 1st Shipping Lines-Freight
Forwarders Convention.
He said the total fleet upgrading,
which will serve the country's biggest trading
partner, will be realized this month with the
commissioning of three additional 8,000-TEU vessels.
De Guzman said the same move is
being done on the Asia-Europe trade, where a fleet
of eight 5,500-TEU capacity vessels is already
operational. "An additional string composed
of another fleet of 5,000-TEU capacity vessels
will be phased in to meet the growing demands
between Asia and Europe," he pointed out.
COSCON owns more than 100 container
vessels, with an annual turnover of about four
million TEUs, accounting for appro-ximately 4.2%
of the total global volume.
From the Philippines, the line
serves major trade lanes such as the US and Europe
traffic, both inbound and outbound.
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Consumer and Oil
Price Watch demands transparency in shipping rates
THE Consumer and Oil Price Watch
(COPW) is urging the Maritime Industry Authority
(MARINA) to present the basis for the recent rate
increases imposed by interisland shipping operators.
COPW chairman Raul Concepcion said
shipping and freight rates must be unbundled to
ensure transparency of all the cost components
to the customers and end-users.
The group is specifically asking
for a comprehensive breakdown of the 5.98% rate
increase imposed by the shipping companies in
March last year under the Automatic Fuel Rate
Adjustment (AFRA) and the 14.5% upward rate adjustment
implemented just last month.
The most recent freight rate hike
has swelled the AFRA and the General Rate Increase
of domestic shipping operators.
"Notwithstanding the deregulation
of the domestic shipping industry, there is greater
moral responsibility for companies to be transparent.
Advocacy is all on the basis of services,"
Concepcion said.
Various ship operators have filed
notices of upward adjustment on freight and passage
rates with the MARINA in September. The 14.5%
freight rate increase will be on a staggered basis.
These operators include Aboitiz Transport System
Corp. and subsidiary Cebu Ferries Corp., Sulpicio
Lines, Lorenzo Shipping Corp., Negros Navigation
Company, Solid Shipping Lines Corp., NMC Container
Lines, Inc. and Oceanic Container Lines, Inc.
In response, the Distribution Management
Association of the Philippines has requested the
MARINA to issue a temporary restraining order
on the rate hike until the issue was settled.
The shippers all agree that the
14.5% rate increase is exorbitant, therefore,
an abuse in the implementation or practice of
the deregulation policy promoted by the Domestic
Shipping Development Act.
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New Central Nautical
Highway to develop Masbate
The new link to the Strong Republic
Nautical Highway (SRNH) will open up the market
of Masbate to the rest of Visayas and other nearby
provinces, according to the Philippine Ports Authority
(PPA).
The livestock-rich and agricultural
province will be connected through the Central
Nautical Highway recently identified by President
Gloria Macapagal-Arroyo. The new stem of the SRNH
was included in PPA's priority projects and presented
to the Department of Transportation and Communications.
The highway will run from Balingoan,
Misamis Oriental to Guinsiliban, Camiguin to Mambajao
(Balbagon), Camiguin to Jagna, Bohol, land travel
to Tubigon, Bohol, to Cebu City, then via land
to Bogo, then to Placer, Masbate to Aroroy, and
finally, to Donsol (Pilar), Sorsogon.
PPA assistant general manager for
Special Projects and Corporate Affairs Raul T.
Santos said all ports in the area are ready. There
are already a number of small operators in the
traditional links, he added.
"We could say there is already
existing trade in the area. It is just a matter
of developing the frequency [of shipcalls] to
develop this trade," he pointed out.
He said the port agency is looking
at areas for improvement in the Masbate ports
such as expansion of berthing areas and construction
of additional roll-on/roll-off (ro-ro) ramps.
Santos said the Masbate local government
has suggested the use of Esperanza, instead of
Placer or Cataingan, as link to the highway. "We
are already studying the viability of the area,"
he added.
Earlier PPA general manager Oscar
M. Sevilla said the project is expected to commence
early next year.
At present, 71 ro-ro links are
distributed in six ro-ro phases: the Pan-Philippine
Highway Ferry Terminals or the Eastern Seaboard
Link; the Western Seaboard Link; the Mindoro-Marinduque-Romblon-Palawan
Ro-ro System; Trans-Visayas Ro-Ro System; Southwestern
Ro-Ro System; and the Northeastern Ro-Ro Transport
System.
The three main component routes
under the SRNH, on the other hand, are Eastern
Nautical Highway, Central Nautical Highway and
the Western Nautical Highway.
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Maritime Equity
Corp. feasible by yearend
THE Maritime Industry Authority
(MARINA) is positive it will be able to put up
the Maritime Equity Corporation (MEC) by year-end
before the Japanese government pulls out its P6-billion
grant as initial funding for the loan facility.
The amount, which was given by
the Japan International Cooperation Agency (JICA)
to finance the Philippines' fleet modernization
program, remains untapped with the Development
Bank of the Philippines (DBP).
MARINA administrator Vicente T.
Suazo, Jr. said the creation of the corporation
is already well on its way. "In fact, we
are scheduled to sit with the DBP in the next
few weeks to discuss the plans regarding the MEC,"
he noted.
Once established, the MEC would
provide financing support to roll-on/roll-off
(ro-ro) operations and shipowners as key component
of the government's Sustainable Logistics Development
Program.
The financing scheme would also
be made available to other shipping stakeholders
such as the shipbuilding and ship repair sector.
The Philippine government acquired
the grant in the 1990s to spur new investments
and assist the country's fleet modernization program.
However, due to the stringent collateral requirements
set by the bank, no shipping companies have yet
to avail of the loan.
JICA is set to pull out the amount
by year-end unless the MEC is created.
A high-ranking official from the
Philippine Interisland Shipowners Association
said the country will be at a great disadvantage
if it loses the funds. He noted the MEC will not
only serve as a financial and funding facility,
but also act as "supervisor" to the
credit line. "The facility will see to it
that all loan applicants will be able to deliver
their investments successfully," he said.
The source stressed the creation
of the MEC is part of the domestic shipping industry's
aim to pursue a broad maritime agenda to address
issues that hold back the industry from attaining
its full potential.
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NOL enjoys continued
growth and profitability in Q3 2004
NEPTUNE ORIENT LINES (NOL) has
reported net profit of $234 million for the third
quarter (3Q), taking net profits for the year-to-date
to US$588 million, almost double the earnings
over the same period last year.
Core Earnings Before Net Interest
Expense, Tax and Exceptional Items (EBIT) for
3Q rose to $254 million, representing an 88% year-on-year
(YoY) growth while net profits were $234 million,
a 13% increase over last year. Gains from exceptional
items fell from $99 million in 3Q03 to $8 million
in 3Q this year. Last year's gains were predominantly
from the sale of American Eagle Tankers while
this year's arise mainly from the cessation of
goodwill amortisation following the early adoption
of Financial Reporting Standard (FRS) 103, which
no longer permits the amortization of goodwill.
Excluding these exceptional items, 3Q net profits
grew 111% over the corresponding period last year.
NOL chairman Cheng Wai Keung said,
"Both the Liner and Logistics businesses
have recorded consecutively higher quarterly profits
as well as an improving margin trend this year."
David Lim, Group President and
CEO, said, "Volume growth remained robust
on the Liner business while Logistics has recorded
strong revenue growth especially in International
Services. We have improved operating profits despite
rising cost pressures as we continue to execute
well our strategy of optimising the use of our
assets and containing our costs."
Liner NOL's Liner business, APL,
recorded Core EBIT of $244 million in the 3Q.
This was a 74% increase over 3Q last year and
a 29% increase over the 2Q 2004.
CEO for APL, Ron Widdows, said,
"Liner profits continued to benefit from
effective asset utilization and tight cost control
combined with higher average revenues and higher
trade volume. Volumes increased 16% YoY in the
3Q, boosted by sustained strong demand along the
key trading routes and the additional capacity
introduced since the beginning of 2004. Average
revenues per FEU (forty-foot equivalent unit)
in the 3Q improved 6% YoY, a result of actively
managing cargo mix and the benefits of seasonal
surcharges and rate increases".
The Group introduced several new
services in the 3Q of 2004. This includes the
SCX (South China Europe Express), an Asia-Europe
service that began in July. In August, it launched
the VCX (Vietnam China Express), which improves
service times from Vietnam to the US, and the
PS5 service between Hong Kong/South China and
the US West Coast (Seattle). The PS5 provides
customers extra support for the peak season and
fast transit times between China and Seattle,
linking with intermodal transport beyond Seattle.
Congestion in most of the major
ports globally, together with infrastructure pressures
at inland transportation systems, continues to
put upward pressure on operating costs. For the
3Q, additional cost savings of $35 million were
achieved, resulting in total cost savings of $75
million for the year-to-date. The company remains
on track to achieve its full-year target of $100
million. Year-to-date, overall Liner costs per
unit fell 2% compared with the corresponding period
last year. Logistics APL Logistics achieved further
profit improvements in the 3Q. Core EBIT rose
from $2 million in the 3Q last year to $11 million
in the current quarter. This was also 120% better
than the 2Q 2004 Core EBIT of $5 million.
3Q revenues increased 15% YoY,
due largely to strong growth in International
Services in Europe.
CEO of APL Logistics, Hans Hickler, said, "Logistics
revenue growth continues to benefit from global
outsourcing trends. Our on-going focus on International
Services has resulted in new contract wins and
increased demand from existing customers, which
has contributed to the strong revenue growth of
34% in the 3Q, as compared to the corresponding
period last year. Revenues for Contract Logistics
Services also continues to grow, at 8% YoY in
the 3Q."
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Foreign carriers
seek additional fuel surcharge
FOREIGN carriers have once again
filed with the Civil Aeronautics Board (CAB) for
additional fuel surcharge in view of the continuous
increase in fuel prices.
As of October 22, aviation fuel
averaged $61.05 per barrel compared to the $55.30
per barrel average in September.
CAB said Northwest Airlines has
filed for an additional $25 fuel surcharge per
passenger per flight. The airline was already
granted a $20 fare hike last month.
EVA Airways is also seeking a $2-hike
in fuel surcharge, increasing current charges
to $8.40 per passenger, per flight from $6.40
approved earlier.
Singapore Airlines and affiliate
SilkAir are also seeking additional charges to
cover the fuel increases. From $5, Singapore Airlines
wants to hike its fuel surcharge to $7 for flights
to Southeast Asia, and $12 for all other flights
except for those bound for Singapore and Kuala
Lumpur in Malaysia, where it would collect only
$4.
SilkAir wants to bring its fuel
surcharge to $7 from $5. Passengers flying to
China, Macau, and India will be charged $12.
Philippine Airlines, whose initial
petition was among the first to be approved by
the CAB, is requesting an added fuel surcharge
of $14 for flights to the United States, Canada
and Australia, $10 to the Middle East, and $8
for other destinations from $6.
Air Philippines wants to collect
$6 for chartered flights to China.
Cathay Pacific was earlier given
the go-signal to hike its fuel surcharge to $19
from $14 for long-haul flights and $7 from $5
for short-haul flights in September.
Fuel accounts for 38% of carrier's
cost per passenger, the second highest operating
expense of an air carrier next to labor.
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