Freight Deflation

Oct 16, 2008 (LBO) – Freight costs could fall with an expected slowdown in the US economy and the end this weekend of shipping liner cartels which fix rates, Sri Lankan shippers said. Sri Lankan shippers have long enjoyed the advantage of having main line vessels calling at Colombo to pick up transshipment cargo, which usually mean space was available at competitive rates for exports and imports. Rates have already fallen on the main Asia-Europe trade route with an influx of big container ships which have created an overcapacity problem for shipping lines, although bunker fuel surcharges remain high owing to high crude oil prices.

A sign of the times was the recent failure by some lines to implement what’s known as a GRI (general rate increase) during the usual surge in shipments to Western markets in the run-up to Christmas.

“The tendency is for freight rates to come down with the slowdown in the US economy although it might take awhile for us to feel its effects,” said Randolph Perera, chairman of the Sri Lanka Shippers Council.

The end of the liner ‘conference system’ under which shipping lines operated like cartels to set freight rates could also benefit shippers, he