COSCO Container Lines is warning that it may be forced to end intermodal service to some 15 East Coast and Midwest cities if it is not able to adjust rates to reflect the rising cost of fuel.
"COSCO is taking a hard look at some of the intermodal services we currently offer," said Howard Finkel, executive vice president, trade at COSCO Container Lines, Americas. "Because of the extremely high cost increase of bunker, along with severe rail increases and imbalance issues, COSCO is considering halting intermodal service to the following points unless a significant increase in bunker collection can be achieved soon."
Finkel named the following cities:
Charlotte and Greensboro, N.C.
Grand Rapids, Mich.
Huntsville and Mobile, Ala.
Miami, Tampa and Jacksonville. Fla.
San Antonio, Texas.
Milwaukee.
Philadelphia.
Norfolk, Va.
Charleston, S.C.
Savannah, Ga.
Ayer, Mass. (outside of Boston).
Finkel hastened to add that his company was not planning to end all-water service to any ports. For example, it plans to continue to continue to sail to Norfolk, but it might eliminate mini-landbridge rail to the city, say, from West Coast ports.
"We have already increased the intermodal cost to these points significantly, but we feel that unless this increase is coupled with a notable bunker collection increase, we cannot continue offering this intermodal service," he said.
"Unfortunately this is a harsh reality of the ocean transportation industry today; we cannot continue offering service at a loss. Bunker is a huge part of our rising costs and unless carriers can get our customers to participate in a floating bunker charge, our services will continue to decrease," he added.
Finkel said the strategy of paring down COSCO's inland network would be similar to steps taken by Maersk to reduce the number of inland points it called at while radically simplifying its intermodal network.
Finkel said his company and the alliance it participates in has reduced the size of vessels in some U.S. strings and moved the bigger ships to Asia/Europe where operating conditions are more favorable, because of high demand for transportation, but also because shippers in the Asia/Europe trade lane agree to contracts with floating bunker charges. Contracts are also commonly adjusted quarterly, so that prices can be adjusted to changing trade conditions.
He said COSCO needs to begin recovering for higher bunker charges right away, not when contracts renew next May. He said that in talks with shippers, "about half have been very understanding."
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Source: American Shipper
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