By Leo Ryan, AJOT
Shippers should prepare for another rate increase soon on the North Atlantic container trade, according to CP Ships CEO Ray Miles.
Speaking at the carrier’s annual general meeting in Toronto on May 10 after releasing improved first quarter results, Miles suggested there could be a 10% increase in transAtlantic rates by the end of the second quarter to allow shipping lines to achieve a better balance between supply and demand.
Since the start of this year, Miles said that CP Ships, which commands a 20% market share on the North Atlantic, decided to assume a leadership role as regards reducing capacity and increasing ocean freight rates. “We did not immediately back off amidst strong resistance from customers.”
Most customers, Miles affirmed, have recognized the need for increasing rates so shipping lines can earn a decent profit. “When supply and demand is in better balance, the opportunity will be there to improve price.”
While reporting first quarter results, CP Ships also announced the appointment of a new chairman, Nigel Rich, to replace company veteran Miles who will remain interim CEO until the appointment of a successor.
Frank Halliwell resigned last December as CEO due to a policy conflict with the board following just seven months at the helm, leading to the provisional return of Miles to the post.
The Q/1 2005 numbers show operating profit at US$29 million, more than double Q/1 2004.
Revenues totaling US$966 million were up 19% from the year-earlier US$814 million. A major factor: average freight rates were up 18% from Q1 2004 and up three percent from Q/4 2004.
However, container carryings slipped by five percent to 533,000 teus over the same period due mainly to schedule delays and capacity reduction on the North Atlantic services between Montreal and Europe. This trade lane accounts for over half of CP Ships container business.
Miles expressed confidence that 2005 net income will be, “substantially higher than in 2004, with volume expected to grow modestly and freight rates continuing to rise. The strong finish to 2004 has continued into 2005 with a solid performance in our seasonally weak first quarter.”
In recent weeks, CP Ships has announced several important new initiatives - notably the abandoning of its multi-brand policy and the acquisition of a second freight forwarding firm in Canada, Borg International Freight Services, as part of a strategy to develop logistics services to leverage strong regional market positions.
Meanwhile, there has been industry speculation that Shanghai’s China Shipping Group could be interested in launching a hostile takeover bid for CP Ships - but thus far there has been no concrete evidence of such a plan in the works.