Pressure on haulage rates set to increase

Maersk’s Mark Cornwall tells Gavin van Marle why rates have to rise

One of the foremost fears of the recession is that in driving so many firms out of business it will ultimately lead to a marked drop in transport and other freight operating capacity. So far, there have been a limited number of casualties among air carriers, while shipping lines are relatively unscathed, largely due to government intervention. But the road haulage industry has taken a severe battering, and in the UK there are warning signs that capacity is tightening and rates are hardening.

That is the message Mark Cornwell, UK director of operations at Maersk Line, wants to get across. The world’s biggest shipping line is preparing to change its inland container haulage tariffs in the UK.

He says: "When sea freight rates were higher, we could look at the end-to-end revenue, but the collapse of sea freight rates has exposed the fact that we are losing money on haulage, and so we are looking to raise rates. We will change our customer tariff in mid-February.

"The amounts that the charge will go up will vary from customer to customer, but we are incurring losses in the tens of millions of pounds, " he says, adding that the proposed increases follow the convergence of a number of factors.

"Traditionally, haulage rates took a bit of a backseat to sea freight rates, and have often been a tool for negotiations over sea freight rates, because it was easier to make adjustments with the haulage rates - whereas the sea freight rates were more centrally controlled. So a lot of our customers got very good deals on haulage.

"However, as a result of the collapse in the sea freight rate levels, the performance of haulage rates has come under the microscope."

Imbalance worsening While there was a history of flexibility in terms of rate negotiation, there was also an imbalance of imports over exports, which has recently worsened.

"We have gone from one-and-a-half import boxes for every one export box, to two-and-a-half import boxes for every one export box, which means our repositioning costs have increased significantly as the imbalance has grown by about 70%, and the haulage rates that we charge our customers haven’t kept pace with that, " he says.

And those two factors are likely to be exacerbated by a reduction in haulage capacity, he adds, "A lot of the smaller hauliers have gone out of business, and we expect there to be a couple of large casualties. There will be a hardening of rates, which have been driven down over the last 12 months."

However, one way that extra inland costs could be mitigated is by importers clearing boxes from port terminals earlier, which would have helped Maersk’s cargo flow during the bad weather that hit the UK recently.

Cornwell says: "At the moment, a lot of customers don’t want to book the inland leg until the container has arrived at the port, which means we are at the mercy of all the problems that exist in the terminals. Every customer that has imported a box in the last three weeks has suffered from some kind of problem.

"The way forward is through the development of inland container depots. We have that at Cannock and we would dearly like more inland hubs.

"If we could store boxes there, rather than at the port, then a lot of the problems that we have seen since the beginning of the year could have been avoided."