Bluff and bluster about making a profit on the transpacific route have disappeared, to be replaced by naked fear about the future. That fear has been brought into the open by Li Shaode, president of China Shipping, who is reported to have said that the Chinese government had ordered lines not to offer what is known as "zero freight" - no extra fees on top of fixed costs such as bunkering and terminal handling charges.

The implication is obvious. Carriers are undoubtedly offering or considering the option, as volumes continue to shrink, but know that the result will be disastrous - as has happened on the Asia-Europe lane.
Conventional industry wisdom says that the 14-member TransPacific Stabilisation Agreement, the group of major carriers that discusses costs but is forbidden by the draconian anti-trust laws to talk about rates, is all that stands between an orderly market and the supposedly uncontrolled European trade, where conference lines have been outlawed.
Some observers doubt this and reckon that no one wants to break ranks first. If and when that happens, the most likely action will be on the back-haul export lane from the US to Asia.
Latest trade figures tend to support this. The overall US trade deficit in January dropped to its lowest level in six years - US$36 billion. Imports fell faster than exports in January, leading to a deficit that was smaller than economists anticipated. Imports dropped eight percent and exports just over seven percent. In other words, the gap between exports and imports is narrowing and much ground on profitability could be made up by jacking up the export rates.
Urgent action is needed. Shipping analyst Drewry said carriers worldwide could lose another $70 billion in revenues this year, although Asia to Europe is the worst hit. Rates on shipments from Asia to the US fell 12 percent between November and January and 14 percent between January 2008 and January 2009. For the year, rates from Hong Kong to the US West Coast fell 15 percent for a 40-foot container while to the US East Coast, they fell 17 percent
"Eastbound transpacific freight rates to the US have also come under market pressure," Drewry said. "Reductions of $300 per 40-foot container have been common in recent months and the trend is continuing downwards." Rates from Hong Kong to Los Angeles were at a record low of $1,350 per 40-foot container in mid-February.
The only lanes to the US where rates increased in 2008 were India to the East Coast, up 20 percent, and Middle East to the West Coast, up 17 percent.
The monthly Port Tracker report by the National Retail Federation said that container volumes in March at all US ports would be down seven percent from a year earlier. The first half of 2009 would be 6.6 million TEUs, down 12 percent from 2008.
US port authorities seem to be adjusting to the carnage quicker than the container lines and are acting less like deer caught in headlights. Their strategy is to get the private sector involved as much as possible and reduce the burden on taxpayers.
Virginia is having serious talks with real estate company CenterPoint to take over management of the state''s main terminals, including Hampton Roads, for 60 years for a fee of $9 billion; Oakland is leasing a large proportion of its terminals to Ports America for 50 years for $700 million; and Baltimore is looking for a private operator for its Seagirt terminal for 30 years.