JULY 12, 2001
NUMBER 6300-01

Far Eastern Shipping Co. (FESCO) is reducing its presence...
FESCO to exit trans-Pacific trade
Updated 3:25 p.m. ET, Wed Jul 11, 2001

Far Eastern Shipping Co. is reducing its presence in the brutally competitive trans-Pacific trade, and will most likely exit the trade eventually. "Our long-term plan will not include the trans-Pacific eastbound," said Mike Evans, director of sales and marketing at Fesco Agencies North America in Seattle. Fesco's primary services have always been in the North America-Australia-New Zealand trade and Australasia-Asia trade. When freight rates in the eastbound Pacific rose dramatically in 1997, Fesco saw an opportunity to enter the trans-Pacific. "We tried to complete the triangle with the eastbound Pacific service," Evans said. Imports from Asia have been basically flat so far this year. At the same time, capacity in the trade continued to increase as carriers introduced larger vessels. Freight rates dropped this spring as carriers negotiated contracts for the 2001-2002 shipping season that began May 1. Since then some carriers have re-negotiated contracts and rates declined further. "Rates have dropped at least 30%. I don't see a great recovery happening," Evans said. Fesco operates in the Pacific in a partnership with Great Western Steamship Co., with Fesco supplying the vessels. Fesco will restructure its service and reduce its exposure in the eastbound Pacific. The line is considering two short-term options: one, to lease its ships to Great Western and pull out of the trade completely, or to lease the ships but slot charter some space. Fesco has still not decided what approach to take. Bill Dale, president of Great Western, declined to comment. Industry analysts note that while most carriers are struggling in the trans-Pacific, times are especially difficult for smaller lines. The established carriers have reduced their rates to the levels of the niche operators, and yet the larger carriers continue to offer frequent departures and rapid transit times. If the smaller lines refuse to lower their rates further - and some can not afford to do so - shippers will push more of their cargo to the established lines. Fesco, which is based in Russia, is also restructuring its Russian Far East service. It will no longer call directly in Russia from the U.S. West Coast. Rather, Fesco will purchase slots on Westwood Shipping Lines vessels for service from Seattle to Pusan, South Korea. The containers will then move on vessels operated by Hyundai Merchant Marine from Pusan to the Russian Far East. Frequency will actually improve, though, from monthly service at present to fortnightly, Evans said.