POSCO agrees to better rates system

POSCO and Korean shipping companies in charge of carrying POSCO's steel products discussed ways to improve the POSCO rates bidding system. During the October 25th meeting, both sides agreed to form a committee composed of officials from POSCO, various shipping companies, and the Korea Shipowner's Association.

Since POSCO adopted the rates bidding system last July 1st, Korean shipping companies and the KSA proclaimed that over-competition amongst shipping companies has dropped rates by 11%, creating hardships for medium sized shipping companies.

However, POSCO took the position that since the rates bidding system was introduced only three months ago, if there are any problems, they need to be fixed gradually. POSCO said there is no way to satisfy both sides, POSCO and the shipping companies, except through the bidding system.

POSCO planned for only 19 Korean shipping companies to participate in the bidding at the beginning and as the next step to expand and include other qualifying Korean shipping companies.

However, as many Korean shipping companies strongly objected, POSCO started to revise its bidding criterion.

POSCO set the standard for "suitable vessels" last October 1st, restricting bidding to vessels younger than 20 years, and prohibiting chartered vessels for less than six months of service.

Korean shipping companies asked POSCO that short-term (below six months) chartered vessels or older vessel be taken out of the bidding, and that for qualifying companies, contract prices and carrying vessels should be open to the public. They also requested the formation of the committee between POSCO and the shipping companies.

POSCO reacted positively toward accepting the Korean shipping companies' offers, so the bidding system revisions should be completed by early November.