Island's two container ship lines.

Prices will eventually rise because stores will have to pay higher costs when freight rates increase.

The increase is vital to combat losses, according to Bermuda Container Line and Bermuda International Shipping.

Both lines have been losing substantial amounts of money for more than three years and say they can no longer afford to do that without one of them going out of business.

Yesterday's announcement ended a rate war between the two companies which has seen prices plummet over the past decade. The recession has also been partly blamed for the problems.

Rates are now expected to rise, so increasing the costs of imports and eventually leading to shops and stores having to raise prices to meet the difference.

BCL and BISL delivered the same press release yesterday. It stated that the Bermuda Discussion Agreement was sanctioned by the Federal Maritime Commission in Washington.

It read: "The Federal Maritime Commission Discussion Agreement was applied for by BCL and BISL in order to stabilise freight rates and restore them to a level of profitability after several years of heavy financial losses by both lines servicing the Bermuda trade.

"The Agreement will allow both parties to share information on operations, freight rates, equipment and vessel costs in the USA-Bermuda Trade.'' Representing BCL, which owns the Oleander , Mr. Robert (Skippy) Lewis said: "We just can't continue to operate the way we've been going. We needed to stop the haemorrhaging. We cannot bear it any longer.

"It is a joint thing. We had to come together to stabilise the whole thing.

It will probably mean price rises for consumers, but otherwise it would mean one of the companies closing down.

"In July we increased our rates. They are still substantially below 1983 levels.'' BISL owns the Bermuda Islander . Director Mr. Henry Hayward said: "The fact is that both lines were losing considerable amounts of money in the last few years because of the competitive factor in the freight rates.

"Bermuda wants container services to import the goods into the Island.

Consumers will have to pay more in the sense that rates will be the same as they were seven to eight years ago, or even 10 years ago. This will bring them into line with today's expenses.'' Chairman of the Chamber of Commerce's retail grocery division Mr. Tredick Gorham said any effect on the consumer would not be known until the new rates were fixed.

"If there is only a two percent rise then there will be little effect on prices,'' he said. "I cannot say until I know what they are doing. In the grocery trade it all depends on the stores. There is a lot of pressure to keep prices as low as possible even if there are cost increases.

"At some point I believe it will have some effect on prices because freight is one of the overall costs that must be taken into consideration.'' Last year a merger between the two shipping lines was rejected.