TRANSPACIFIC RATE INCREASES

TSA confirms rate increases in March and April

Transpacific carriers cite port congestion and stronger demand as economy improves.

By Chris Dupin |Thursday, February 26, 2015

   The 15 container shipping companies that are members of the Transpacific Stabilization Agreement said they are recommending carriers move forward with two previously announced general rate increases of $600 per 40-foot containers (FEUs) on March 9 and April 9.
   The carrier discussion agreement cited both congestion that has developed in recent months at West Coast ports during the negotiations between employers and longshoremen over a new contract, and what it expects will be stronger demand as the economy improves as reasons for raising rates.
   “Overall freight revenues must rise to levels that will address higher long-term rail, truck, equipment management and cargo handling costs, as a ‘new normal’ in shoreside and inland operations grows out of recent congestion difficulties and the new longshore labor agreement,” TSA said.
   “Carriers are mindful that all affected parties face higher operating costs as well as lost revenue and business opportunities amid the current situation,” said Brian Conrad, the president of TSA. “But it is also a reality that we are all not simply returning to business as usual. To the extent the U.S. economy is showing sustained recovery and the dollar is likely to remain strong against Asian currencies for some time, carriers need to step up their game, reverse some of the retrenchment seen since 2011 and complete the service integration necessary to fulfill scale and efficiency objective in the market. The limited improvement in freight rates to date neither addresses costs accrued since last September nor the network investment necessary through 2016 to meet customers’ needs.”
   “We are looking at several months ahead where demand, as we see it, will be increasing. We are going to be digging out of the current situation and trying to invest for the longer term. It is an attempt to bring the rate structure up a bit,” said Niels Erich, a spokesman for the TSA.
   Erich noted that the TSA has reduced the recommended guidelines for bunker surcharges. The bunker surcharge for the first quarter of 2015 for containers moving to the West Coast, for example, was $444 per 40-foot containers and is slated to drop to $336 per FEU for the second quarter. The low sulfur component during the same period is slated to drop from $53 to $49 per FEU.
   Many contracts with TSA carriers run from May 1 to April 30 of each year. In October, TSA said it had published guidelines that recommended carriers seek minimum eastbound rates in contracts of $2,000 per FEU and $1,800 per TEU from Northeast Asia ports to the U.S. West Coast and $3,800 per FEU and $3,150 per TEU to the U.S. East and Gulf Coasts, respectively.
   From Southeast Asia ports to the U.S. West Coast it recommended rate minimums of $2,150 per FEU, $1,935 per TEU to the U.S. West Coast and $3,950 per FEU and $3,285 per TEU to the U.S. East and Gulf Coasts.
   It noted intermodal base rates will vary by destination, but proposed CY rates to Chicago-area ramps of at least $4,100 per FEU from North Asia and $4,250 per FEU from Southeast Asia.
   TSA members include APL, China Shipping, CMA CGM, Cosco, Evergreen, Hanjin, Hapag-Lloyd, Hyundai, “K” Line, Maersk, MSC, NYK, OOCL, Yang Ming, and ZIM.
   TSA only recommends rates to members who negotiate contracts with individual shippers confidentially.