Transpacific Lines Push for Price Hikes

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Informa - IFW Apr 03, 2012

As container shipping lines face 2011 losses estimated in the billions of dollars across their global networks, member carriers in the Transpacific Stabilization Agreement (TSA) have reaffirmed their commitment to restore rate levels on the trade – beginning Thursday.

The move comes as the TSA carriers – APL, CSCL, CMA-CGM, Cosco, Evergreen, Hanjin, Hapag-Lloyd, HMM, K LIne, Maersk, MSC, NYK, OOCL, Yangming and Zim – begin 2012-13 contract talks with customers.

The TSA carriers are recommending a second, across-the-board guideline rate increase of US$300 per feu, effective 15 March, following the successful price hike on 1 January.

The TSA said Thursday’s general rate increase (GRI) was intended to bring Asia-US freight rates back up to near 2011 contract levels, “establishing a baseline for upcoming contract negotiations”.

And as most annual contracts come up for renewal, in May, the TSA lines would look to raise rates – with perhaps further increases later in the year, “after a review of market conditions and outlook for the second half of 2012”.

By 1 May, the lines will be looking for a price hike of $500 per feu for cargo to the US west coast and $700 per feu for all other destinations.

“The erosion in transpacific rates during 2011 has been well-documented and dramatic,” said TSA Executive Administrator Brian Conrad.

“If carriers adopt a marginal increase that only partially offsets huge losses as costs continue to rise, the result is another 18 months of losses. This year in particular, rate recovery must be meaningful in order to maintain service levels and, ultimately, carrier viability.”

And he warned customers not to assume that the winter season spot rates on isolated route segments should set contract prices through to mid-2013.

“While there may be excess global capacity, infrastructure constraints continue to limit vessel size and utilisation,” he said.

Bunker fuel prices had exceeded $700 per tonne since the beginning of the year, and US?west coast prices in particular were approaching the record levels seen in mid-2008. In addition, he said, improved employment, income, housing and consumer spending numbers suggested improved demand in the coming year.

“There has been a lot of uncertainty in the market and we should not assume the challenges are behind us,” Conrad said. “Still, indications look generally positive for a recovery in the trade, making it all the more important for shippers and carriers to co-ordinate their forecasting and plan for contingencies, and for carriers to adequately manage and recover their costs.”

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