Transpacific container carriers say more freight rate hikes ahead

TSA lines forecast “significant increases in shoreside and inland rail, truck and equipment management costs during 2015.”    Fifteen container shipping companies in the transpacific trade say they are planning back-to-back freight rate increases of $600 per 40-foot container (FEU) next week and in March, and a possible additional rate hike in April.
   The Transpacific Stabilization Agreement, whose 15 members carry nearly all containerized cargo from the Asia to the United States, said it had reaffirmed support for a recommended $600 per FEU increase in rates first announced Jan. 16. The rate increase would go into effect Feb. 9, 2015. TSA indicated it will ”follow with a second $600 per FEU increase on March 9, with an April increase likely to follow, in an amount to be determined and announced later.”
   TSA also said “Container lines are forecasting significant increases in shoreside and inland rail, truck and equipment management costs during 2015 and beyond as demand remains strong, as cargo and equipment imbalances widen, and as locomotive, truck and equipment shortages in key locations push up rates.”
   It added “These conditions reflect long-term operational challenges separate from the ongoing labor contract negotiations, and are not expected to be quickly resolved.”
   “Cargo demand for Asian containerized imports has remained strong through the typically slower winter season and heading into the Lunar New Year holidays,” said TSA.
   TSA said its members “report consistently full sailings into the Pacific Northwest and via all-water Panama and Suez routes to the U.S. East and Gulf Coasts, as well as 95 percent utilization or better through California ports hardest hit by congestion. This suggests an overall strong market apart from recent cargo diversion trends, and is consistent with broader indicators of economic growth affecting the Asia-U.S. trade over 2014,” the group said. “The current environment has encouraged TSA lines to move ahead with revenue improvement measures which they say will help support continued carrier service investments heading into the pre- and post-Lunar New Year shipping periods, while laying a sustainable pricing foundation for 2015-16 service contracts.”
   TSA said its members have also recommended upward adjustment of previously announced guideline minimum service contract rates.
   Revised minimum contract rate levels are as follows, with proportionate levels for other equipment sizes.

• U.S. West Coast: $2,000 per FEU from North Asia; $2,150 per FEU from Southeast Asia.
• U.S. East/Gulf Coasts: $3,800 per FEU from North Asia; $3,950 per FEU from Southeast Asia.
• Inland to Chicago container yards: $4,100 from North Asia; $4,250 from Southeast Asia.

   TSA said its members stressed the need to optimize equipment flow and move cargo efficiently given recent operational challenges, and therefore, have committed to avoid exemptions to, or reductions of, special equipment, service and other non-rate items in 2015-16 contracts.
   “The transpacific freight market is maturing,” suggested TSA executive administrator Brian Conrad. “We should not continue to measure it against double-digit annual growth seen a decade ago, but rather in the context of a healthy, steadily improving trade.” He added that, similarly, the excess vessel supply reported globally is often overstated in the transpacific because it does not take into account infrastructure and other operational constraints.
   “The primary imbalance in the transpacific is not so much one of supply versus demand,” Conrad explained, “but rather one of costs versus revenue, that in turn drives service.”
   The TSA members are APL, China Shipping, CMA CGM, COSCO, Evergreen, Hanjin, Hapag-Lloyd, Hyundai Merchant Marine, “K” Line, Maersk, MSC, NYK, OOCL, Yang Ming and ZIM.