Drewry cautions TP rate hikes won’t stick

   Transpacific ocean carriers may find it hard to get planned rate increases on the eastbound trade to stick, according to London-based research and consultancy firm Drewry.
   Drewry’s container rate benchmark from Hong Kong to Los Angeles ticked up 3 percent in the last week to $2,542 per FEU, about $71 per FEU higher than the week prior.
   But that’s far below the $500 per FEU lines are seeking from Asia to the U.S. West Coast. In mid-July, the Transpacific Stabilization Agreement announced recommended rate increases for its members of $500 per FEU for U.S. West Coast shipments and $700 for other North American destinations on Aug. 1.
   Drewry noted that previous attempts to raise rates on the trade have yielded some positive effects for carriers, but that those increases have receded in subsequent weeks.
   “The previous increase in the rate was in mid-June, when carriers pushed through a peak season surcharge of about $450, though most of this gain has since been lost,” Drewry said.
   Martin Dixon, Drewry’s research manager for freight rate benchmarking, said market fundamentals will make it hard for this increase to have traction.
   “The apparent failure of this week’s GRI is down to two factors,” Dixon said. “Carriers are staggering the implementation of this month’s GRI, so further rate recovery is to be expected over the next 10 days.
   “But it also reflects the weak state of the market, as soft demand growth and insufficient capacity correction weighs on rates. We expect freight rate levels to drift back downwards through the latter part of August,” he said.
   Rate levels, it should be noted, are about 50 percent higher than a year ago, 44 percent above the 2011 full-year average and 40 percent higher than the 2006-2011 historical average rate, according to Drewry’s index.
   “While we expect further reduction in eastbound transpacific spot rates through the remainder of the year, importers and exporters will have to consider the impact of any big increase in spot rates between late 2011 and late 2012 on contract rates for 2013 and adjust their negotiation strategy accordingly,” Dixon said. – Eric Johnson