Transpacific contract rates outlook appears foggy

Beneficial cargo owners and other industry experts are divided on whether transpacific contract freight rates will rise or fall in 2018, but it’s clear most shippers expect total transportation costs for their overall supply chain to be higher this year.    Beneficial cargo owners (BCOs) and other industry experts are divided over what direction contract freight rates in the transpacific trade are likely to move in 2018, according to a study conducted by the Gemini Shippers Association, IHS Markit and the Journal of Commerce (JOC).
   A paper on the survey findings was distributed in conjunction with JOC’s TPM (Transpacific Maritime) Conference, which runs this week in Long Beach.
   When asked about transpacific contract rates this year, 41.2 percent said they expect an increase, 29.3 percent forecast no change, and 26.6 percent anticipate a decline, with the remainder not offering a response.
   The same survey found a majority of shippers are expecting total transportation costs for their overall supply chain to be higher this year.
   For their overall transportation spend, 62.7 percent of those surveyed anticipate an increase in 2018, while 22.4 percent expect no change, and 11.9 percent expect overall transportation spend to go down. The remaining participants did not offer an opinion.
   “While price remains the main contract driver, consideration of service dependability, customer support, technology, and carrier stability rank high on the BCO checklist,” the report said.
   The report also noted how 36.2 percent of those surveyed believe carrier service has declined over the past 24 months, with the same percentage saying service is the same. Only 8.6 percent said carrier service has improved over the past two years.
   Many shippers looking to have products transported from Asia to North America are now in the process of negotiating 12-month contracts that begin May 1.
   The white paper where the survey was published suggests that “to nail down cost predictability, BCOs must design requests for proposals requiring all-in pricing that includes all accessorials and surcharges.”