TSA seeks interim $400 per FEU min.

   Container line members of the Transpacific Stabilization Agreement said Monday they plan to raise all-in freight rates and charges on the eastbound transpacific trade by a minimum of $400 per 40-foot container from Jan. 1.
   The planned increases are “an interim step prior to rolling out the agreement’s customary annual service contracting guidelines” based on “the urgent need to reset steadily falling freight rate levels in the trade during the past quarter.”
   The recommended increases – the TSA cannot require that members enforce the organization’s recommendations – apply to all shipments moving under individual carrier tariffs, as well as service contract cargo in all commodity segments where volume commitments have been met and/or contract provisions permit.
   By this time, the TSA has traditionally unveiled its rate guidelines for members to pursue in spring annual contract negotiations. But it has delayed the guidelines due to extreme uncertainty in the market, TSA Executive Administrator Brian Conrad said at a conference in Shenzhen last month.
   “The TSA haven’t released guidelines on 2012 yet because it’s unclear what the carriers need,” he said. “The carriers need more money next year, but the question is, can they get it. How much more pain can carriers handle?”
   On Monday, the agreement said bringing rates up to more viable levels will be pursued in a stepped approach.
   “Rather than adopting a single formal guideline increase, (TSA lines) will pursue various approaches to interim cost recovery and revenue restoration, whether in the form of across-the-board general rate increases, peak season surcharges or other mechanisms, depending on each carrier’s unique situation,” the agreement said.
   In all cases, the TSA said, the objective is to meet expected cargo demand growth and begin reversing 2011 revenue losses resulting from slower than expected demand, ongoing market uncertainty and the impact of short-term concessionary rates bleeding into 12-month 2011 service contracts.”
   “It’s no secret that the transpacific is a highly competitive freight market,” Conrad said in a statement. “Rate levels during 2011 have steadily eroded despite rising inland transport, cargo handling and other costs. Now, carriers are seeing stronger U.S. holiday season cargo volumes on the heels of positive economic GDP and retail sales data, as well as robust forward bookings leading into the early Lunar New Year factory holidays in Asia. As carriers look toward building a platform for the 2012-13 contract cycle, the feeling is that a correction is both imperative and overdue.”
   Conrad emphasized that these interim cost recovery and revenue restoration efforts are separate from TSA’s customary annual recommended revenue recovery program in connection with May 2012 contracts, which will be finalized and announced around the end of 2011 or at the beginning of 2012. In addition, he indicated that some lines, on an individual basis, will be pursuing further opportunities for restoring particularly hard-hit rates prior to Jan. 1.
   TSA members lines are APL, China Shipping, CMA CGM, COSCO Container Lines, Evergreen Line, Hanjin Shipping, Hapag-Lloyd, Hyundai Merchant Marine, “K” Line, Maersk Line, Mediterranean Shipping Co., NYK Line, OOCL, Yang Ming, and Zim.