The Transpacific Stabilization Agreement, a discussion agreement among 14 container carriers in the eastbound transpacific trade, said they will work “on an individual and non-binding basis” to let expire reduced short term/spot rates by the end of June and “establish rates going forward in 2009-10 contracting at levels $500 to $600 per 40-foot container (FEU) above the low levels that some rates deteriorated to over the last few months.”
The TSA said chief executives of its members recently met and vowed “to ensure that 2009-10 service contracts do not result in the kind of non-compensatory, unsustainable rate levels that began to develop principally in the 'spot' rate market during the off-peak this winter.”
The carriers also said they intend to “ensure that the progress made in 2008-2009 contracting which produced an improved level of fuel cost recovery continues.”
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“There have also been isolated incidents where these non-compensatory rate levels have found their way into a small number of new contracts. Everyone involved in this trade faces the certainty of significant losses if quick action is not taken to approach the upcoming round of contract negotiations with a renewed focus on rates that will support continued servicing of this market. It will be evident shortly whether member lines individually can rise to the challenge.'
Back in December, the TSA announced plans to amend their agreement on file with the Federal Maritime Commission that would have allowed them to discuss controlling capacity in the Asia/U.S. trade. That sparked objections from groups such as the National Industrial Transportation League and National Customs Brokers and Forwarders Association of America, and requests for additional information from the FMC. The TSA withdrew the request in February.
In its statement Tuesday, the TSA said its members acknowledged the difficulties facing shippers and carriers alike in the Asia/U.S. trade, as the continued global economic downturn has affected U.S. consumer demand and curtailed manufacturing output and exports from Asia.
'All carriers involved in the transpacific trade are adjusting as best they can to this new cargo demand level, which will probably be with us for some time to come,' said TSA Executive Administrator Brian Conrad. 'This is a time for all parties to come to the table with an eye toward sharing the burden of this extraordinary market environment. Carriers will see rates soften from their 2008-2009 levels — however, shippers will need to understand that in order to continue to be able to service this market, the rates will have to settle at sustainable levels.'
Conrad said, “Carriers have reached a point where financial survival, not utilization or market share, has to become the driving force. Moving to establish rates at least $500 to $600 above the levels to which the spot market has eroded, is a desperately needed first step in the industry's efforts to move away from a potential catastrophic event.”
On Monday the information service AXS-Alphaliner said average weekly capacity in the Far East to North America trade were down 13 percent in March compared to October 2008. It estimates there are 60 dedicated liner services on the Far East-to-North America trade, down from 70 services in October 2008. It said 14 services have been withdrawn within the last six months while four new services were introduced, to partially replace the strings axed.
It said first quarter capacity was down 8 percent in January-March 2009 compared to the previous quarter.
“A significant number of the ships displaced have been sent into layup by the carriers as the industry grapples with the most serious downturn in its history. Industry players have warned that rates in the transpacific trade could fall dramatically, mirroring the rate reductions already seen on the Asia/Europe trade lane.”
In addition to APL, TSA members are China Shipping Container Lines, CMA CGM, COSCO Container Lines, Evergreen Line, Hanjin Shipping Co., Hapag-Lloyd, Hyundai Merchant Marine, 'K' Line, Mediterranean Shipping Co., NYK Line, OOCL, Yangming Marine Transport Corp., and Zim Integrated Shipping Services.
