TSA PREDICTS EASTBOUND CAPACITY BALANCE, NEED FOR RATE RISES

   Strong containerized cargo growth in the trade from Asia to the U.S. will continue to absorb additional ship capacity in the eastbound Pacific trade, an executive of the Transpacific Stabilization Agreement said.
    "Carriers generally expect 1999 cargo growth from Asia to the U.S. in the 10-percent range, with a further 8-percent growth in 2000," Albert A. Pierce, executive director of the TSA and of the Westbound Transpacific Stabilization Agreement, told an industry conference in Hong Kong.
    "All indicators point to a continued strong U.S. economy and sustained consumer and business demand for Asian products," he added. "Assuming those growth levels, it can be expected that supply and demand for vessel space — with the new capacity — will remain roughly at equilibrium."
    Referring to the entry of six new shipping lines in the Pacific trade this year, Pierce said that the demand for added vessels and service strings "was evident prior to May 1," when Pacific carriers introduced eastbound rate increases of about $900 per 40-foot container. He questioned whether carriers would have been willing to add capacity if rates had not been increased.
    Referring to last year’s rate rises, Pierce said that "there is absolutely no way TSA carriers as a group could have made a $900 to $1,000 general rate increase, plus a $300 peak season surcharge, stick if the market did not support it."
    Transpacific rates at the beginning of 1999 were down more than 30 percent since 1995 and the May 1999 rate increases and surcharges brought freight rates "back up to 1994 levels at best," he said.
    "We want the market to function at its most efficient level – and it does," Pierce commented.
    TSA carriers have announced another rate increase of $400 per 40-footer for next year, and the reinstitution of the $300 peak season surcharge from July 1 through Oct. 30.