U.S.-Asia carriers say cost recovery ôimperativeö
Maersk's announcement last week that it will raise rates on services from the United States and Canada to Asia may be an initial step to similar news to come from other carriers in the trade.
'Given the strong market and increased volumes, it's imperative that lines recover the sharply higher round trip sailing costs they've seen in the Pacific this year as a result of a more than 65 percent increase in marine fuel costs,' said Niels Erich, a spokesman for the Westbound Transpacific Stabilization Agreement (WTSA).
He said bunker fuel prices have risen from an average $295 per ton in January 2007 to $495 in December.
In addition to rising fuel costs, carriers have experienced higher rail, truck and cargo handling costs associated with repositioning equipment, Erich said.
'The alternative, as trade lanes compete for vessel and container assets, is potential consolidation of vessel strings and reductions in port and inland locations served, trends that can already be observed in the Pacific,' he said.
Maersk, which is not a member of WTSA, said last week it will raise westbound container rates by $160 per TEU (dry), $200 per FEU (dry and high cube), and $220 per 45-foot high cube container. Maersk cited both higher fuel costs as well as 'strong export market growth to the Far East.'
WTSA is a research and discussion forum of 10 major ocean container shipping lines that carry cargo from ports and inland points in the U.S. to destinations throughout Asia and the Indian Subcontinent. Members of WTSA develop voluntary, non-binding guidelines for rates and charges.
WTSA said westbound transpacific cargo volumes grew by 11.7 percent in the first half of 2007, from 2.14 million TEUs to 2.28 million TEUs. That followed increases of 7.5 percent in 2006 over 2007. For the full year, WTSA said westbound cargo was expected to increase 12 percent to 15 percent in 2007 and 6 percent to 8 percent in 2008.
The Asia-North America trades are still highly imbalanced, with many empty containers moving back to Asia. But the imbalance has eased slightly, said the Transpacific Stabilization Agreement, the discussion agreement that represents carriers moving cargo in the other direction ' from Asia to the United States.
'At the beginning of 2007, the ratio of import containers from Asia to outbound export loads was 2.8:1, meaning nearly three containers arrived at U.S. ports and traveled locally or moved inland for every one loaded return to Asia. As many as one in four containers moving through any major U.S. container port at a given time was empty, requiring the same documentation, handling and other costs as a loaded container but with no offsetting revenue,” said information posted on the TSA Web site. 'That situation has eased somewhat, as imports have slowed and favorable exchange rates have encouraged export growth. But the ratio is still likely around 2.5:1, incurring significant costs to retrieve empty containers from inland U.S. locations and reposition them to Asia where they are needed'
In November, WTSA said that for wastepaper shipments to Asia, it recommended that members assess bunker fuel surcharges separately from base freight rates, allowing those surcharges to float and be adjusted regularly.
Erich said WTSA lines are now 'specifically negotiating to break out an increased bunker surcharge from base rates and allow it to float with fuel prices, for cotton and hay shipments in addition to wastepaper so far.'
He said 'WTSA rates and contracts are negotiated throughout the year on a commodity-by-commodity basis and carriers can be expected to apply the same approach where appropriate as other cargoes come up for discussion in 2008.'
WTSA said 'wastepaper, metal and plastic scrap, and hay account for more than a third of the total westbound cargo market, but growth in those commodities slowed relative to other major commodity categories such as horticultural items, lumber and logs, chemical resins, animal and vegetables by-products, animal feeds and manufactured products.
'Refrigerated meat and poultry moves were up nearly 7 percent as Asian markets continued to reopen to U.S. beef, but more significantly as pork and poultry exports grew. China again dominated the market in terms of volume and growth, but Korea and Southeast Asia, including Vietnam, posted strong gains,' it added.
WTSA said 'drought in Australia has created new opportunities for U.S. agricultural exporters in Asia' and noted that high commodity prices have driven up vessel charter rates and pushed some farm products that have traditionally moved in bulk – grain in particular – into containers.
It also said 'last-minute shipments relating to the 2008 Olympic Games could translate into a strong first half' of 2008. ' Chris Dupin