Container line members of the Transpacific Stabilization Agreement have recommended a rate increase from Dec. 1, ahead of a previously announced increase on rates for new contracts negotiated now through May, the TSA said Tuesday.
The lines will seek rate increases of $400 per FEU to the U.S. West Coast and $600 per FEU for all other destinations. TSA member Maersk Line announced its Dec. 1 rate hike this week
TSA said the Dec. 1 increases are advised “to establish a more compensatory rate baseline for contracts that will be in effect through mid-2014.” The discussion agreement said eastbound transpacific operators “continue to resist downward pressure on rates in the early days of their 2013-14 contract negotiations.”
The TSA pointed to “recent flat or declining revenue growth in some commodity categories, as winter season demand weakens and existing contracts expire, making further revenue improvement critical.”
In September, TSA carriers outlined a recommended rate increase
of $800 per FEU to the U.S. West Coast, $1,000 per FEU via all-water to the U.S. East and Gulf Coasts, and $1,200 per FEU for intermodal shipments via all coasts for the upcoming contracting season, including “early bird” contracts that end in late 2012 or early 2013.
TSA members also sought an increase
of $500 per FEU to the U.S. West Coast and $700 per FEU to other destinations in August.
“Even though contracts run 12 months or more, rates ebb and flow throughout the year depending on contract timing and structure, as well as cargo seasonality,” said TSA Executive Administrator Brian Conrad. “This is especially true in the fourth quarter, as peak season traffic begins to ease, and more so this year, as U.S. holiday retail shipments were moved forward amid labor uncertainty. Lines want to be sure that revenue gains made earlier in the year are not prematurely eroded in upcoming contracts.”
The TSA carriers have also adopted a guideline increase on refrigerated cargo from all Asian origins – including Pakistan, Bangladesh and Sri Lanka – to all U.S. destinations of $1,500 per standard and high-cube FEU, effective Jan. 1.
The increase mirrors one announced in September by Maersk Line and followed by a number of other carriers.
“The revenue situation for refrigerated cargo is so dire at this point that some lines are increasingly scaling back participation in the market because moving rates are below cost,” Conrad explained. “This increase follows years of gradual rate deterioration; the message to the trade is that rates are unsustainable and will not support the purchase, lease, operation and maintenance of very sophisticated and costly equipment.” - Eric Johnson