The Transpacific Stabilization Agreement, a discussion agreement of 15 container carriers who handle over 90 percent of the trade from Asia to the United States, said they were recommending a rate hike effective April 1, their fifth since last summer.
The across-the-board general rate increase (GRI) applies to all dry and refrigerated cargo and will be in the amount of $400 per 40-foot container (FEU) to the U.S. West Coast and $600 per FEU to all other destinations.
TSA said its members "want to shore up rate gains made to date as they look ahead to the post-Lunar New Year shipping period and as 2013-14 service contract negotiations intensify." Many transpacific shippers have annual contracts that run from May 1 through April 30.
TSA said "freight rates remain below compensatory levels despite previous adjustments" and that its members "want to ensure that 2013-14 contract rates contain meaningful net increases relative to 2012 contract levels."
“The week-long Lunar New Year factory closures in Asia tend to pull forward spring shipments, especially among retail customers,” explained TSA Executive Administrator Brian M. Conrad. “This translates into slowing cargo demand after the holidays, and is one of many such inflection points that can erode revenue throughout the year. Carriers are committed to keeping market rates stable over the next 6 to 8 weeks, as the contracting season ramps up."
Contract negotiations are expected to accelerate in the coming weeks, and Conrad emphasized that while current market rates have shown improvement, another year of longer term rates at 2012 contract levels – or with only minimal increases – is not sustainable. “It is essential to carriers’ long-term viability that new contracts include rates that are more closely aligned with current market levels,” he said.
TSA members include APL, CMA CGM, China Shipping, COSCO, Evergreen, Hanjin, Hapag-Lloyd, Hyundai, "K" Line, Maersk, MSC, NYK, OOCL, Yang Ming, and Zim.
TSA rate recommendations since last summer include:
- The July 2012 recommendation that TSA members increase dry cargo rates an average of $500 per FEU to the U.S. West Coast and $700 per FEU for all other shipments. It was also recommended that refrigerated cargo rates be increased of $1,000 per FEU to the U.S. West Coast and $1,250 per FEU for all other destinations, with effect from last Aug. 15.
- The September 2012 recommendation requested rates be increased $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. TSA suggested these increases become effective with contracts, from mid-October going forward, including “early bid” contracts concluded in late 2012 and early 2013, as well as with standard contracts which would typically take effect on May 1, 2013. They also “reiterated the need for full fuel cost recovery.”
- The October 2012 recommendation called for TSA members to implement a dry cargo general rate increase of $400 per FEU and $600 per FEU for all other destinations, effective Dec. 1. They later postponed the recommended start day to Dec. 15.
- In December, TSA recommended a GRI on dry cargo, effective Jan. 15, of $600 per 40-foot container on shipments to U.S. West Coast ports and inland coastal state destinations, and $800 per FEU to all other destinations.
Despite those reommendations, TSA's own revenue indexes - one for cargo going to West Coast or inland intermodal locations, the other for cargo going to the East and Gulf trade (http://www.tsacarriers.org/documents/TSArevindex1112.pdf
) - has shown little change in the past year.
Pegged at 100 in June 2008, before the recession, the West Coast income index has ranged in 2012 from 82.47 in January 2012 to a high of 90.68 in September 2012 and was 87.79 in November 2012, the last month for which data is available. The East Coast income index ranged from 73.96 in January 2012, reaching a high of 80.51 in August 2012, and was 77.73 in November 2012. - Chris Dupin