Tuesday, September 25, 2012

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TSA member carriers want baseline rates raised for 2013-14 contracts

Container lines on the Asia-U.S. route are determined to make a comeback from 2011 and 2012 losses, and intend to raise the baseline standard for freight rates as negotiations begin for 2013-14 customer contracts.

Participants in the Transpacific Stabilization Agreement (TSA) have issued a new set of guideline rate changes to be applied to all service contracts from Asian origins, effective in mid-October. This includes "early bid" contracts decided in late 2012 and early 2013, and standard contracts that take effect on May 1, 2013.

TSA recommends rate hikes 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.

TSA members restated the need to recoup full fuel costs, including the bunker charge. The low-sulfur component will address the increased cost of using cleaner fuels within North America coastal zones, and a new intermodal fuel component that converts the current three-tier inland fuel surcharge into a single bunker charge will go into effect January 1, 2013.

TSA executive administrator Brian M. Conrad said that for container lines to reverse dramatic losses, they must address the sharply discounted rates that landed in 12-month contracts due to price wars in key trade lane segments. "The eastbound transpacific is a dynamic, highly competitive market," Conrad said.

"Rates negotiated for one route or commodity too easily go viral, spreading to all routes and commodities. That may often be the nature of markets, but it does not necessarily mean those rates are anywhere near economically sustainable for lines carrying the cargo," he said.

Conrad defended the higher sustainable rate structure because overall rates fell so far in early 2012. "It is critical that, between individual lines' announced September rate initiatives and the TSA guideline adjustments, there will be a reasonably compensatory baseline in place for the coming contract year, beginning with early contracts coming up for renewal," he said.

TSA members project that most of the new vessel capacity launched in the transpacific trade during 2012-13 will be offset rising demand, slow-steaming and other factors.

Inland transport, equipment repositioning, cargo handling, feeder ship and maintenance and repair costs will rise by 8 percent over 2012-13, which will be evident as new labor contracts are signed in coming months.

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