Executive Briefings

Transpac Container Lines Slate Big Rate Increases for 2010

Member lines of the Transpacific Stabilization Agreement (TSA) (www.tsacarriers.org) will pursue big increases in ocean freight rates for the coming year, the group announced.

TSA, a carrier discussion agreement whose members are not bound by its decisions, said it seeks a collective general rate increase of $800 per 40-foot container (FEU) for freight bound for the U.S. West Coast, and $1,000 per FEU for intermodal moves and all-water routes to the East and Gulf coasts. Similar boosts are targeted for other equipment sizes. Most of the increases will kick in with the renewal of service contracts, beginning in May and June 2010.

In addition, TSA will continue its tradition of assessing a peak-season surcharge of $400 per FEU, beginning Aug. 1, 2010. Shippers can expect to be assessed additional surcharges for fuel and accessorial charges, TSA said.

TSA said the increases were necessary to offset "huge carrier losses" incurred by its members in 2009, thanks to steep rate reductions triggered by global recession. The group cited an independent analysis by AXS-Alphaliner, estimating that the top 17 global container lines lost a combined $6bn in the first half of 2009 alone. Drewry Shipping Consultants has predicted that carriers will lose at least $20bn for the full year in 2009, TSA added.

"Clearly, the industry entered trans-Pacific contracting in 2009 facing truly unprecedented trade conditions, in which cargo demand was deteriorating at an alarming pace," TSA executive administrator Brian M. Conrad said in a statement. "Those dynamics produced a panic to maximize ship utilization and maintain market share, leading to a precipitous collapse of rates. Most, if not all, trans-Pacific carriers find themselves operating in the red; it's a situation that is certainly not sustainable over the 2010-11 contract year."

Philip Chow, chief executive officer of TSA member OOCL, added that the recommended rate action will for the most part restore carriers only to the revenue levels of late 2008. The newly announced slew of increases "reflects a determination, finally that the race to the bottom on pricing in the trans-Pacific must stop," he said.

TSA said it will soon announce a schedule of customer forums across the U.S., to educate shippers about the impact on carriers of the current downturn. The group expressed "cautious optimism" over the prospects for economic recovery in the coming year, but stressed that it views the near future as a period of "significant uncertainty."

TSA consists of 14 container lines providing service from Asia to the U.S.

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Member lines of the Transpacific Stabilization Agreement (TSA) (www.tsacarriers.org) will pursue big increases in ocean freight rates for the coming year, the group announced.

TSA, a carrier discussion agreement whose members are not bound by its decisions, said it seeks a collective general rate increase of $800 per 40-foot container (FEU) for freight bound for the U.S. West Coast, and $1,000 per FEU for intermodal moves and all-water routes to the East and Gulf coasts. Similar boosts are targeted for other equipment sizes. Most of the increases will kick in with the renewal of service contracts, beginning in May and June 2010.

In addition, TSA will continue its tradition of assessing a peak-season surcharge of $400 per FEU, beginning Aug. 1, 2010. Shippers can expect to be assessed additional surcharges for fuel and accessorial charges, TSA said.

TSA said the increases were necessary to offset "huge carrier losses" incurred by its members in 2009, thanks to steep rate reductions triggered by global recession. The group cited an independent analysis by AXS-Alphaliner, estimating that the top 17 global container lines lost a combined $6bn in the first half of 2009 alone. Drewry Shipping Consultants has predicted that carriers will lose at least $20bn for the full year in 2009, TSA added.

"Clearly, the industry entered trans-Pacific contracting in 2009 facing truly unprecedented trade conditions, in which cargo demand was deteriorating at an alarming pace," TSA executive administrator Brian M. Conrad said in a statement. "Those dynamics produced a panic to maximize ship utilization and maintain market share, leading to a precipitous collapse of rates. Most, if not all, trans-Pacific carriers find themselves operating in the red; it's a situation that is certainly not sustainable over the 2010-11 contract year."

Philip Chow, chief executive officer of TSA member OOCL, added that the recommended rate action will for the most part restore carriers only to the revenue levels of late 2008. The newly announced slew of increases "reflects a determination, finally that the race to the bottom on pricing in the trans-Pacific must stop," he said.

TSA said it will soon announce a schedule of customer forums across the U.S., to educate shippers about the impact on carriers of the current downturn. The group expressed "cautious optimism" over the prospects for economic recovery in the coming year, but stressed that it views the near future as a period of "significant uncertainty."

TSA consists of 14 container lines providing service from Asia to the U.S.

Read Full Article