Subscribe to our free, weekly email newsletter!


Ocean cargo rate hikes should take hold in the Transpacific

Carriers say strengthening demand and a reversal of rate erosion seen since the end of 2012 are critical to ongoing negotiations with freight shippers
By Patrick Burnson, Executive Editor
April 03, 2013

Transpacific container shipping lines say a combination of leading market indicators and forward bookings suggest the beginnings of a gradual upturn in cargo volumes. As a consequence, general rate increases (GRIs) appear to be taking hold this month.

Transpacific Stabilization Agreement (TSA) executive administrator Brian M. Conrad said the current trend of modest but steady growth is expected to continue in 2013, with improved vessel utilizations already apparent throughout April, following the traditional post-Lunar New Year lull.

“Coming off a period of close to zero cargo growth in 2012, the outlook is definitely more positive at this point,” he said.

Carriers say strengthening demand and a reversal of rate erosion seen since the end of 2012 are critical to ongoing negotiations with freight shippers toward signing the 12-month contracts under which more than 90% of containerized cargo from Asia to the U.S. moves. Most of those contracts come up for renewal on or around May 1.

The April 1 increases are intended to restore current market rates closer to sustainable levels, to then pave the way for negotiation of further meaningful increases in the contracts themselves. Carriers will continue to assess the current market in the coming months, seeking further opportunities for improvement in moving market rates.

Conrad stressed that despite repeated efforts to shore up rates during the 2012-13 contract season as contracts permitted, revenue gains were inconsistent, as reflected in dire financial reports and ongoing industry consolidation, service changes and formation of new alliances. “As we head into the bulk of the negotiations in April,” he explained, “it is critical for shippers to understand that rates which reflect little or no increase in rates over 2012 levels are simply not sustainable in the long run. The financial repercussions are serious, and carriers are looking to ensure that new contracts include rates that reflect a meaningful increase above 2012 levels, and closer to the post-April 1 market trends.”

In an inteview with LM, TSA spokesman, Niels Erich, said the fundamentals of the U.S. economy remain strong, and lines expect retail imports from Asia to steadily strengthen in the coming months. This is particularly the case for segments like home furnishings, building supplies and back-to-school.

“Look at recent carrier financial reports and announcements of service consolidations and asset sales - they can’t just lock in contract rates for another year at post-Lunar New Year levels,” he said. “It would be money left on the table that can’t be made up somewhere else and can’t be reinvested in service expansions or improvements down the road.”

About the Author

image
Patrick Burnson
Executive Editor

Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

BNSF said that its 2015 capital expenditures will be allocated towards various areas of its business, including maintenance and expansion of the railroad to meet the expected demand for freight rail service, with 2015 representing the third straight year BNSF has invested a record annual capital expenditures investment.

While the ongoing labor negotiations between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) ostensibly going from bad to worse, following the ILWU’s announcement late last week that it was halting negotiations from November 20 through November 30, a Congressional group last week penned a letter to PMA and ILWU leadership expressing concern over the state of the negotiations.

The ongoing themes of tight capacity and carrier pricing power are still in full effect, much to the dismay of shippers, based on the most recent edition of the Shippers Condition Index (SCI) from freight transportation forecasting firm FTR.

Information abounds about the growing trend of electric lift trucks and the advantages and disadvantages of the electric solution. Amid all of the information from so many sources, what's the truth about electric lift trucks? This complimentary white paper breaks through the clutter to review why electric lift trucks are gaining in popularity and also to review their challenges, as well as their economic and environmental benefits.

Three weeks after initiating a coordinated series of slowdowns that have mired the major West Coast ports of Tacoma, Seattle, Oakland, Los Angeles and Long Beach, the ILWU has pushed away from the bargaining table.

Article Topics

News · All topics

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA