Ocean cargo rates to rise on Westbound Transpacific

Carriers say this is part of their ongoing effort to stem revenue erosion in the U.S.-Asia cargo market

By ·

Container shipping lines in the Westbound Transpacific Stabilization Agreement (WTSA) have announced a new round of incremental dry cargo rate increases, part of their ongoing effort to stem revenue erosion in the U.S.-Asia cargo market.

Effective April 1, WTSA is recommending a schedule of increases that will raise dry commodity rate levels by US$50 per 40-foot container (FEU) from Pacific Southwest ports (Los Angeles, Long Beach and Oakland) to Asia, and by $100 per FEU for all other cargo, moving via all-water or intermodal service from Pacific Northwest ports, from inland U.S. points and from the U.S. East and Gulf Coasts.

According to Peter Sand, chief shipping analyst for The Baltic and International Maritime Council in Copenhagen (BIMCO), carriers have made many necessary sacrifices, but continue to operate at over capacity.

“No one is really ready to change the current tactics and start reducing,” he said.

But U.S. shippers have argued that just the opposite is needed, as demand for exports ramps up.

WTSA lines also reaffirmed their commitment to fully apply higher bunker fuel surcharges scheduled to take effect on April 1 on top of the adjusted base rates. Agreement executive director Brian M. Conrad said it is critical for carriers in the current market environment that the westbound transpacific trade makes a greater contribution to network revenues.

“This is a moment of significant opportunity for U.S. exporters to Asia, and carriers want to ensure that service levels – in terms of schedule reliability, space and equipment availability, accurate and timely documentation, or other requirements – are in place to maximize that opportunity,” Conrad stressed. He noted the unique challenges of the westbound trade, such as the 2:1 cargo imbalance favoring eastbound imports from Asia, operational and cost challenges getting empty containers to remote inland load points, and capacity constraints due to the mix of heavier westbound cargoes and empty equipment on a typical sailing. “All of these factors add to cost and load planning complexity and must be adequately addressed in the rate structure,” he pointed out.

Regarding fuel surcharges, Conrad said WTSA lines are keenly aware of the low margins facing many westbound shippers of raw commodities and semi-finished goods.  But he cited independent industry estimates of carrier’ collective global losses of more than $5 billion as demand slowed, rates fell and operating costs – especially fuel costs – increased dramatically.

“Since the beginning of 2012 lines have seen their fuel costs rise steadily, and recently break through the previous record levels set in mid-2008,” he said.  “With bunker fuel prices now exceeding $750 per metric ton and bunker accounting for 60 percent of operating expense on a typical sailing, absorbing any portion of that cost on a sustained basis is not an option.”

 


About the Author

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 [email protected]

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!

Latest Whitepaper
New Supply Chain Technology Best Practices
New breakthrough developments, such as drones and driverless vehicles, seem to be everywhere.
Download Today!
From the October 2017 Logistics Management Magazine Issue
A leading distributor of professional salon products in the U.S. forms unique partnerships with its key LTLs to lower transport costs, reduce its carbon footprint and improve service to its 565 store locations.
Q4 2017 Rail/Intermodal Roundtable: Improvements apparent; work remains
LM Viewpoint: Collaboration, Now more than ever
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
EDITORS' PICKS
SalonCentric: One Beautiful Network
A leading distributor of professional salon products in the U.S. forms unique partnerships with its...
2017 Alliance Awards: Recognizing outstanding supply chain partnerships
In an era where effective supply chain collaboration is both highly valued and elusive, Logistics...

26th Annual Study of Logistics and Transportation Trends: Transportation at Digital Speed
While a majority of companies strongly agree that transportation is a strategically important...
34th Annual Quest for Quality Awards: Winners Revealed
Which carriers, third-party logistics providers, and North American ports have crossed the service...