Transpacific ocean cargo carriers to stage Peak Season rate hike

Container shipping lines in the U.S. export trade lane to Asia are recommending phased, across-the-board increases in freight rates, beginning October 1, 2015. The scheduled action reflects the trade’s recovery from congestion challenges earlier in the year; a strengthening market heading into what is typically the trade’s peak season; and an urgent need to halt damaging rate erosion.

Effective October 1, member carriers in the Transpacific Stabilization Agreement (TSA)’s Westbound section will be seeking to establish new target rates in all dry commodity segments that translate into modest increases in most cases, with higher proportionate increases for the most depressed rates. TSA-Westbound lines say they expect to follow with similar, gradual increases in November and December.

Transpacific shippers should be concerned about a reduction in capacity, too, as there may soon be a shakeup on the TSA alignment.
In the wake of one government-backed carrier being reportedly being put up for sale (Singapore’s NOL), China is preparing to merge two of its state-owned shipping entities, China Cosco and China Shipping Container Lines (CSCL).

“U.S.-Asia freight rates have fallen to historically low levels since the beginning of 2015 due to a strong dollar and unusually weak emerging market demand,” said TSA-Westbound executive administrator Brian Conrad. “Current westbound rate levels in many cases do not fully cover costs. At best, they make only a nominal contribution to a round-trip sailing, and barely compete for space aboard ship with empty repositioned containers needed in Asia. Worse, at a time when westbound equipment is already in short supply, depressed rates encourage migration of containers to other trades.”