The Westbound Transpacific Stabilization Agreement loses APL
August 27, 2012 - LM Editorial
The Westbound Transpacific Stabilization Agreement (WTSA) is losing another member, as APL Ltd. announced its withdrawal effective September 1.
Remaining members comprise Hapag Lloyd, COSCO, K Line, Evergreen, Hanjin, Yangming HMM, OOCL and NYK.
APL spokesmen in Singapore indicated that cost of membership was not justified in the current “overcapacity” marketplace.
WTSA executive administrator, Brian M. Conrad told LM in an interview that demand will eventually rise and come into line with supply.
“Most estimates show that happening in the next 2-3 years. The question is how effectively carriers will manage assets and pricing in the meantime.”
Conrad added that the WTSA does not influence or manage vessel capacity decision making – that is a function purely for individual carriers based on their internal economics and objectives.
“That said, capacity imbalances have existed in global trade lanes for centuries. It is an inevitable condition of the industry,” said Conrad. “Scheduled carriers invest in ships and equipment over a 25-year time horizon while their principal revenue stream is freight rates based on 90-day bookings and 12-month contracts.”
Conrad added that recent decisions to purchase ships and container equipment are based on long-term economic and competitive factors – expanding global trade, high fuel costs, pursuit of lower slot costs through scale – along with external considerations such as favorable shipyard terms, cost of capital and exchange rates.
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