The Transpacific Stabilization Agreement (TSA) said it will bring forward a previously announced May 1, 2014 general rate increase (GRI) to April 15 “in an effort to mitigate rate erosion seen in February and early March.”
The increase, set at US$300 per 40-foot container (FEU) for all commodities and origin/destination pairs, follows similar recommended increases implemented on January 15 and March 15.
“Final $300 GRI is intended to offset rate erosion in preparation for 2014-15 contract renewals,” a TSA e-mailed statement said.
Executive administrator Brian Conrad said the series of increases represents a necessary step in correcting a slide in rates that misrepresents actual conditions in the Asia-U.S. freight market.
“The downward rate pressures we are seeing do not reflect the steadily improving cargo picture eastbound from Asia,” Conrad said. “The Lunar New Year period was strong, with average vessel utilization numbers in the 95% range; while most people tend to focus only on the supply/demand imbalance, what is getting lost in the pricing discussion is service value.”
Conrad compared the rate situation in the trans-Pacific to decisions by governments worldwide to defer needed infrastructure investment. “We are in effect negotiating the annual operating budget for a major piece of global transportation infrastructure that happens to be privately financed,” he said.
“Competitive pressures to match the lowest short-term rate levels and lock them into 12-month service contracts across the board amounts to a significant deferred investment in the trade. Eventually we will have to stop pricing based solely on supply-demand and pay more attention to long-term service reliability and flexibility—hopefully before a crisis makes the problems more acute and the solutions far more costly.”
TSA is a research and discussion forum of major container shipping lines serving the trade from Asia to ports and inland points in the U.S. Its members include APL, China Shipping Container Lines, CMA-CGM, Cosco Container Lines, Evergreen Line, Hanjin Shipping, Hapag-Lloyd, Hyundai Merchant Marine, Kawasaki Kisen Kaisha, Maersk Line, Mediterranean Shipping Co., Nippon Yusen Kaisha, Orient Overseas Container Line, Yangming Marine Transport, and Zim Integrated Shipping Services.