Restoring West Coast Ocean Cargo Service May Be Costly Proposition

Expected post-Lunar New Year cargo growth will accelerate equipment, cargo handling and other costs going forward, maintain ocean carrier executives.

While the full impact on ocean carrier deployments to U.S. West Coat ports has yet to be measured, major players comprising the Transpacific Stabilization Agreement (TSA) are standing firm on raising rates.

According to TSA spokesman, Niels Erich, container shipping lines have begun the slow work of repairing their networks as U.S. West Coast congestion difficulties ease.

“At the same time, forward bookings suggest that post-Lunar New Year cargo demand will resume after the week-long Asia holidays and continue to pick up pace,” he said.

Restoring service levels and further ramping up to meet sustained and rising demand will, in turn, entail significant operational costs, carriers are forecasting.

Member carriers in the TSA say that overall freight revenues must rise to levels that will address higher long-term rail, truck, equipment management and cargo handling costs, as a “new normal” in shoreside and inland operations grows out of recent congestion difficulties and the new longshore labor agreement.

Toward that end TSA has reaffirmed its March 9 general rate increase (GRI) of $600 per 40-foot container (FEU) for all shipments, and lines have also filed a previously announced April 9 GRI in the same amount.

“Carriers are mindful that all affected parties face higher operating costs as well as lost revenue and business opportunities amid the current situation,” Conrad said.

But Conrad added that it is also a reality that carriers are all not simply returning to “business as usual.”

To the extent the U.S. economy is showing sustained recovery and the dollar is likely to remain strong against Asian currencies for some time, carriers need to step up their game, reverse some of the retrenchment seen since 2011 and complete the service integration necessary to fulfill scale and efficiency objective in the market.

“The limited improvement in freight rates to date neither addresses costs accrued since last September nor the network investment necessary through 2016 to meet customers’ needs,” said Conrad.

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