Transpacific Stabilization Agreement plans more rate hikes

Having played their hand on an earlier rate hike announcement, the 15 member carriers in the Transpacific Stabilization Agreement (TSA) are recommending a further increase of $400 per 40-foot container (FEU) effective April 15, 2012.

Less than 10 days ago, TSA had announced a March 15 $300 general rate increase (GRI) which they expect to be widely applied, to address rates that remain below baseline levels at that time.

According to TSA executive administrator Brian M. Conrad, the recommendation reaffirms the resolve of transpacific container lines to improve Asia-U.S. market rates as they move forward in a new round of contract talks with customers. The increase comes just ahead of the previously announced May 1 recommended increase of $500 per FEU for US West Coast cargo and $700 per FEU for all other shipments.

He spoke with SCMR last week in advance of his speech at a an industry event staged in Southern California focusing on Asia Pacific maritime issues.

Although at that time he did not signal another rate “adjustment,” he did indicate that rates might be hiked to sustain carrier operations:

“Current market uncertainty worldwide has made it difficult to plan for long-term reinvestment in and configuration of carriers’ global services,” he said Markets are increasingly news-driven and prone to wild swings.”
TSA lines also stressed that they remain committed to recovering record high fuel costs through separate bunker and inland fuel surcharges. They also say they intend to implement a peak season surcharge (PSS) later in the year, with the amount and duration to be determined soon, based on a review of anticipated market conditions moving into the summer and fall months.

“Carriers operating in the Pacific are at a critical juncture,” said Conrad. “Once again, as in 2009, we are back to a situation in which nearly all major carriers in the trade are moving cargo at a loss. For any carrier rate or cost recovery effort to be meaningful in 2012-13, it must reflect an actual increase from rates in effect at the beginning of the previous year; and it cannot extend promotional short-term rates in select trade segments to all commodities and all routes for 12 months.”

Conrad pointed to the service consolidation already seen in the trade, including elimination of service strings, and deteriorating schedule reliability. “Supply and demand is no longer the only or even the primary consideration in carrier pricing,” he said. “The conversation needs to focus on sustained carrier viability and service quality in a major, recovering trade lane with complex and sophisticated service needs.”

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