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Transpacific carriers
look to raise rates
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Transpacific container lines Tuesday said
they must secure rate increases in the upcoming contract year to avoid
“unsustainable conditions which will threaten to destabilize the trade.”
The Transpacific Stabilization Agreement, a discussion
agreement among 14 container carriers in the eastbound transpacific trade,
said they will work "on an individual and non-binding basis" to
let expire reduced short term/spot rates by the end of June and
"establish rates going forward in 2009-10 contracting at levels $500
to $600 per 40-foot container (FEU) above the low levels that some rates
deteriorated to over the last few months."
The TSA said chief executives of its members recently met and
vowed "to ensure that 2009-10 service contracts do not result in the
kind of non-compensatory, unsustainable rate levels that began to develop
principally in the ‘spot’ rate market during the off-peak this
winter."
The carriers also said they intend to "ensure that the
progress made in 2008-2009 contracting which produced an improved level of
fuel cost recovery continues."
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Widdows
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Ronald D. Widdows, TSA chairman and chief
executive officer of Neptune Orient Line, parent of TSA member APL, said,
"In spite of TSA members earlier announced intention to expire these
unsustainable rates, carrier behavior not only failed to arrest the
volatility in the trade, but contributed to further erosion in a number of
cargo segments, most significantly in the spot market.
"There have also been isolated incidents where these non-compensatory
rate levels have found their way into a small number of new contracts.
Everyone involved in this trade faces the certainty of significant losses
if quick action is not taken to approach the upcoming round of contract
negotiations with a renewed focus on rates that will support continued
servicing of this market. It will be evident shortly whether member lines
individually can rise to the challenge.”
Back in December, the TSA announced plans to amend their
agreement on file with the Federal Maritime Commission that would have
allowed them to discuss controlling capacity in the Asia/U.S. trade. That
sparked objections from groups such as the National Industrial
Transportation League and National Customs Brokers and Forwarders
Association of America, and requests for additional information from the
FMC. The TSA withdrew the request in February.
In its statement Tuesday, the TSA said its members
acknowledged the difficulties facing shippers and carriers alike in the
Asia/U.S. trade, as the continued global economic downturn has affected
U.S. consumer demand and curtailed manufacturing output and exports from
Asia.
“All carriers involved in the transpacific trade are adjusting
as best they can to this new cargo demand level, which will probably be
with us for some time to come,” said TSA Executive Administrator Brian
Conrad. “This is a time for all parties to come to the table with an eye
toward sharing the burden of this extraordinary market environment.
Carriers will see rates soften from their 2008-2009 levels -- however,
shippers will need to understand that in order to continue to be able to
service this market, the rates will have to settle at sustainable levels.”
Conrad said, "Carriers have reached a point where
financial survival, not utilization or market share, has to become the
driving force. Moving to establish rates at least $500 to $600 above the
levels to which the spot market has eroded, is a desperately needed first
step in the industry’s efforts to move away from a potential catastrophic
event."
On Monday the information service AXS-Alphaliner said average
weekly capacity in the Far East to North America trade were down 13 percent
in March compared to October 2008. It estimates there are 60 dedicated
liner services on the Far East-to-North America trade, down from 70
services in October 2008. It said 14 services have been withdrawn within
the last six months while four new services were introduced, to partially
replace the strings axed.
It said first quarter capacity was down 8 percent in
January-March 2009 compared to the previous quarter.
"A significant number of the ships displaced have been
sent into layup by the carriers as the industry grapples with the most
serious downturn in its history. Industry players have warned that rates in
the transpacific trade could fall dramatically, mirroring the rate
reductions already seen on the Asia/Europe trade lane."
In addition to APL, TSA members are China Shipping Container
Lines, CMA CGM, COSCO Container Lines, Evergreen Line, Hanjin Shipping Co.,
Hapag-Lloyd, Hyundai Merchant Marine, “K” Line, Mediterranean Shipping Co.,
NYK Line, OOCL, Yangming Marine Transport Corp., and Zim Integrated
Shipping Services.
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