Ocean container carriers push "significant" rate hikes
Transpacific Stabilization Agreement will push hikes of $1,000 per container
Dave Hannon -- Purchasing, 10/7/2009 3:13:50 PM
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Discussion Topic: Negotiations strategies for 2010 logistics contracts
With the battle for dwindling ocean container volumes consuming most ocean carriers this year, container rates have plummeted, most notably in the Pacific lanes, where carriers claim to be losing money on some business just to keep ships moving. But heading into 2010, most ocean freight buyers can expect that to change.
The Transpacific Stabilization Agreement, a group that represents ocean container carriers shipping from Asia to the U.S., this week said it is pushing another round of "significant" rate hikes in a frantic effort to restore rates to their 2008 levels.
According to a statement from TSA, the rate hikes will include a general rate increase of $800 on each 40-foot container for shipments from Asian ports to the West Coast and $1,000 for each 40-foot container headed to the U.S. East and Gulf Coast.
The TSA is also issuing a $400 peak season surcharge effective August 1, 2010 "to address higher cargo handling, equipment positioning and contingency planning costs during periods of peak cargo volume."
TSA members will also enforce full collection of fuel and other accessorial charges.
The TSA admitted that the current rate levels were the fault of its members' "panic" to deal with plunging volumes during the global recession.
"Clearly, the industry entered Transpacific contracting in 2009 facing truly unprecedented trade conditions, in which cargo demand was deteriorating at an alarming pace," said TSA executive administrator Brian Conrad. "These dynamics produced a panic to maximize ship utilization and maintain market share, leading to a precipitous collapse of rates. Most, if not all, transpacific carriers find themselves operating in the red; it's a situation that is certainly not sustainable over the 2010-11 contract year."
As reported on Purchasing.com, the TSA issued a round of rate hikes earlier this year, citing similar concerns heading into the contracting season. But clearly, 2009 has put ocean carriers into uncharted waters. In a recent report, Drewry Shipping Consultants said recession that hit in the latter half of 2008 "led to a complete collapse of container trade. But, now is the time for management [of carriers] to test their resolve and make bold decisions."
Drewry forecasts a "small recovery" in container traffic and trade flows in 2010 which will be more than offset by the supply side. "Over-capacity is now the critical feature in the container landscape," Drewry says. "Managing over-capacity and keeping costs contained needs some clear management focus if container businesses are to survive the challenging market conditions that will prevail until at least 2014."
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