The 15 container shipping companies that are members of the Transpacific Stabilization Agreement are recommending a "guideline" general rate increase (GRI) for all commodities in the amount of $400 per 40-foot container (FEU) to the U.S. West Coast and $600 to all other destinations, subject to contract terms, effective July 1.
The announcement by the discussion agreement came as Drewry Supply Chain Advisors said that average global freight rates fell 12 percent in April to a 15-month low, their lowest level since February 2012.
Drewry said eastbound transpacific pricing has retreated since April 1, when the TSA had recommended a similar $400/$600 GRI. Drewry said its benchmark rate between Hong Kong and Los Angeles fell below $2,000 per 40 foot container in April for the first time since March 2012 to $1,884 per 40 foot container.
Last Friday, the Shanghai Container Freight Index was at $2,093 per 40-foot container on the Shanghai-U.S. West Coast route, up $81 for the week, but down from $2,287 on March 1. On the Shanghai-U.S. East Coast Route, the index was $3,254, up $85 for the week, but down from $3,447 on March 1.
(On the Asia-Europe route, Drewry said rates fell 13 percent to $1,335 per 40-foot container, reaching below $1,400 for the first time since March 2012.)
As it announced the GRI on Tuesday, the TSA said its members "intend to pursue further revenue improvement that is essential if they
are to achieve financial viability and maintain service levels customers
expect in the service-intensive Asia-U.S. market."
Brian M. Conrad, the executive administrator of the TSA, said transpacific freight rates are still not keeping pace with rising costs, and a meaningful increase from current levels is essential to achieve profitability for the benefit of the trade.
“The revenue issue is not going away,” Conrad said. “We have to make the case repeatedly that short-term, off-season rates cannot be extended for 12 months or longer in contracts, and that new capacity entering the Asia-U.S. market reflects global trends and an investment in productivity to meet future long-term demand. It does not somehow diminish service value, and it does not justify moving cargo at unsustainable levels.”
TSA's own revenue index, which tracks average revenue per 40-foot container and which was pegged at 100 in June 2008, stood at 86.57 in March for West Coast and inland intermodal cargo. It has ranged from a high of 114.75 in August 2010 to a low of 77.02 in November 2011. The TSA revenue index was at 79.87 for East and Gulf Coast cargo in March. It has ranged from a high of 101.02, also in August 2010, to a low of 71.36 in November 2011. The TSA Revenue Index tracks average revenue per 40-foot container across the entire geographic scope of the eastbound transpacific trade. The index includes tariffs and service contracts representing more than 75 percent of eastbound cargo volume.
Conrad said that despite modest revenue gains in 2013-14 service contracts and subsequent increases taken by individual carriers in May, rates remain well below target levels needed to maintain profitability and invest for future growth.
He said increases implemented to date are partly offset by rising port charges, labor and inland transportation costs in both the U.S. and in Asia, including recent wage increases for East Coast and Hong Kong longshore workers, higher Suez Canal costs and higher rail and truck rates for inland equipment repositioning.
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, CMA-CGM, COSCO, Evergreen, Hanjin, Hapag-Lloyd, Hyundai, "K" Line, Maersk, MSC, NYK, OOCL, Yang Ming, and Zim. - Chris Dupin