Transpacific cargo demand has posted steady growth coming off a healthy holiday season, and container lines serving the Asia-U.S. trade lane say the gains are so far reflected in freight rates.
A January 15 general rate increase (GRI) taken by member lines in the Transpacific Stabilization Agreement (TSA) has added an average US$300 per 40-foot container (FEU) to rate levels. Strong forward bookings suggest that the increase will hold through the important Lunar New Year period, TSA says, and lines intend to build on the momentum with another $300 per FEU increase, effective March 15, and a further May 1 increase separate from rate adjustments planned for 2014-15 contracts.
“Carriers have left a lot of money on the table in this market as partially successful increases have been eroded over time,” said TSA executive administrator Brian Conrad. “There is now a growing sense that pent-up demand, depleted retail and business inventories, and a greater overall sense of economic security are converging in 2014. Lines are determined not to miss that opportunity.”
At the same time, TSA also announced its 12-month revenue and cost recovery program for 2014-15 contracts, which recommends increases to contract rates of $300 per FEU from 2013-14 levels for U.S. West Coast cargo and $400 per FEU for all other cargo. A key consideration at this time is the revenue baseline set as contract negotiations move forward.
“Simply rolling over last year’s contract rates – let alone reducing the rates, as some shippers have requested – is just not workable,” Conrad said, reiterating that no major transpacific carrier operated profitably in the trade in 2012 or 2013. “The goal is a meaningful net increase, with full cost recovery for fuel, chassis, free time and other costs, irrespective of supply/demand or other considerations.”