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Higher US-Asia wastepaper rates proposed
Strong demand, plus rising equipment and handling costs, drive September increase.Trans-Pacific container lines are recommending a second-stage 2005 increase in US-Asia wastepaper rates, in order to accommodate demand growth and address steadily higher cargo handling and equipment positioning costs in Asia.
Carriers in the Westbound Transpacific Stabilization Agreement (WTSA) have adopted a voluntary guideline increase in wastepaper rates, of US$50 per 40-foot container (FEU), effective September 1, 2005. The action is the latest in a series of incremental increases that reflects the high volume of wastepaper moving in the US-Asia container trade, as well as the unique characteristics of the cargo and its routing, as these relate to equipment positioning.
Wastepaper shipments to Asia grew by 4.1% in first quarter of 2005, to 212,000 FEU or about 21% of the total westbound transpacific trade. Shipments in 2004 totaled 746,000 FEU. Wastepaper moves at relatively low margins and freight rates. At times it is shipped and stored at destination awaiting a buyer. Buyers are often located in industrial areas far from the retail centers where the container will move next for eastbound loading. Containers must be specially cleaned and maintained after carrying a load of wastepaper, typically at a port location, requiring an additional truck trip. Cost impacts are multiplied by the high volumes at which wastepaper moves.
WTSA lines said that a current 2.5-to-1 ratio of cargo and containers crossing the Pacific to the US versus to Asia puts severe pressure on carriers to turn westbound equipment quickly and deliver it in good condition to eastbound shippers. Delays in unloading, maintaining and repositioning equipment can result in significant added round trip cost and possible lost business.
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