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Issue #590 | Perishables | Mediterranean | Middle East | Africa Trade

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Peroshables

Mediterranean | Middle East | Africa Trade

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2014 Media Kit
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Trans-Pacific peak season heats up, fuel prices hit record levels

By: | at 07:00 PM | Liner Shipping  

TSA lines report year-to-date cargo growth up 8.2% over first nine months of 2006.

After a brief slowdown in August, Asia-U.S. cargo demand rebounded in September, apparently in anticipation of a healthy holiday season. Container shipping lines in the Transpacific Stabilization Agreement (TSA) report strong growth in shipments during September, with high vessel utilization rates continuing through the first week of October.

In September TSA lines carried more than 488,000 40-foot containers (feu), a near 12% gain over September 2006, bringing the third quarter total to 1.36 million feu ’ up 9.1% from third quarter 2006. Cargo volume for the first nine months of 2007 totaled 3.42 million FEU, up 8.2% from the 3.16 million carried during the same period a year earlier. Totals and comparisons were based on cargo moved by the lines that belonged to TSA in 2006.

All of the current TSA member lines reported near-full ships through the month of September and first week of October, most notably in the high-traffic Southern California segment, which saw 97% utilization or better over those five weeks. With West Coast services at or near capacity, and with concerns about possible West Coast labor disruption during upcoming longshore contract negotiations, all-water services to the East Coast through the Panama Canal have seen strong growth in recent months. Third quarter all-water cargo volumes were up by an average 26.8% over 2006. Year-to-date East Coast all-water volumes are up an average 17.2%. Utilization on TSA members’ Panama Canal services have averaged 95% or higher since the beginning of August.

‘While one would expect moderation in transpacific growth, the market is nonetheless growing, and at a healthier pace than some earlier reports indicated,’ said TSA chairman Ronald D. Widdows, CEO of American President Lines. ‘The tendency to look at a snapshot of one month, one gateway or one commodity segment and draw conclusions about the bigger picture can be misleading.’

Widdows also emphasized that growth is taking place in the context of sharply rising fuel prices, which can account for a half or more of a typical carrier’s operating cost per sailing. Marine bunker fuel prices reached record prices in late October, varying by load port but in the range of $450 per ton ’ up from around $400 per ton at the beginning of the month, $350 at the beginning of June, and under $300 at the beginning of 2007.

‘Carriers are looking at a 50% increase in marine fuel costs alone during 2007,’ Widdows noted. ‘The structure of the vast majority of contracts in the TP trade did not anticipate the degree of escalation in fuel costs that has occurred. In a trade where many of the carriers were not operating profitably prior to the most recent run-up in fuel prices, the additional pressure coming from the rapid escalation in fuel cost in recent weeks is simply not sustainable.’

‘When we come back to the table in this year’s contract discussions with customers,’ he added, ‘we are going to have to revisit the fuel cost issue and, as difficult as it may be, tackle the issue of a full floating charge, adjusted monthly, to more appropriately share the burden of fuel cost escalations, just as all other transport modes have done in the U.S. and globally.’ In the meantime, Widdows said, between now and May 2008 carriers will be exploring any and all options available to them, to control operating costs and mitigate the impacts of higher fuel prices. He added that TSA is in the process of finalizing its 2008-09 revenue and cost recovery program and will announce it shortly.

TSA is a research and discussion forum of 14 major container shipping lines serving the trade from Asia to ports and inland points in the US.