Transpacific shipping lines have announced an emergency revenue program for the first half of 2010, in an effort to obtain critically needed revenue prior to the usual service contracting season that begins for most carriers and their customers in May 2010. With every major transpacific carrier suffering massive losses reaching into the hundreds of millions individually, and estimated at $20 billion collectively for 2009, lines say they cannot afford to carry current rates forward another six months until the new round of 2010-11 contracts is signed.
Member lines in the Transpacific Stabilization Agreement (TSA) have adopted a voluntary guideline Emergency Revenue Charge (ERC) of US$320 per 20-foot container (TEU); $400 per standard 40-foot container (FEU); $450 per high-cube FEU; and $505 per 45-foot container, effective January 15, 2010. TSA emphasized that the ERC is an interim charge that is distinct from a previously announced general rate increase (GRI) of $800 per FEU for West Coast port-to-port and local cargo, and $1,000 per FEU for all other all-water and intermodal shipments. The ERC is intended to expire upon execution of new contracts in 2010.
'Taking this step now, as many shippers face the stress of an economy that is still a long way from recovery, is not what carriers would have preferred,' said TSA Chairman Ron Widdows. 'But without some improvement in the economics of this trade in the very near future, they will be left with some very tough choices that involve either moving even more aggressively to individually consolidate or reduce the number of services now offered, or incur further losses that in the longer term are simply not sustainable.'
'We're looking at the ERC as a bridge to get carriers through the first half of 2010, recognizing that the current rate levels do not adequately cover the cost of operating assets in this trade,' said Jack Yen, President of Evergreen Marine Corp. and a member of TSA's Executive Committee. 'Without this additional revenue, along with further steps to lower operating costs, carriers will continue to lose millions of dollars on a daily basis.
'While the U.S. economy is showing signs of bottoming and gradual recovery, the slight uptick in volumes makes little difference due to the excessively low rate levels that now prevail in the trade,' Mr. Yen added. 'The transpacific customer base relies heavily on the container transport infrastructure to provide reliable, time-sensitive, value-added supply chain services. As an industry, we're sending out an SOS to the shipping community with this emergency charge.'
TSA lines say they will be engaging with customers in various ways depending on how their contracts are structured, applying the ERC where contract terms allow, and seeking to negotiate reopening of contracts that do not provide for interim adjustments. The TSA guideline recommends that early bids or new contracts with early start dates prior to May 1 be quoted with the full, previously announced GRI.
TSA members also noted the 81% increase in marine fuel prices year to date in 2009 ' adding more than $520,000 to the cost of a single Asia-U.S. sailing to the West Coast, and nearly $720,000 to a single East Coast all-water sailing. TSA carriers reaffirmed their commitment to assess the full, floating TSA guideline bunker charge of $348 per FEU to the West Coast and $689 per FEU to the East and Gulf Coasts, effective for the calendar quarter beginning January 1, 2010, and to similarly apply the full charge as adjusted on April 1, 2009 to subsequent contracts.
And in a related move, TSA said it will amend its agreement on file with the U.S. Federal Maritime Commission to provide members with additional authority to discuss matters relating to slow steaming or other environmental initiatives that will enable the industry to more significantly reduce emissions and other impacts, at the same time it reduces operating costs.
