Tanspacific container lines announce 2003 rate program

Container shipping lines operating from Asia to the U.S say they must improve their overall revenue situation in 2003 if they are to keep pace with service demands in the world?s largest ocean shipping trade lane.
Chief executives of 14 major Pacific carriers, meeting in Washington D.D this past week, say they intend to raise base freight rates across the board in their 2003 -04 tariffs and service contracts by US $700 per 40-foot container (FEU) for all-water services to U.S West Coast and East Coast ports, and by US$900 for all intermodal inland point and cross ?country minilandbridge shipments, with proportionate increase for other equipment sizes and cargo otherwise rated. The increase will take effect upon expiry of current contracts or May 1, 2003, whichever is sooner.
Carriers also plan to include provisions in upcoming contracts that address ongoing cost considerations. Specifically;
Contracts will be subject to tariff terminal handling charges (THCs), quarterly adjusted fuel surcharges and all other applicable accessorial charges.
A peak season surcharge of US$ 300 per FEU will be applied from June 15 through October 31, 2003.
Free time allowances will be limited to those provided for in standard tariff provisions.
New contracts will contain language allowing for future implementation of surcharges to cover government mandated port/maritime security costs, as those costs arise.
Finally, lines announced a further extension of the current US$300 per FEU peak season surcharge through November 30, 2002, given expectations for a continued strong market and full ships well into the fall season.
The 14 carrier CEOs, meeting as members of the Transpacific Stabilization Agreement (TSA) discussion forum, cited several factors driving the 2003 rate increase and revised contract terms an evolving transpacific market; customer demand for more extensive and sophisticated services; steadily rising information technology, equipment and other costs; and the decline in rates since late 2001 below levels considered compensatory.
Transpacific cargo demand grew by 17.5% in first half 2002 over the same period in 2001, to nearly 1.9 million 40-foot container loads (FEU), and July 2002 year ?on-year cargo volume is up 24%. Behind the more obvious explanations for this growth ?replenishment of business inventories, consumer spending related to a strong real estate market, low interest rates, and a strong dollar ?is a larger issue, the lines concluded.
A critical mass of foreign manufacturing investment has steadily been transforming Asia into the primary manufacturing source for the U.S and much of Europe. The transpacific freight market now accounts for about 16% of global container trade, according to Drewry Shipping Consultants, making it the world?s largest trade has. Some 60% of the trade moving from Asia to the U.S is from China, including the gateway of Hong Kong.
A growing share of the trade is manufacturing and retail supply chain shipments from contract factories or joint venture plants in Asia. This segment of the business relies more heavily on end-to-end, time-definite transportation and logistics services, requiring real-time shipment visibility on the Internet and complex consolidation and distribution services.
?Carriers have been struggling to provide the full range of transportation and logistics services customers expect in a highly competitive environment,?said Transpacific Stabilization Agreement (TSA) Executive Director Albert A. Pierce. ?They?ve increased service levels and lowered rates, hoping to make up the difference in managing and bringing down costs. Despite major progress in cost control, failure to restore rates in 2002 will likely result in transpacific carrier losses of some $2billion this year. Carriers are simply not being adequately compensated for the service provided.?
Pierce noted, in addition, that several smaller carriers, including some that entered the transpacific trade after rates increased in 1999, have since scaled back or canceled services.
As the Asia ?U.S freight market evolves from a two ?way export ?import trade lane to balanced manufacturing investment supply line, several key trends have resulted. Peak seasons are greatly extended in healthy years and compressed into short, sharp spikes in economically troubled ones, marking it difficult to scale vessel and equipment fleet sizes. Vessel loading stowage, trip and contingency planning have become more complicated to accommodate time sensitive moves. Lastly, unpredictable, inadequate revenue streams limit carriers?flexible to pursue longer-term capital investment and service improvements.
Carriers anticipate another strong transpacific market next year from Asia to the U.S., with at least 8-9% cargo growth overall and 14% growth out of China. The rate program, they add, will be critical to maintaining service viability, expansion and choice in such an environment.
TSA is a voluntary discussion and research forum of 14 major container shipping line serving the trade from Asia to port and inland point destinations throughout the U.S.