Maersk to Rejoin TSA

Maersk Line is reapplying for membership in the Trans-Pacific Stabilization Agreement, which has been trying for two years to get it to rejoin the discussion agreement.

Maersk Line quit the TSA in 2004 because of concerns that it was not promoting stability on the largest U.S. trade lane and because of disappointment over the rate increases secured by carriers that year.

When Maersk rejoins the group it will bring its membership up to 15 carriers that transport more than 90 percent of trans-Pacific import container volumes. The group’s market share could attract scrutiny by U.S. antitrust regulators, including the Federal Maritime Commission even though, as a discussion agreement, the TSA cannot set freight rates or allocate capacity.

"Five years ago, the market conditions were vastly different than they are today,” said Lars Mikael Jensen, Maersk’s vice president for the Pacific trade, network and product. “Most trans-Pacific carriers are operating at a loss. To overcome the challenges facing the industry, it is crucial to build a cohesive relationship with shippers.

The decision by the world’s largest container line to re-join the TSA comes after the trans-Pacific trade has incurred industry losses estimated to be $3 billion or more. “The market remains extremely fragile; continued rate declines could result in far-reaching and possibly permanent implications for global trade, including fewer services,” Jensen said in a statement released Monday.

“Maersk Line is convinced that restoring profitability long-term is needed in the marketplace and has demonstrated market leadership in this regard,” Jensen said.

“It is imperative that service levels involving vessel capacity and string frequency across the Pacific do not suffer as a result of continued rate deterioration. The purpose of Maersk Line’s participation in the TSA is to develop a platform that allows customers and carriers to find stability for years to come, avoiding the gross fluctuations of 2009. This business must be managed for long-term health,” Jensen said.

Maersk’s decision to rejoin underscores the growing importance that carriers place on TSA membership since it was reorganized in 2007 under the leadership of Ron Widdows, CEO of Neptune Orient Lines, who has convened periodic meetings between carriers and shippers to discuss market conditions.