Trying to maintain pricing momentum in the trans-Pacific, shipping lines that carry U.S. imports from Asia announced two proposed rate hikes that could increase freight rates $800 per 40-foot container over the next three months.
The Transpacific Stabilization Agreement, a discussion group representing 15 of the largest carriers in the trade lane, called this week for a voluntary rate increase of $300 per FEU to take effect on March 15.
The TSA also recommended an additional increase of $500 per FEU to West Coast ports, and $700 per FEU on intermodal services to interior destinations and on all-water services from Asia to the East Coast.
The proposed increases come as carriers and importers are preparing for to start annual service contract negotiations for the 12-month period beginning on May 1. They also come amid aggressive new Asia-Europe rate increases from individual carriers that would effectively double prices on that troubled trade lane.
Freight rates in the major east-west trade lanes took a prolonged dive last year as a flood of new capacity caused carriers to compete fiercely for cargo. In the trans-Pacific, the spot rate for shipping a 40-foot container from Hong Kong to Los Angeles dropped almost to $1,400 per FEU by mid-December, according to the Drewry Container Rate Benchmark.
Rates suddenly spiked in January, however, as factories in Asia ramped up production before shutting down for the annual Chinese New Year celebrations that began on Jan. 23.
TSA members hope to ride that momentum for another GRI of $300 per FEU to take effect on March 15. “The March (general rate increase) is intended to bring Asia-U.S. freight rates back up to near 2011 contract levels, establishing a baseline for upcoming contract negotiations,” the TSA said in a statement.
They also announced the intention to collect full, floating fuel surcharges to cover the cost of bunker fuel, which is currently around $700 per metric ton.
“The erosion in trans-Pacific rates during 2011 has been well-documented and dramatic,” said Brian Conrad, TSA’s executive administrator. “If carriers adopt a marginal increase that only partially offsets huge losses as costs continue to rise, the result is another 18 months of losses.”
The TSA is a discussion agreement, which means its members can talk to each other about rate increases. However, individual carriers are free to set their own freight rates in confidential negotiations with customers.