Having succeeded in raising their freight rates several times since Jan. 1, carriers in the eastbound Pacific will try to secure another rate increase in early August.
The proposed rate hikes are even higher than previous ones as the import trade from Asia enters the peak shipping season. Carriers are aiming for a dry cargo increase of $500 per 40-foot container to the West Coast and $700 to all other destinations. Previous rate hikes were about $300 to $400 per FEU. The lines intend to implement the rate increases during the first week of August.
Rate hikes suggested by the carrier discussion group Transpacific Stabilization Agreement also include an increase of $1,000 per FEU on refrigerated imports from Asia moving to the West Coast, and $1,250 on reefer shipments to all other destinations, effective Aug. 15.
Cargo consolidators, known as non-vessel-operating common carriers, are concerned that they will be the ones paying the increased rates because many direct importers and retailers, or beneficial cargo owners, have clauses in their service contracts prohibiting additional rate increases during the life of the contracts.
After collectively losing more than $5 billion in their global operations in 2011, and reporting additional losses in the first quarter of 2012, carriers are seeking a return to profitability. They are counting on tightening capacity in the eastbound Pacific to help them achieve this goal.
“Carriers across the entire trade are determined to maximize yield from ships they expect to approach full utilization throughout the summer months,” said Brian Conrad, TSA’s executive administrator.
TSA spokesman Niels Erich said carriers have generally been experiencing vessel utilization rates of 90 percent or higher in recent weeks. Services to Southern California and the all-water routes via the Panama Canal to the East Coast are experiencing utilization rates in the mid- to high-90s, Erich said.
Carriers since Jan. 1 had implemented four rate increases in the eastbound Pacific trade before this latest announcement.
It appears that many of the rate hikes have stuck because the Drewry spot rate for NVO shipments from Hong Kong to Los Angeles stood at $2,700 per FEU during the week of June 22, up from $1,264 in December 2011.
However, BCOs that signed confidential service contracts with carriers this spring reportedly negotiated rates around $2,000 per FEU or lower.
Contact Bill Mongelluzzo at email@example.com. Follow him on Twitter @billmongelluzzo.