Rate volatility on the trans-Pacific ocean trade illustrates that existing regulations are not working as intended, according to the new the new head of UPS’s forwarding division in Asia.
Jeff McCorstin, appointed president of global freight forwarding for UPS’s Asia-Pacific region in September, told the JOC that the Transpacific Stabilization Agreement was “not working as intended”.
“We would prefer, and our customers would prefer, rational pricing,” he said. “We want known and stable pricing so we can plan. We want constant GRIs to go away. The TSA helps but I don’t believe its original intentions are being met, either for lines or for customers.”
The TSA is a voluntary agreement between lines established in 1989 to develop non-binding guidelines for rates and charges on Asia-U.S. services as a means of bringing pricing and capacity stability to the trade. However, rates on the trans-Pacific both eastbound and westbound have suffered huge fluctuations over the last year despite lines introducing GRIs and PSSs with growing frequency to help stem losses.
McCorstin said the addition of mega-container ships onto the Asia-Europe trade had seen smaller ships — many of them still over 10,000 TEUs capacity — cascaded onto the trans-Pacific trade. New surcharges by lines, slow-steaming strategies and canceled sailings have been used to reduce supply and keep a lid on spot rate declines, although with little effect in 2013, as rates have slumped.
He said he was hopeful the P3 Network, which will link the operations of Maersk Line, Mediterranean Shipping Co. and CMA CGM from the second quarter of 2014 if regulators clear the arrangement, was a sign that lines will cooperate more in future to help manage the market and avoid volatility.
“Code sharing has taken place in many industries,” he said. “The passenger airline industry is one example and I’m comfortable with it.”
“We believe there’s enough competition in the liner market,” McCorstin said.
“This is an extension of driving down costs in the supply chain, which is good for all users and consumers,” he said. “Our job is to offer solutions that drive costs out of the supply chain so we support any type of alliance which can help us do this.”
Contact Mike King at firstname.lastname@example.org.