JOC reporters face a delicate balancing act in covering annual contract talks between ocean shippers and carriers. The container industry is difficult to cover because contract rates are confidential. We develop sources among carriers and shippers who tell us what’s going on, at times reporting what they’re saying without identifying who’s said it. And when our stories hit print, the other side, be it a shipper or a carrier, sometimes faults us for taking the other’s side.
Take this year’s annual contract rate negotiations. After the JOC’s big TPM conference in Long Beach in March, which usually sets the tone for those talks, we wrote several stories about what shippers were telling us about their contract negotiations in the Pacific and Atlantic trades. Although trans-Pacific carriers implemented a series of rate increases recommended by the Transpacific Stabilization Agreement, we heard from shippers that carriers were offering rates at the same levels as their 2011 contracts, give or take a few hundred dollars per container.
That didn’t make a lot of sense to us, because carriers lost an estimated $6.5 billion last year. On top of that, bunker fuel prices, a primary factor in those losses, were continuing to rise through the first few months of this year.
Just after the TSA carriers put a March 15 general rate increase of $300 per 40-foot equivalent unit into effect, several shippers told us — and we reported — that they were getting contract offers from carriers at last year’s levels. Soon after the story appeared, an executive with one of the Asian carriers called. He wasn’t complaining about the story but asking for help.
“We’re fighting for our lives here,” he said. “Can’t you provide our side of the picture?” He said his line desperately needed rate increases to offset rising fuel costs and stem the red ink. “How can I get the increases we need when the shippers across the table from me have read your story?” We explained that it’s our responsibility to cover both sides of the rate negotiation story as we hear it from both sides.
I told one of my shipper sources about the call. “I can sympathize with that because the carriers don’t put the pressure on,” he said. “If the carriers had said: Look we need to get $250 per container or we’re in deep trouble, I’d give it to them. But they don’t press. They come in and say: ‘Here it is and it’s the same as last year.’ And I say, ‘OK, thanks.’ ”
After all the carriers’ talk about needing increases of $400 to $500 per container, is this the same old rattling of sabers we’ve been seeing for years?