Drewry's Trans-Pacific Benchmark Rate Soars 15 Percent

Drewry's Trans-Pacific Benchmark Rate Soars 15 Percent

Drewry’s Hong Kong-to-Los Angeles Container Rate Benchmark soared 15 percent or $323 this week, reflecting the April 1 general rate increase. The Transpacific Stabilization Agreement and some of its member carriers, including OOCL, MSC and CMA CGM, announced hikes of $400 per 40-foot container to the West Coast and $600 per FEU to all other destinations. They achieved just over 80 percent of the proposed GRI to the West Coast.

Drewry Container Rate Benchmark, April 3, 2013

The benchmark rate jumped to $2,500 per FEU in the week of April 3, according to the latest release of the Drewry Hong Kong-Los Angeles Container Rate Benchmark, after dropping last week to its lowest level in 2013. The current rate is up 24.7 percent from the same week in 2012 and almost 13 percent or $287 from the beginning of 2013.

It remains to be seen whether the spot rate falls off in weeks to come, as it did following the Jan. 15 GRI. Jefferies shipping analyst Johnson Leung said carriers need an increase of $200 to $300 per FEU to break even on the trade, “so $50 per FEU or no increase would be disappointing.”

“Trans-Pacific container shipping lines say a combination of leading market indicators and forward bookings suggest the beginnings of a gradual upturn in cargo volumes, and that is helping to support the latest round of general rate increases that took effect on April 1,” said Niels Erich, spokesman for TSA, in today’s press release.

Erich goes on to quote TSA Executive Administrator Brian M. Conrad who says that steady growth is expected to continue in 2013 and states that the outlook is more positive now than in 2012. “It is critical for shippers to understand that rates which reflect little or no increase in rates over 2012 levels are simply not sustainable in the long run. The financial repercussions are serious, and carriers are looking to ensure that new contracts include rates that reflect a meaningful increase above 2012 levels, and closer to the post-April 1 market trends,” Conrad explains.