Eastbound trans-Pacific spot rates fall short of goals

Eastbound trans-Pacific spot rates fall short of goals

Drewry’s benchmark spot rate from Hong Kong to Los Angeles rose to $1,900 per 40-foot container this week.

Attempts by the trans-Pacific carriers to institute a two-tiered July general rate increase fell just short of realization, as Drewry’s benchmark rate from Hong Kong to Los Angeles showed carriers achieved $300 of the $400 per container in spot rate increases proposed for July.

Members of the Transpacific Stabilization Agreement originally proposed two sets of GRIs for July: one, $200 per 40-foot container charge set for July 1, and a second of the same amount that planned for July 15. This week’s jump in Drewry’s spot rate from Hong Kong to Los Angeles ― the spot rate came in at $1,900 per FEU, $100 more than the previous week ― was only half of the recommended GRI.

The July 1 installment was fully realized at $200 per FEU. TSA members fell short of their July goals by $100 per FEU. Because of increased cargo heading to U.S. West Coast ports due to the contract negotiations between the International Longshore and Warehouse Union and the Pacific Maritime Association, and also to keep up with the revenue improvements, TSA members announced this week that they are aiming for a $600-per-FEU GRI slated for Aug. 1.

“It is essential for trade to have a rate structure that encourages reinvestment, attracts equipment back to the market, covers rising inland transportation and handling costs, and enables carriers to broaden their service offerings,” TSA Executive Administrator Brian Conrad said. “Given current rate levels, TSA members believe that $600 per FEU is the minimum needed to reach those objectives.”

The mid-July GRI didn’t seem to have much of an impact on the Shanghai Containerized Freight Index. The index, which prices for the week ahead and came out July 11, was down from China to the U.S. West Coast, dropping 0.9 percent for the week ahead, which includes two days of the GRI implementation. The SCFI spot rate to the West Coast sat at $1,824 per FEU this week.

In the week between GRIs, spot rates are expected to drop, especially because trans-Pacific eastbound spot rates have barely clung on to any gains made in the past six months.

“Drewry expects rates to weaken through the remainder of the month before rising briefly on the back of the [Aug. 1] GRI by TSA carriers, but how long they will last will depend largely on the outcome of the ILWU-PMA contract negotiations,” Drewry said.

Contact Corianne Egan at cegan@joc.com and follow her on Twitter: @CEgan_JOC.