Rate agreement plans to raise freight rates for dry cargo traveling from the U.S. to Asia.
Container shipping lines in the Westbound Transpacific Stabilization Agreement (WTSA) have announced plans to increase rates for dry cargo from locations in the United States to Asian ports. The WTSA says the proposed increase is part of an effort to stem revenue erosion in the U.S.-Asia cargo market.
Effective April 1, WTSA is recommending a schedule of increases that will raise dry commodity rate levels by $50 per 40-foot container (FEU) from Pacific Southwest ports, including Los Angeles, Long Beach and Oakland, Calif. to Asia. Rates for all other cargo, moving via all-water or intermodal service from Pacific Northwest ports, from inland U.S. points and from the U.S. East and Gulf Coasts will rise by $100 per FEU.
WTSA lines also reaffirmed its commitment to apply higher bunker fuel surcharges, scheduled to take effect on April 1, on top of the adjusted base rates. Brian Conrad, WTSA’s executive director, says it is critical for westbound transpacific trade carriers to make a great contribution to network revenues.
WTSA is a ground of 10 ocean and intermodal container shipping lines serving the trade from ports and inland points in the U.S. to destinations throughout Asia.
“This is a moment of significant opportunity for U.S. exporters to Asia, and carriers want to ensure that service levels—in terms of schedule reliability, space and equipment availability, accurate and timely documentation, or other requirements—are in place to maximize that opportunity,” Conrad says.
He adds the unique challenges of the westbound trade, including the 2:1 cargo imbalance favoring eastbound imports from Asia, operational and cost challenges getting empty containers to remote inland load points, and capacity constraints due to the mix of heavier westbound cargoes and empty equipment on a typical sailing. “All of these factors add to cost and load planning complexity and must be adequately addressed in the rate structure,” Conrad says.
Regarding fuel surcharges, Conrad says independent industry estimates of carriers’ collective global losses exceeded $5 billion as demand slowed, rates declined and operating costs increased significantly. “Since the beginning of 2012, lines have seen their fuel costs rise steadily, and recently break through the previous record levels set in mid-2008,” he says. “With bunker fuel prices now exceeding $750 per metric ton and bunker accounting for 60 percent of operating expense on a typical sailing, absorbing any portion of that cost on a sustained basis is not an option.”