Member carriers in the Transpacific Stabilization Agreement (TSA) Westbound section have recommended guideline minimum rates of $300 per 40-foot container (FEU) from Los Angeles/Long Beach and $750 per FEU for all-water U.S. East Coast and Gulf Coast shipments of recovered fiber, scrap metal, plastic scrap and hay to China base ports. The new minimum rates are scheduled to take effect Nov. 1, 2014.
The TSA says the rate hike is needed in light of freight rates that have dropped below break-even levels amid weakening demand and rising costs.
In calling for the hike, the TSA says that the low-value, low-margin cargoes, such as recyclables and hay, account for up to 40 percent of the entire market and are moving at rates that do not cover the variable transport costs.
TSA Westbound lines add that the specified minimums still do not restore rates to sustainable levels for the commodities and port pairs in question and say they expect that these, along with rates for other origins and other destinations, will need to be higher. The TSA indicated that further increases are likely in December and early 2015.
“Many base cargo rates in the Westbound transpacific market are approaching levels that do not justify carriage, especially when you take into account offsetting destination costs such as equipment cleaning and repair and local delivery,” says Brian Conrad, TSA Westbound executive administrator. “That’s bad news for shippers in a market with strong headhaul Asia-U.S. demand for repositioning of empty equipment on westbound ships, as well as for carriers for which recyclables and hay represent a large share of the market. We need to bring those rates up and we believe the market can support the higher minimums.”
Members of the TSA include APL Ltd., K Line, China Shipping Container Lines, Maersk Line, CMA-CGM, Mediterranean Shipping Co., COSCO Container Lines, N.Y.K. Line, Evergreen Line, OOCL, Hanjin Shipping Co. Ltd., Yangming Marine Transport Corp., Hapag-Lloyd AG, Zim Integrated Shipping Services and Hyundai Merchant Marine Co.
The TSA says the rate hike is needed in light of freight rates that have dropped below break-even levels amid weakening demand and rising costs.
In calling for the hike, the TSA says that the low-value, low-margin cargoes, such as recyclables and hay, account for up to 40 percent of the entire market and are moving at rates that do not cover the variable transport costs.
TSA Westbound lines add that the specified minimums still do not restore rates to sustainable levels for the commodities and port pairs in question and say they expect that these, along with rates for other origins and other destinations, will need to be higher. The TSA indicated that further increases are likely in December and early 2015.
“Many base cargo rates in the Westbound transpacific market are approaching levels that do not justify carriage, especially when you take into account offsetting destination costs such as equipment cleaning and repair and local delivery,” says Brian Conrad, TSA Westbound executive administrator. “That’s bad news for shippers in a market with strong headhaul Asia-U.S. demand for repositioning of empty equipment on westbound ships, as well as for carriers for which recyclables and hay represent a large share of the market. We need to bring those rates up and we believe the market can support the higher minimums.”
Members of the TSA include APL Ltd., K Line, China Shipping Container Lines, Maersk Line, CMA-CGM, Mediterranean Shipping Co., COSCO Container Lines, N.Y.K. Line, Evergreen Line, OOCL, Hanjin Shipping Co. Ltd., Yangming Marine Transport Corp., Hapag-Lloyd AG, Zim Integrated Shipping Services and Hyundai Merchant Marine Co.
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