High Shipping Costs Are Here to Stay, Says Bloomberg
By Henry Ren (Bloomberg) Stubbornly high shipping expenses for businesses are getting sealed into contracts for the next 12 months, forcing companies to pass the extra costs on to consumers....
After a challenging year for container shippers who continue to deal with the issue of too many ships and too few cargoes, the top names in the business have agreed to raise prices on the Asia-US route by $300 per 40-foot container.
Member container shipping lines in the Transpacific Stabilization Agreement (TSA) had previously agreed to the general rate increase (GRI) for May 1st, however in an effort to mitigate rate erosion seen thus far in February and early March, they will be moving this timeline to the left and executing the GRI on 15 April.
“The downward rate pressures we are seeing do not reflect the steadily improving cargo picture eastbound from Asia,” notes TSA executive administrator Brian Conrad in a statement on the TSA website. “The Lunar New Year period was strong, with average vessel utilization numbers in the 95% range; while most people tend to focus only on the supply/demand imbalance, what is getting lost in the pricing discussion is service value.”
Rates from Asia to the U.S. West Coast stand at $1900 per 40ft per 40-foot container.
Conrad warned of a potential crisis developing if rates continued to be priced solely on the supply-demand equation without consideration for the long-term service reliability and flexibility of container shipping.
“We are in effect negotiating the annual operating budget for a major piece of global transportation infrastructure that happens to be privately financed,” he notes. “Competitive pressures to match the lowest short-term rate levels and lock them into 12-month service contracts across the board amounts to a significant deferred investment in the trade.”
TSA is a research and discussion forum of major container shipping lines serving the trade from Asia to ports and inland points in the U.S. Its members include:
China Shipping Container Lines
COSCO Container Lines, Ltd.
Hanjin Shipping Co., Ltd.
Hyundai Merchant Marine Co., Ltd.
Kawasaki Kisen Kaisha, Ltd. (K Line)
Mediterranean Shipping Co.
Nippon Yusen Kaisha (N.Y.K. Line)
Orient Overseas Container Line, Ltd.
Yangming Marine Transport Corp.
Zim Integrated Shipping Services
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