[EN-SEA] Opening TSA Salvo Sets Tone for Next Year's Contract Talks

TRANSPACIFIC container lines have fired the opening salvo ahead of next year's contracting season with shippers, bluntly telling them rates are going up - way up - to levels achieved in halcyon days of 2008.

In a bold public statement, the 13-carrier alliance spoke of "serious financial losses and major service consolidations" and that member carriers in the Transpacific Stabilisation Agreement (TSA) have had to adopt tough guidelines on rates.

There will be a general rate increase US$800 per FEU for local west coast and group 4 western coastal states cargo, said the TSA communique, and $1,000 per FEU for intermodal and US east and Gulf coasts all-water cargo, with per formula increases for other equipment sizes.

"A $400 peak season surcharge will take effect from August 1, 2010, to address higher cargo handling, equipment positioning and contingency planning costs during periods of peak cargo volume," said the statement.

There will also be a full collection of fuel and other accessorial charges, the TSA said.
"The guidelines represent an effort not only to reverse a sharp decline in rates during early 2009, but also to fully recover volatile equipment and fuel-related costs," the statement said.

"The dire situation the industry finds itself in as a result of the unprecedented events that have played out in 2009 must be reversed," said TSA chairman Ron Widdows, also CEO of Neptune Orient Lines, parent of APL.

"Carriers must deliver on the contractual commitments they have undertaken, however, a dialogue between carriers and shippers needs to begin straight away so all can plan for the changes needed in 2010-11 contracting," he said.

Said Hong Kong's OOCL chief executive Philip Chow:" No question, the increases are significant, and we recognise our customers have suffered from the global crisis. However, these increases must be viewed in the context of volume and rate declines. The race to the bottom on pricing must stop."

Said NYK liner trade director Kenji Mizushima: "Vessel-sharing alliances have consolidated services and have laid up hundreds ships, however, those actions were unable to keep pace with the collapse of rates and dramatic reduction in demand. The revenue to address those challenges simply isn't in the current rate structure."

While expressing cautious optimism about an improving Asia-US freight market in 2010-11, TSA members felt "it will remain a year of significant uncertainty" and carriers must concentrate on conserving cash, building stronger balance sheets, and establishing a sustainable rates.

Said Mr Widdows: "Our immediate need is to find a path forward that will allow our industry to achieve improved economic results and deploy sufficient assets that will support customers' supply chain needs."

TSA members are APL, Hyundai Merchant Marine, CSCL, "K" Line, CMA-CGM, MSC, Cosco, NYK, Evergreen, OOCL, Hanjin, Yangming, Hapag-Lloyd and Zim.

Source : HKSG, 08.10.09