Asia-U.S. Container Lines Seek $500 Annual Box Rate Increase
Container shipping lines will seek to raise rates by at least $500 per 40-foot box for Asia-U.S. West Coast cargos in upcoming annual contracts after price wars and higher fuel costs caused the industry losses.
Carriers will also seek a $700 increase for other U.S. points, said the Transpacific Stabilization Agreement in an e- mailed statement late yesterday. The Oakland, California-based group, representing 15 of the world’s largest lines, has limited antitrust immunity to discuss rates and advise on yearly shipping contracts, which generally start in about May.
The TSA members, who include Maersk Line and China Cosco Holdings Co., also agreed to add a $300 per box increase beginning March 15, following the successfully introduction of a similar increase in January. The group last year delayed plans to raise rates in the peak summer season as excess capacity and the economic slowdown let customers find lines willing to offer discounts.
“The erosion in transpacific rates during 2011 has been well-documented and dramatic,” Brian M. Conrad, a director of TSA, said in the statement.
The industry lost money last year after rates dropped because container shipping lines had added too many ships in anticipation of an economic recovery. TSA, which called the increase “critical” to carriers, said its members will consider further revenue and cost recovery initiatives later in the year.
“If carriers adopt a marginal increase that only partially offsets huge losses as costs continue to rise, the result is another 18 months of losses,” Conrad said in the statement. “This year in particular, rate recovery must be meaningful in order to maintain service levels and, ultimately, carrier viability.”
Other TSA members include Mediterranean Shipping Co., CMA CGM SA and Hanjin Shipping Co.
The industry may have had a loss of $5.2 billion before interest and taxes last year, and prospects for 2012 “could be dire” if companies don’t take “a substantial amount of tonnage” out of the market, London-based Drewry Shipping Consultants Ltd. said in a Jan. 4 report.
Container lines have said in recent weeks that they plan to raise prices on some routes. Maersk Line, which has a global market share of about 16 percent, said Jan. 31 it will increase the price it charges to transport a 20-foot container from Asia to Europe by $775.
The container industry was under “severe pressure” last year and “we still see an unhealthy balance between supply and demand,” Michael Pram Rasmussen, chairman of Copenhagen-based Maersk, said yesterday in the company’s employee newsletter.
Global freight rates dropped on average 25 percent last year, according to RS Platou Markets AS. Prices fell the most on Asia-to-Europe routes, where the decline was almost 60 percent, the Oslo-based broker said in a Jan. 4 note.
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