Cargo owners exporting products to the United States face at least a 40 per cent surge in freight rates by May after shipping lines recommended raising charges following a meeting in Hong Kong last week.
Under the proposals, the 15 member carriers of the Transpacific Stabilisation Agreement were recommended to increase freight rates by US$300 per feu (40-foot equivalent unit) from March 15.This could be followed by a minimum increase of US$500 per feu when new shipment contracts are agreed between cargo owners and shipping lines in April.
The TSA said the US$500 would apply to containerised cargo shipped to ports on the west coast of the United States, with a recommended minimum of US$700 per feu to other US destinations. By comparison, the current spot rate for a 40 foot container from Shanghai to the US west coast is US$1,800.
Jon Windham, the Asian marine transport analyst for Barclays Capital, said: 'Our base case remains that we expect a return to profitability in 2012 across the container shipping industry from deep losses in the fourth quarter 2011'. Container lines are expected to report collective losses of US$5.2 billion for last year.
The 15 members of the TSA, who control about 90 per cent of eastbound cargo shipped across the Pacific, include Orient Overseas Container Lines, Cosco Container Lines, and China Shipping Container Lines. The TSA said the March general rate increase was intended to bring Asia-US freight rates back up to near 2011 contract levels, and establish a baseline for contract negotiations.
'The erosion in transpacific rates during 2011 has been well-documented and dramatic,' TSA executive administrator Brian Conrad said. '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 added that rate recovery must be meaningful this year in order to maintain service levels and, ultimately, 'carrier viability'.