The Transpacific Stabilization Agreement, a discussion agreement of 15 of the largest container lines in the trades from Asia to the U.S., said the additional revenue will be needed as carries begin to repair their networks following the Feb. 20 tentative contract agreement reached by the International Longshore and Warehouse Union and the Pacific Maritime Association. The agreement brought to an end more than nine months of negotiations, the last four of which were marked by severe port congestion, work slowdowns and dozens of vessels being thrown off schedule.
“Restoring service levels and further ramping up to meet sustained and rising demand will, in turn, entail significant operational costs, carriers are forecasting,” said Brian Conrad, executive administrator of the Transpacific Stabilization Agreement.
The general rate increases are also being proposed on the expectation that imports from Asia will grow strongly after factories restart their operations following the Chinese New Year celebration. “Forward bookings suggest the post-Lunar New Year cargo demand will resume after the weeklong Asia holidays and continue to pick up,” Conrad stated.
Growth in imports could be sustained into 2016 due to the recovering U.S. economy and the increasing strength of the dollar. Carriers are therefore being called upon to “complete the service integration necessary to fulfill scale and efficiency objectives in the market.”
The TSA is a discussion agreement and has no enforcement powers, so member lines are free to deviate from the proposed rate actions in their confidential service contracts with customers. During the protracted labor negotiations and severe congestion at West Coast ports that constricted capacity in the eastbound Pacific, carriers achieved some success in increasing their rates, especially on all-water services to the East Coast, where ports were not affected by the West Coast labor negotiations.
Nevertheless, Conrad said, “The limited improvement in freight rates to date neither addresses costs accrued since last September, nor the network investment necessary through 2016 to meet customers’ needs.
