  |
 |
|
|
 |
Costs continue to dominate early discussions toward upcoming 2008-09 service contracts, which come up for renewal on May 1. The Transpacific Stabilization Agreement (TSA), a research and discussion forum of 15 major Asia-U.S. container lines, reiterated this week that: - Freight traffic will continue to grow in 2008, on the order of 2-5% by most industry forecasts. - A combination of market forces – including increased demand and conditions favoring greater profitability in the Asia-Europe and other trade lanes, plus marine bunker fuel prices near $530 per ton – will likely limit some carriers’ transpacific ship capacity through redeployments, slow-steaming and other cost mitigation initiatives. - Negotiation of a new five-year West Coast longshore labor contract, effective July 1, raises chances for congestion delays and increased costs; rising customer demand for U.S. East Coast all-water services – to diversify serviceoptions and manage risk – comes as many of those services, as well as the Panana Canal, are operating at or near capacity. - Southern California port environmental programs and federal government harbor security initiatives all are scheduled to take effect during 2008, creating the potential for shortages of trained longshore personnel, trucks and drivers, as well as raising regulatory compliance costs. “Even with substantial cost recovery, the economics of serving the U.S. market from Asia will still result in a challenging profitability picture for most lines”, said TSA chairman Ronald D. Widdows, chief executive of Singapore-based APL Ltd. A number of carriers in the trade have individually reduced their vessel capacity during the post-holiday winter season to meet demand in other markets, perform routine maintenance and repairs, and cut fuel and other operating costs as cargo demand slowed. Some of that capacity will be restored by mid-2008, in time for the peak shipping season, but net year-on-year TSA capacity growth for all of 2008 is expected to reach only a modest 3.3%. Recently announced vessel-sharing arrangements, involving both TSA and non-TSA lines, will actually produce additional redeployments and a net decline in transpacific vessel space, the Agreement pointed out. And according to a recent industry presentation by Clarkson Research Services, effective overall capacity growth in the trade – after allowing for vessel loading and infrastructure constraints, slower sailing speeds and other factors – will probably end 2008 in the 2% range, in balance with cargo demand growth. Widdows, explained that all transpacific lines have faced mounting fuel, inland transport and equipment positioning costs in the past year, and have responded in the post-holiday period to optimize their transpacific services. “Rail rates are up 30 percent, with fuel surcharges added on,” he said. “Marine fuel prices have risen more than 75 percent since January 2007. The costs of moving containers through port gateways and the Panama Canal are rising steadily. The result of operating a ship at less than full utilization in that environment – at rates that in many cases barely cover costs, if at all, is clearly not sustainable.” TSA members reported an average 90-95% utilization to the U.S. West Coast in January-February 2008, and 95% or higher for all-water East Coast services. TSA carriers reported further progress in their negotiations with customers to recover a greater share of full accrued bunker fuel costs, as reflected in TSA’s published bunker surcharge – and to allow those surcharges to float in upcoming service contracts, adjusted monthly with fuel price fluctuations. Weighted average fuel prices across the 12 loading ports used by lines in their transpacific services topped $530 per ton on March 10, up from $462 at the beginning of February, and from $295 at the beginning of 2007. “We’ve seen a steadily upward trend in fuel prices, while the surcharges in a number of the transpacific contracts that were signed last year, are mitigated, capped and locked in over twelve months,” said TSA executive administrator Brian M. Conrad. “At the same time, we look at other trade lanes where carriers are collecting full, floating bunker charges that are higher than ours, and at other modes where railroads, trucking lines and air parcel services are collecting full surcharges that are adjusted weekly in some cases. We have to do better at recovering the full, floating surcharge. Customers are now acknowledging that and are beginning to work with carriers on solutions that recognize industry’s need to pass these costs on. At a recent industry conference, Widdows drew key distinctions between TSA’s bunker surcharge and others introduced by individual carriers: The TSA surcharge reflects a weighted average of fuel costs and consumption patterns among 15 lines; offers a single surcharge in the interest of simplified contracting; and addresses accrued costs only sporadically collected in 12-month contracts since 2002. One well-publicized surcharge announced recently only recovers costs going back one year and lists charges for selected port pairs “for illustrative purposes,” suggesting that final charges could be higher. Cargo handling costs will also be an important topic in upcoming service contract negotiations. West Coast costs are poised to rise as a new longshore labor contract sets wages, benefits and terminal productivity. Southern California ports, through which 40% of Asia-U.S. container traffic passes, are moving ahead with implementing a joint ‘clean truck’ program to replace nearly 17,000 dirty trucks with more fuel-efficient ones, and emission reductions under that program are instrumental in allowing permitting for new container terminal and intermodal rail expansion to go forward. Finally, U.S. ports and their state governments are charged during 2008 with implementing the federal Transportation Worker Identification Credential (TWIC) cargo security program, which potentially involves screening more than 750,000 harbor workers nationwide and could result in large numbers of rail, trucking, warehousing and longshore workers leaving the industry. At the same time, East Coast all-water services from Asia via the Panama Canal have seen double-digit growth in the past year, picking up transpacific share from the intermodal segments. Inland rail and trucking rates have risen an average 25-30% over 2006-07, adding to both headhaul shipment and equipment repositioning costs. “Differences between the West and East Coasts are less than most people expect,” Conrad stressed. “Each has its own unique set of operational impacts and costs, both are significant, and both are on the rise.” “Transpacific market dynamics this year are being shaped by a wide range of external events and challenges that directly impact customer supply chains and carrier service capabilities,” Widdows said. “It is critical that we remain focused on the fundamental economics in the trade and, in so doing, ensure that we are able to flow our customers’ freight efficiently.” TSA lines are seeking rate increases in their 2008-09 contracts of US$400 per 40-foot container (FEU) to the West Coast, and $600 per FEU for intermodal and East Coast all-water shipments, along with a $400 per FEU peak season surcharge in effect from June 1-October 31, 2008. 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.
China Shipping Container Lines Mediterranean Shipping Co. CMA-CGM Mitsui O.S.K. Lines, Ltd. Evergreen Line Orient Overseas Container Line, Inc. Hanjin Shipping Co., Ltd. Yangming Marine Transport Corp. Hapag-Lloyd AG Zim Integrated Shipping Services Hyundai Merchant Marine Co., Ltd.
Niels Erich |
 |
||
|
||||
