Transpacific Carrier Meetings Focus On Cost Analysis

Furniture World Magazine

Container shipping lines in the Transpacific Stabilization Agreement (TSA) have concluded CEO-level meetings to assess market, operational and infrastructure conditions in the Asia-U.S. freight market. Carriers say their forecasting for the coming 2005 contract season will focus to a greater degree on operating, infrastructure and service delivery costs, in addition to projected cargo demand versus available vessel capacity. They indicate that an immediate concern in the transpacific market is the rising cost of maintaining service levels and schedule reliability in light of port and inland supply chain congestion. “Member lines and their customers are grappling with transit time delays of 8 to 9 days that are largely beyond their control, and infrastructure gridlock that will easily take more than a year to fix,” explains TSA Deputy Executive Director Brian M. Conrad. “Carriers are forced to skip port calls, shift priority cargo to other sailings, burn more fuel to make up schedule time and incur added trucking costs by using alternative U.S. gateways, among other strategies. All that is in addition to long-term increases in equipment, charter, feeder service, rail, truck, cargo handling, information systems, administrative and capital costs. This is a critical problem for our industry and one that carriers will be evaluating in coming months.” Current indications in the transpacific trade, Conrad added, suggest an increase in overall 2005 operating, technology and administrative costs of 10% or more. TSA lines plan to meet in late October to further review the outcome of their research and analysis. Carriers stress that the supply-demand relationship in 2005-06 will still be an important consideration given recent, record transpacific growth. Infrastructure congestion is likely to continue on all U.S. coasts through 2005 and beyond. Lines anticipate 10-12% cargo growth in 2005, placing even more serious pressures on port, rail, highway and warehouse capacity, on both the East and West Coasts. And while vessel capacity in the Pacific is expected to grow at a similar pace to demand, that new capacity is effectively reduced by an estimated 2-3 percentage points after factoring in diversion, time at anchor, yard and gate delays, and rail system and highway congestion. As a result, carriers expect actual supply to lag behind demand during the next year or more. Diversion of U.S. East Coast cargo to all-water service via the Panama Canal has reached saturation levels, lines report, with ships fully booked and some cargo being rolled to later sailings. New or expanded services are nearly impossible due to size limits on ships transiting the Canal, capacity of the Canal itself, and a shortage of vessels for services requiring 8-9 ships each. To help address congestion and cover operating contingencies, TSA members say they intend on a voluntary basis to extend by 30 days the current US$400 per 40-foot container peak season surcharge, through November 30, 2004, on all-water cargo moving to the East Coast. TSA is a voluntary discussion and research forum of 13 major container shipping lines serving the trade from Asia to ports and inland points in the U.S. Members include: American President Lines, Ltd. Kawasaki Kisen Kaisha, Ltd. (K Line); CMA-CGM; Mitsui O.S.K. Lines, Ltd.; COSCO Container Lines, Ltd.; Nippon Yusen Kaisha (N.Y.K. Line); Evergreen Marine Corp. (Taiwan), Ltd.; Orient Overseas Container Line, Inc.; Hanjin Shipping Co., Ltd.; P&O Nedlloyd Ltd./B.V.; Hapag Lloyd Container Linie;Yangming Marine.