Outbound ocean cargo rates for transpacific shippers may spike soon

Declining Asian consumer and industrial demand, made worse by a strong dollar, has cut into U.S. export volumes and eroded U.S-Asia freight rates to the point where some dry cargoes are moving at levels which make them less attractive to carriers than repositioning empty containers.

As a result, member container lines in the Transpacific Stabilization Agreement (TSA) have agreed on the need for an across-the-board increase in dry cargo rates, effective February 1, 2016.

This announcement comes at a time when inbound volumes have been surging, with all three major California ocean cargo gateways - Los Angeles, Long Beach, and Oakland - reporting robust throughput.

The recommended general rate increase (GRI) is in the amount of US$100 per 40-foot container (FEU) for cargo moving via the U.S. West Coast, and $200 per FEU for cargo moving via the U.S. East and Gulf Coasts. The GRI will not apply to refrigerated shipments, which are rated separately.

TSA Executive Administrator Brian Conrad noted that westbound cargo volumes are likely to post negative growth for 2015, as orders have slowed overall, and as sourcing for many goods and raw commodities have shifted to countries with more favorable exchange rates.

“The market slowdown has been unprecedented, due primarily to weakening demand,” Conrad said. “Lines don’t envision sustained low rates growing the market, and see little benefit in growing market share at current rate levels. The challenge now is to generate sufficient revenue to maintain service levels and make a reasonable contribution to the round-trip sailing.”