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Asian freight to US West Coast set to rise by $300 per FEU

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The increase is due to forecast of steep increases in operating costs, fuel

A FILE photo of the containers piled inside Chennai port .
A FILE photo of the containers piled inside Chennai port .

Raja Simhan T.E.

Chennai, Sep. 27

Shipping freight rates for cargo from Asia to the US West Coast will increase by $300 per 40-foot container (FEU) early next year. And, on cargo to the East Coast through the Panama or Suez Canals, the rates will increase by $500 a FEU, according to plans announced by shipping lines in the US-based Transpacific Stabilisation Agreement (TSA).

Forecasts

The increase is due to forecasts of steep increases in operating costs, including fuel, and would take effect as the 2007-08 contracts are formalised. However, the increase would not be later than May 1, 2007, according to a trade notice issued by the TSA.

The TSA is a voluntary discussion and research forum of 11 major container shipping lines serving from Asia to ports and inland points in the US.

The shipping lines also plan to implement a minimum $400 per FEU peak season surcharge from June 15 to October 15, 2007.

Cargo and container imbalance

In other actions, the TSA extended its current peak season surcharge till February 28, 2007. This reflects near-full ships forecast through the rest of 2006 and a widening cargo and container imbalance in the transpacific route. But the TSA says it will recommend adjusting the surcharge to a uniform $400 per FEU for all the US coasts effective December 1, according to a notice.

Shipping lines stressed the need for a rate recovery following rising import volumes, and a widening cargo and box imbalance.

The US containerised imports from Asia grew year-on-year by 13.2 per cent in the first half of the current calendar year to 3.06 million FEUs. At the same time, the US containerised exports to Asia grew by 6.5 per cent to 1.12 million FEUs, according to the TSA.

TSA estimates higher costs in the coming year for box handling, inland transport and other aspects of carrier operations related to the overall box imbalance. It also forecasts increases in Asia feeder service rate, rising marine container prices due to higher steel costs; carrier investments in terminal productivity and increased costs related to infrastructure and security improvements.

TSA members are APL, K Line, Cosco Container Lines, Mitsui OSK, Evergreeen Marine Corp, NYK, Hanjin Shipping, OOCL, Hapag Lloyd, Yangming Marine and HMM.

Scepticism

The shipping lines usually stick to the TSA's decision. However, there are doubts among trade members on the implementation of the increase, said a source.

The freight rates are governed by the demand-supply situation of containers in the market. If there is a shortage of boxes, the shipping lines charge more, and if the boxes are more the rates are cut.

"When there is a surplus of boxes in the market, a shipping line cannot charge $300 more when a competitor would offer at much lesser cost," the source said.

(This article was published in the Business Line print edition dated September 28, 2006)
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