Drewry: Transpacific Minimum Spot Rate Unrealistic

TSA's Minimum Spot Rate Unrealistic

The pain of losing so much money from the US West Coast port congestion is for the shipping lines now receding, and so too with it is the impetus to secure the minimum income levels prescribed for this year’s new BCO contracts, shipping consultant Drewry says.

Just ahead of Chinese New Year (19 February) USWC westbound spot prices had climbed to USD 2,200 per 40ft but shortly thereafter as the seasonal lull set in – coinciding too with the tentative settlement of the ILWU/PMA dispute – rate slippage took hold as utilisations drifted below 80%.

By the third week of March, rates to Los Angeles had fallen to below USD 1,800 and rate hikes announced by the Transpacific Stabilisation Agreement carriers for both 9 March and 9 April lost any traction from the outset. By the middle of April, with no pick up in ship utilisation levels, the erosion had brought rates down to USD 1,600, says Drewry.

This development could not have come at a worse time for the carriers as they are currently locked in negotiations with their BCO accounts for new annual contracts commencing 1 May.

This year, the TSA membership had set a minimum contract price at USD 2,000 rather than targeting a specific dollar increase quantum.

That would entail achieving an increase of some USD 400 over the current average BCO rate, and with prevailing spot rates at USD 1,600 this would appear to be a bridge too far for the carriers.

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