Another busy peak season will bring even more surcharges

June 5, 2006
Companies importing goods via ocean carriers from Asia should be prepared to pay increasingly stiff surcharges the closer it gets to peak shipping season

Companies importing goods via ocean carriers from Asia should be prepared to pay increasingly stiff surcharges the closer it gets to peak shipping season this fall. Container shipping lines operating from Asia to the U.S. have expressed concern that even a modest peak season in the summer and fall months will cause disruptions and have major cost impacts on their operations, particularly with regard to East Coast all-water shipments. As a result, member lines in the Transpacific Stabilization Agreement (TSA) say they intend to phase in higher peak season surcharges in those market segments as the season progresses.

A previously announced peak season surcharge of $400 per 40-foot containers (FEUs) for all Asia-U.S. cargo moving on TSA member line vessels will take effect on June 15, 2006 as scheduled. Effective July 15, surcharges for all-water East and Gulf Coast moves via the Panama and Suez Canals will be increased to $500 per FEU. Effective August 15, those surcharges will be set at $600 per FEU through the remainder of the peak season period ending November 15, unless further adjustments are required. The peak season surcharge for U.S. West Coast port-to-port cargo, and for inland and minilandbridge intermodal shipments, will remain at $400 for the entire June 15-November 30 period.

TSA is a voluntary forum of 11 major container shipping lines serving the trade from Asia to ports and inland points in the U.S. TSA members include:

American President Lines (APL) Ltd.

COSCO Container Lines Ltd.

Evergreen Marine Corp. (Taiwan) Ltd.

Hanjin Shipping Co. Ltd.

Hapag Lloyd Container Line

Hyundai Merchant Marine Co. Ltd.

Kawasaki Kisen Kaisha Ltd. (K Line)

Mitsui O.S.K. Lines Ltd.

Nippon Yusen Kaisha (NYK Line)

Orient Overseas Container Line Inc.

Yangming Marine Transport Corp.

“The industry expected Asia-U.S. cargo growth to moderate last year and it exceeded even the most optimistic forecasts,” explains Albert Pierce, executive director of the TSA. “The trade has now seen four record years of mostly double-digit growth. Vessel space is still tight, terminal and rail improvements are still far from completion, equipment turn times are still slow and carriers are concerned; they’re not taking anything for granted.”

Pierce notes that first quarter 2006 container volumes from Asia totaled 1.4 million FEU, up 9.8% from the same period in 2005, and China cargo was up nearly 15%. Post-Lunar New Year and post-Golden Week cargo levels have returned to normal following those holidays in Asia. Third- quarter peak season Asia-U.S. traffic exceeded first quarter levels by 28% in 2005 and 19.9% in 2004. An average of one in four containers moving through U.S. container terminals is an empty unit being repositioned, most as part of a transpacific round trip, with no revenue contribution toward repositioning costs.

“Customers tell us they want above all else service choice, schedule reliability and equipment availability,” Pierce observes. “This a high-cost, high-stakes game for all of the parties involved. Shipping lines cannot afford to be caught unprepared.”