Pacific carriers hurt by port, inland congestion
Transpacific container lines said port congestion and the inland gridlock in America are hurting their costs and transit times, as the Transpacific Stabilization Agreement said Wednesday it will extend its $400-per-40-foot-box peak season surcharge by a month for all-water services from Asia to the U.S. East Coast.
The peak season surcharge, applied on a voluntary basis by TSA carriers, will be extended until Nov. 30, TSA said.
After a meeting of carrier chief executive officers to assess market, operational and infrastructure conditions in the Asia/U.S. freight market, the TSA group noted concerns over the rising cost of maintaining service levels and schedule reliability in light of port and inland supply chain congestion. The TSA estimates carriers’ costs will increase “10 percent or more” in 2005 when compared to this year.
“Member lines and their customers are grappling with transit time delays of eight to nine days that are largely beyond their control, and infrastructure gridlock that will easily take more than a year to fix,” said Brian M. Conrad, deputy executive director of TSA. “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,” he added.
These extra costs are combined with the long-term increases in equipment, charter, feeder service, rail, truck, cargo handling, information systems, administrative and capital costs, TSA said.
“This is a critical problem for our industry and one that carriers will be evaluating in coming months,” Conrad said. TSA carriers plan to meet in late October to further review the situation.
The group’s statement may be a forewarning of large freight rate increases by TSA carriers in the 2005-2006 season starting next May.
Reviewing the expected supply-demand balance in 2005-2006, TSA noted the “recent, record transpacific growth” and said infrastructure congestion “is likely to continue on all U.S. coasts through 2005 and beyond.”
“Lines anticipate 10-12 percent cargo growth in 2005, placing even more serious pressures on port, rail, highway and warehouse capacity, on both the East and West coasts,” the carrier group said.
TSA said congestion delays result in curbing the effective ship capacity provided to the market.
“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,” TSA said. The carrier group predicts that actual supply will lag behind demand “during the next year or more.”
TSA’s forecasts of capacity shortages differ from other predictions.
CP Ships chief financial officer Ian Webber told an investment conference Monday that worldwide ship capacity would rise 14 percent in 2005, as compared to worldwide cargo growth of about 8 percent in the same year.
In August, transpacific carrier MOL predicted eastbound transpacific cargo volumes would increase 7.8 percent in 2005 and in 2006, whereas ship capacity would jump 8 percent in 2005 and 12.3 percent in 2006.
Industry analysts predict that once numerous containerships on order have been delivered in 2006, the container shipping market will move into a downturn.
But TSA said the diversion of U.S. East Coast cargo to all-water service via the Panama Canal has reached saturation levels, with ships fully booked and some cargo being rolled to later sailings.
“New or expanded (East Coast) 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 eight-nine ships each,” TSA said.
Following the withdrawal of Maersk Sealand from TSA Sept. 17, the remaining TSA carriers are: APL, CMA CGM, COSCO Container Lines, Evergreen, Hanjin Shipping, Hapag-Lloyd, Hyundai Merchant Marine, “K” Line, MOL, NYK Line, OOCL, P&O Nedlloyd and Yang Ming.