Transpacific ocean carriers have managed to more than double their annual contract rates compared to last year - and in some cases have even increased rates by 80% according to shipper sources.
Annual rates per FEU from Asia to the US West Coast are now on average USD1,800, according to Philip Damas, division director, Drewry Supply Chain Advisors, which he pointed out was more than double the amount compared to last year's contracts.
Meanwhile, Sunny Ho, Hong Kong Shippers Council executive director, said he had heard rates per FEU were between 1,700/2,000 per FEU - which in some cases he said was almost as high as 80% more than last year's contracts.
He said that the contracted rates had been boosted by restricted capacity and a more positive market outlook. He told CI-eXpress: 'Shipping lines have been tactical enough to restrict capacity and also to force up rates by controlling space on vessels. Even when they have had spare capacity, they have still refused some bookings and create the implication that space is very tight to add pressure for shippers to agree to rate increases over last year's contracts.'
He added that a more positive market outlook, backed by the fact that US retail had improved in March and April and was proving a 'quite solid' trend, had also helped boost rates.
He commented: 'The rates are back to 2008 levels - and in some cases are actually higher than those levels. While we understand that it was difficult last year, these rates to many shippers are a bit on the high side, as many importers and exporters were also very affected by the economic crisis.'
Damas said that as of May 2010, available capacity had been cut by 5% on the transpacific compared to the same month last year. He told CI-eXpress: 'Securing capacity is the number one issue and many shippers have been working at getting clauses in their contracts to guarantee capacity, as they want to be protected if space is not provided.'
He said that they wanted to avoid the lack of space in the run up to the Chinese New Year, in February, which he said was a 'major disaster in terms of the supply chain as some shippers were not getting products to market in time'.
However, Brian Conrad, Transpacific Stabilisation Association (TSA) executive administrator, told CI-eXpress: 'Decisions about what vessel capacity should be deployed in the transpacific are not made or even discussed within TSA. Those are individual and independent decisions made by carriers. Second, as those carriers have indicated, vessel capacity was removed because of the absolute necessity to reduce costs. Carriers have said from the outset that they need to see dramatic improvement in round trip economics to justify redeployment of vessel and equipment assets in the transpacific, especially given ongoing market uncertainty.
'It may be convenient, in the midst of contract negotiations, to turn this fundamental point on its head, but to do so is disingenuous.'
He added that while it was impossible to verify rates quotes, 'leaving aside the loss-making rates that found their way into many 2009-10 contracts and became moving rates for 12 months, the levels cited [above] are still below both historic averages for the trade and what shippers have paid in prior years'.