Transpacific August rate hike fails to take hold amid fears of price plunge
THE latest transpacific general rate increase (GRI) recommended for August 1 has failed to take hold, according to the Drewry's Hong Kong-Los Angeles container rate benchmark - with spot rates expected to continue to fall for the rest of 2012. Monday, 06.Aug.2012, 01:07 (GMT+3)
THE latest transpacific general rate increase (GRI) recommended for August 1 has failed to take hold, according to the Drewry's Hong Kong-Los Angeles container rate benchmark - with spot rates expected to continue to fall for the rest of 2012.
The price per FEU travelling from Hong Kong to Los Angeles last week only increased three per cent to US$2,452 compared to the previous seven days, showing that the carriers' announced $500 rate increases have had limited effect on rates, so far, the London's Containerisation International reported.
The general rate increase took effect at the beginning of the month for some carriers and was reflected in the Drewry benchmark. The Drewry Hong Kong-Los Angeles rate was $2,380 the previous week and the increase last year was $71 per FEU. The previous increase in the rate was in mid-June, when carriers pushed through a peak season surcharge of $450, although as Drewry commented, most of this gain has since been lost.
"The apparent failure of the GRI is down to two factors," explained Martin Dixon, Drewry's research manager for freight rate benchmarking. "Carriers are staggering the implementation of this month's GRI so further rate recovery is to be expected over the next 10 days.
"But it also reflects the weak state of the market as soft demand growth and insufficient capacity correction weighs on rates. We expect freight rate levels to drift back downwards through the latter part of August."
But Drewry said that freight rates remain high by historic standards. For instance, the current benchmark spot rate is now 44 per cent above the 2011 full year average and 40 per cent higher than the 2006-2011 historic average rate.
However, Mr Dixon cautioned: "While we expect further reduction in eastbound transpacific spot rates through the remainder of the year, importers and exporters will have to consider the impact of any big increase in spot rates between late 2011 and late 2012 on contract rates for 2013 and adjust their negotiation strategy accordingly."
The 15 container line members of the Transpacific Stabilization Agreement (TSA) were recommended to hike their dry cargo rates again from the first week of August by an average of $500 per FEU for west coast ports and $700 for the east coast.
The voluntary group said in a statement that they sought to "stabilise recent volatility, boost rates to better accommodate growing demand and establish a more compensatory baseline for subsequent negotiation of 2013 longer-term contract."