TSA: Rates can't stay this low

 Shipping lines in the Transpacific Stabilization Agreement met in Hong Kong this week to discuss recent rate instability and competitive actions by carriers that have taken some Asia-U.S. freight rates to non-remunerative levels, the members said.

   In a move to seemingly send a message to shippers that rates will go up in April contract negotiations, the 14-carrier discussion agreement said the present situation can't continue.

   TSA, in a statement Wednesday, acknowledged that member carriers as well as non-TSA lines have participated in the rate actions in selected commodity and customer segments during the past month.

   The rate actions seen in recent weeks are shortsighted and regrettable, said TSA executive administrator Brian M. Conrad. They haven't produced new business, they haven't increased anyone's market share and they do not adequately reflect operating costs. He said TSA lines have strongly indicated they do not intend to leave those rates in place beyond Jan. 31.

   o one should expect to see freight rates extended at current levels in upcoming 2009-10 contracts,?Conrad added. To maintain current rates over an 18-month time frame would threaten the financial viability of any major carrier in the market today. It's TSA's hope that the trade as a whole will take a step back and reconsider the financial impacts of recent actions, in the face of widely reported carrier losses and service consolidations. Rate levels on all the east-west trades have shrunk dramatically in the second half of 2008, as demand fell and excess capacity remained. Now that most carriers and alliances have withdrawn significant capacity from both the transpacific and Far East/Europe trades, rate should gradually climb. 

Source: American Shipper