Cargo Business News

August 2012

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18 By William ARMBRUSTER NVOs pay the price as spot ra Little change in co The Cost of a Spot-market container shipping costs from Asia to the U.S. have risen more than a thousand dollars this year, but shippers that have annual contracts with the carriers have experienced far smaller increases, if any. Drewry, a London-based shipping consultancy, said its Hong Kong-Los Angeles benchmark rate was $2,542 per FEU as of August 2, up $1,107 since the end of December 2011, an increase of 77 percent. The benchmark rate is based on spot prices. Drewry said the early August rate levels are about 50 percent higher than a year ago, 44 percent above the 2011 full-year average and 40 percent higher than the 2006-2011 historical average rate. But Drewry said it expects rate levels to drop later this year. out of business." — Marc Greenberg, The American Companies "They're going to put many of the smaller and midsize NVOs Non-vessel-operating common carriers and small shippers are bearing the brunt of the container carriers' aggressive rate strategy. "They're going to put many of the smaller and midsize NVOs out of business," said Marc Greenberg, president of The American Companies, a midsize NVO based in Moonachie, N.J. "We have already lost some business where clients have seen such a huge difference between NVOs and the BCO market," Greenberg said, referring to beneficial cargo owners – companies that actually have title to the goods, or will have title once the transaction is completed. NVOs account for about 40 percent of cargo loaded on eastbound transPacific routes. But they have limited ability to negotiate rates down, said Daniel Cooke, a spokesman for OHL, a midsize NVO. Most trans-Pacific carriers announced they would be raising rates at the beginning of August by $500 per FEU to the West Coast and $700 to the East Coast, with some planning additional increases. Mediterranean Shipping Co. said that it would be raising rates another $500 per FEU to the West Coast and $700 to the East Coast on September 1, with proportional increases for other types and sizes of containers. Peak season surcharges The Transpacific Stabilization Agreement, which represents most major container carriers in the trade from Asia to the U.S., announced in early May that its members were recommending peak season surcharges of $600 per FEU, effective June 10. Most, if not all carriers, postponed the increase, at least for BCOs, until August 1 or August 2012 later, and it remained to be seen how much, if any, increase they were actually able to obtain. Shippers of refrigerated cargo may have to pay substantially more. TSA members have recommended increases in refrigerated cargo rates of $1,000 per- FEU to the U.S. West Coast and $1,250 per-FEU for all other destinations, effective August 15. Announcements of rate increases are often just a bargaining ploy. The Shipping Act requires that carriers considering an increase must announce it 30 days in advance, but can cancel or reduce it on the day that the increase is supposed to take effect. "It's disruptive to the trade. On the other hand, it's better than implementing (the increase)" said Peter Friedmann, a Washington, D.C.- based attorney who represents several shipper organizations. "Ultimately it's the market that decides," he added. Actual implementation of the increases is up to individual carriers. Contracts usually set a fixed rate for the entire year. One large footwear importer said his carriers did not get any increase from his company this month. Some contracts have provisions allowing for surcharges. Regardless of the contract rates, that doesn't necessarily stop carriers from demanding higher rates – or shippers from demanding lower rates. Plans for both the general rate increases and peak season surcharges were predicated on assumptions of fairly S

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