Eastbound Pacific carriers seek double GRIs to recover from congestion
To recover from congestion, ocean carriers seek double GRI’s
On Wednesday, shipping lines in the eastbound pacific announced their intentions to raise ocean freight rates $600 per FEU (forty-foot equivalent unit) on March 9th, and also announced an additional $600 per FEU anticipated on April 9th.
15 of the largest container lines in the trades from Asia to the U.S, known as The Transpacific Stabilization Agreement, said the additional revenue will be needed as carries begin to repair their networks following the Feb. 20 tentative contract agreement reached by the International Longshore and Warehouse Union and the Pacific Maritime Association. The agreement brought to an end more than nine months of negotiations, work slowdowns, and vessel delays. All of which has caused severe port congestion.
Brian Conrad, executive administrator of the Transpacific Stabilization Agreement, said “Restoring service levels and further ramping up to meet sustained and rising demand will, in turn, entail significant operational costs, carriers are forecasting.”
Carriers also see strong forward bookings which suggest that demand will continue following Chinese New Year, and carrier’s expectation is that imports from Asia will grow strongly throughout the year.
Whether or not demand holds strong and the market is able to sustain two additional general rate increases remains to be seen. The Transpacific Stabilization Agreement has no enforcement powers, each carrier member is free to implement their own GRI based on carrier market conditions. During the drawn out labor negotiations and severe congestion at West Coast ports, which had a carryover effect on capacity in the eastbound Pacific, carriers did have success in increasing their rates, especially on all-water services to the East Coast, in which demand increased due to cargo being shifted away from the West Coast.
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