TSA should be closed down

I've said it before, and I'll say it again.

The carriers which are members of the TSA (Transpacific Stabilization Agreement) should disband, close down, the TSA.

It's not just because the TSA has outlived it's usefulness. It's also because the carriers need to be looking at every dime they spend. And, this organization costs money to run. Probably quite a lot.

NOL/APL has today stated they can't get the rate increases announced by the group.
So, that means the drive for the rate increase has fallen apart.

From Lloyd's List (click here for link)

HOPES that freight rates for containerised cargo had stabilised appear to have been dashed after Neptune Orient Lines disclosed another considerable lurch downwards.

The latest decline reflects both cheaper core rates and lower bunker recovery.
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In the year to date, average revenue per feu has fallen 20% to $2,375 compared with $2,972 in the corresponding period of 2008, while cargo volumes were 24% less at 970,600 feu.

I'll stand by my previous forecast of a decline of 20 percent for 2009 vs 2008.
I don't know why everyone thinks this is so outrageous. Considering there have been 10% increases every year for about the past 5, this only erases 2 years of gains.

And, I think it will probably stay at that level for 2010 also.

The only good news for the carriers is the price of oil is coming down. But, if they really hold to their "bunker adjustment factors" that would mean they will be giving bunker credits.

I would not want to be an owner in an international shipping company right now.

Update- Rates did not go up

Back on March 20, 2009, in a post called Ocean Rates will not go up this is what I said regarding ocean rates increasing on the Transpacific Trade (which is basically Asia to U.S., sorry Canadians)

Various CEO's of international container companies keep saying there is a need to "restore market discipline", meaning they need to quit cutting rates.

What these guys don't understand is, you can't restore market discipline by saying "don't do that". You restore market discipline by getting the supply more closely matched with demand.
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So shippers, or consignees, you don't need to worry too much about the rates going up for some time. I have seen it happen too often - everyone gets together, agrees they will behave themselves, and it all falls apart as soon as there is no cargo.

Now, having said that, if you want the rock bottom rates, you will probably only get a short term contract. If you want a contract valid for 12 months, the rates will be less than last year, but not crazy cheap like they are now.

And, how did it go for contract rates this year?

According to Maersk

Maersk Line chief executive Eivind Kolding described the rate reductions that ocean carriers have been forced to accept for transpacific eastbound cargo as “quite substantial”.

While not quantifying how much lines such as Maersk had dropped their prices, Mr Kolding indicated that reductions exceeded 10%.

The percentage drop was in double digits, he told Lloyd’s List.

And I am quite sure this is the actual rate, not the rate plus the bunker adjustment.

I suspect the decrease is even more than 10%. Maersk said they were determined to keep their market share, and MSC has been aiming to increase theirs.

Leave a comment if you know what kind of decrease was given.

Thanks