General Rate Increase for Freight Shipping
Unfortunately, current ocean freight rates are below the required level for ocean lines to cover basic operating and transportation costs for sea freight. Some ocean lines have already implemented general rate increases from Europe, the Far East, and Africa in order to recover losses from 2011. Starting in March, 2012 many more ocean lines intend to follow suit.
Unsustainable Freight Rates
The TSA (Transpacific Stabilization Agreement) has been concerned about current freight rates and are calling for a general rate increase. The reason for this is that many freight shipping companies are losing money due to low rates and high fuel costs. It has become difficult for carriers to maintain proper service levels during the drop in freight rates due to the economic crisis.
TSA Evaluating Market Conditions
The TSA includes Taiwan’s Evergreen Marine, China’s COSCO, Korea’s Hanjin Shipping, French privately held CMA GGM, Denmark’s Maersk Line, privately owned Switzerland-based Mediterranean Shipping Company (MSC), and several others. This group states that the March general rate increase (GRI) is occurring so that freight rates can rise back to 2011 levels. They state that they will continue to review market conditions and take further steps as necessary in order to aid carriers who will not be able to continue taking losses.
What Does This Mean for My Business?
Despite the official announcements that a GRI is occurring, it is still not completely clear what will happen come March, or if all ocean lines will follow through with these increases. Please, contact us with any questions regarding this matter and how it may affect your business specifically.