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January 7 2019

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30 The Journal of Commerce | Januar y 7 2019 Maritime 2019 Annual Review & Outlook AFTER ENDURING EXTREME rate volatility in 2018, carriers and importers in the eastbound Pacific will enter service contract negotia- tions cautiously this spring, seeking to achieve mutually agreeable rate levels that truly reflect supply and demand in the largest US trade lane. "There will not be a return to last year," when annual service con- tract rates were, from the carriers' perspective, disappointing and unacceptably low at about $2,200 per FEU to the East Coast and $1,200 per FEU to the West Coast, predicted Lawrence Burns, senior vice presi- dent of trade and sales at Hyundai America Shipping Agency. Carriers responded by reducing capacity by 6 percent to the West Coast and 1.3 percent to the East Coast. When imports increased strongly last summer, due in part to front-load- ing of shipments to get ahead of Trump administration tariffs on China, spot rates soared by more than $1,000 to each coast, and remained high through the peak season as the threat of an increase to 25 percent tariffs loomed on Jan. 1 this year. Michael Klage, solutions director at TOC Logistics International, said carriers and importers learned from last year's roller-coaster ride that started with low service contract rates in May and led to unusually volatile spot rate adjustments later Contracting caution A rocky 2018 peak season and the IMO's low-sulfur fuel rule will shape annual trans-Pacific service contracts By Bill Mongelluzzo

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