TSA: Carriers Feel an Urgent Need to View Pricing Differently

TSA carriers will adopt contract rate objectives for 2015-2016 instead of general rate increases.

The Transpacific Stabilization Agreement (TSA) announced that its carriers will introduce new rate formulas that will also include a low-sulfur fuel cost recovery charge to offset rising costs due to Emission Control Area (ECA) regulations. 

The extra low-sulfur fuel charge is currently being studied and will be announced in the coming weeks, said the TSA, a consortium major container shipping lines.

Its 15 member lines, which includes companies such as Maersk Line and Mediterranean Shipping Co., will also adopt contract rate objectives for 2015-2016, instead of general rate increases (GRIs) from varying baseline levels.

"Carriers feel an urgent need in the current market environment to view pricing differently," said TSA executive administrator Brian Conrad.

"Rate minimums are an effort to better reflect actual costs of service, rather than simply recommending a specific increase to whatever baseline rate is in the tariff based on short-term supply-demand conditions."

The TSA said that bunker surcharges will also "more accurately reflect" vessel size and fuel consumption, and that there would be changes to rates on varying container sizes. 

"Rates will continue to fluctuate with the market according to origin-destination pairs, service requirements, routing and so on, but a common base guideline is essential for lines to maintain basic service levels and, beyond that, expand their offerings based on customers' needs," Conrad said. 

He added that as the exact impact of new sulfur content regulations on prices is still uncertain, it is still difficult to adapt their existing formulas. 

"We expect to have a clearer picture closer to January 1, in time to announce a charge with the necessary advance notice," he said. 

Beginning January 1, 2015, marine fuel used within ECAs must have a sulfur content of no more than 0.10 percent by weight. 

Maersk Line announced earlier this year that new regulations would cost the company an extra $250 million in fuel costs per year.