News Content

Transpacific contract rates higher than last year: APL says

SHIPPER concern over the safety of their supply chains in a post Hanjin Shipping world was having a significant effect on the annual trans-Pacific service contracts, with the rate levels being negotiated well above those of 2016, according to APL CEO Nicolas Sartini.

The APL head said just 20 per cent of the carrier's contracting had been secured so far and the next two to three weeks would be critical, but it was already apparent that rates would be well above those locked in last year.

"We are in the heart of the negotiations and we clearly see that the rates we are going to get this year are much higher than those we obtained in 2016," he said. "Both the shippers and the carriers understand that this is a different market and that to be able to secure space for 2017, customers will need to pay more."

Mr Sartini said the bankruptcy of Hanjin Shipping was very much on the minds of shippers and this was influencing the market. "Many shippers were exposed to Hanjin and had containers stranded, and they understand that there are limits to low rates. It was a wake up call to customers that there is a limit to squeezing rates down and that there can be a negative consequence to it," he said.

"Of course, BCOs [beneficial cargo owners] will always negotiate rates, but we see that rates will definitely be on the higher side. They are expecting to do well this year and they want to ensure that their supply chains are safe."

Meanwhile, APL is launching a date-specific, premium, moneyback service called Eagle Guaranteed on the trans-Pacific that Mr Sartini believes is what BCOs are looking for as they try to further secure their supply chains, IHS Media reported.

"APL is strong on the trans-Pacific, and the Eagle Guaranteed service is an example of a way to be innovative in a market where we are already strong," he said.

APL intends to expand its customer base of US importers whose supply chains are built upon day-definite performance with the Eagle Guaranteed programme, in which customers pay a surcharge to participate in the programme and 100 per cent of the surcharge will be refunded if the delivery date is not met.

Vessels will be US-flagged, with a capacity of 5,500 TEU units and a target of 1,000 FEU carried per vessel every week.

The service involves intermodal shipments through APL's terminal at the Port of Los Angeles, destined for rail yards at six destinations: Chicago; Columbus; Dallas; El Paso, Texas; Kansas City; and Memphis, Tennessee, on Union Pacific Railroad trains.

Chris Corrado, vice president, supply chain at global protective products maker Ansell, said APL wasn't the first carrier to introduce a premium solution, but for a customer with a time specific shipment needs, this product would be of interest.

Philip Damas, director at Drewry Supply Chain Advisors, said for BCOs, it was about calculating the value of a time definite, high reliability service. "The value of time will be different for each commodity shipped, and the BCOs will be asking themselves 'how much am I prepared to pay for 5 per cent more reliability'," he said.