After telling U.S. exporters earlier this week that their cargo "must truly begin to pay its own way," the major discussion agreement for the U.S.-Asia container carriers has followed up with another statement saying there is "no quick fix" for shippers who have been unable to get containers or space on ships for their cargo.

The Westbound Transpacific Stabilization Agreement (WTSA) said its members "are working closely with U.S. exporters to address continuing space and equipment shortages to Asia. But sorting out the complex operational and cost factors behind those shortages has left both carriers and shippers with difficult challenges."

"No one sets out to turn away business, but at this point carriers face hard choices with each sailing about how best to balance competing customer demands for limited vessel space and equipment. To say that carriers are not doing all they can to accommodate the maximum amount of export cargo their networks will handle is simply inaccurate," explained WTSA Chairman Ronald D. Widdows, who is also chief executive officer of APL. "Carriers are doing the best they can to work with their customers to satisfy their need for space under very difficult circumstances."

WTSA said that the problem is caused by booming exports because of the weak dollar and strong demand for agricultural products, industrial raw materials, machinery, and other commodities.

Exports were up 17 percent in 2007, and are expected to grow 12 percent to 13 percent over the next two years. The lines noted that while dry bulk shipping costs have reached new heights, more grain is shipped in containers.

At the same time, eastbound traffic volumes remain anemic, up less than 1 percent in 2007, WTSA said.

"The volume of loaded containers shipped from Asia was still more than twice that of loaded container volume for return U.S. exports. That imbalance means transpacific carriers must continue to scale their fleets, routing and schedules for the higher-volume Asia-U.S. ‘headhaul’ segment, and the current soft inbound market does not justify adding new capacity, particularly given record fuel and other fixed operating costs," WTSA said in a statement.

"Vessels and equipment cannot easily be reallocated among trade lanes in a matter of weeks, given ship sequencing requirements, customer commitments in affected trades, vessel size and draft restrictions, port and terminal capabilities, and other considerations. In addition, the Transpacific routes are competing for assets with trade lanes that are still growing and offer more attractive economic returns, such as Intra-Asia, Asia/Europe," the group added.

WTSA warned that the "situation is likely to persist until there is an improvement in the economics of serving the U.S. trades."
Widdows noted that the mix of commodities on ships bound for Asia tends to have a lot of heavy products, such as frozen poultry, metal scrap, forest products, steel or machinery. He said this means a ship sailing to Asia may load 35 percent to 50 percent fewer containers due to added weight.

Widdows also acknowledged that, for the first time in over a decade, some U.S. exporters to Asia have experienced difficulty getting container equipment delivered to their premises for loading after having made a booking.

The dramatic change in trade flows caught many shippers and carriers unprepared, Widdows said, necessitating some adjustment in cargo flows and equipment repositioning patterns within the United States.

Positioning equipment for rural Midwest grain exporters proved both difficult and costly, as inland rail and truck rates have increased on the order of 25 percent to 35 percent, WTSA said.
The group added that refrigerated containers pose a separate problem, as a large number of these boxes has left the transpacific market since 2003, when major Asian trading partners embargoed U.S. beef and poultry shipments during the "mad cow" and avian flu scares.

"Those markets have been steadily reopening, but the transpacific refrigerated market is largely one-way, with little return business from Asia, inefficient space utilization for carrying dry cargo, high equipment maintenance and operating costs, and low rates relative to other lanes," the lines said.

WTSA’s members include APL, COSCO Container Lines, Evergreen Line, Hanjin Shipping, Hapag-Lloyd, Hyundai Merchant Marine, "K" Line, NYK, OOCL and Yang Ming.