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April 20, 2017

Alliance Update

 

To Our Valued Customers: 

With all the changes due to the new alliance networks that went into effect on April 1, 2017, we wanted to provide some insight into what we are seeing and experiencing and how this impacts you.  In general, carriers are struggling with such a massive undoing of existing alliances and the formation of new alliances with new partners overnight on April 1.  Everything is different, including terminals, rotations, capacity, transit times, direct calls, cut-offs, and ports that specific carriers no longer service.  In addition, through the month of May carriers will be trying to transition vessels that departed in March (with one set of alliance partners) and then will have to arrive at their destination, discharge, and load export containers (with another set of alliance partners with different terminals and schedules).  It is incredibly complicated, and we are seeing significant delays and confusion throughout the supply chain as a result.

Larger, but Fewer Vessels:   One impact of the new alliances is that the market will have fewer vessels and fewer sailings, but with much larger ships.  Market capacity in the Transpacific trade will increase about 2% this peak season over peak season 2016 (Alphaliner) but with fewer deployed vessels and fewer direct call options.  This will result in slightly limited choice and flexibility for shippers.  It may also contribute to additional terminal congestion, especially at smaller ports that simply can’t handle the newer, mega ships that are being deployed.

Blank Sailings:  Carriers implemented a series of blank sailings in April to assist in their efforts to move vessel assets to the locations where they will marry up to the new alliance schedules.  Most of these have been unannounced so they have been difficult to plan around.  We anticipate that by mid-May in Asia, mother vessels will be in the appropriate locations and fully integrated into the new alliance rotations, although feeder networks may take longer to incorporate fully. 

Terminal Congestion and Vessel Delays:   Just this week, Yangshan Terminal (Shanghai) has approximately 100 vessels parked outside the terminal waiting to berth.  Some of this is due to weather (fog), but much is due to the scheduling changes and larger vessels deployed as a result of the new alliances.  We are also experiencing vessel delays throughout the networks, with some delays exceeding one week.  In addition, with the feeder networks being challenged with all the alliance changes, the smooth transfer of equipment from feeder to mother vessel or mother vessel to feeder is experiencing delays and uncertainty. 

Equipment Shortages:  Equipment shortages are expected throughout 2017 due to two reasons:  a lack of investment in new equipment since 2008-9, and also the equipment disruption caused by Hanjin’s bankruptcy.  What makes matters worse is when equipment is available, it is often in the wrong location or terminal as a result of terminal changes within the alliances; this is especially true for US exporters.

Carrier Alliances:  As a reminder, the new Carrier alliances effective April 1, 2017 are as follows:

          THE Alliance:        Yangming, KLine, NYK, MOL, Hapag Lloyd (UASC)

          Ocean Alliance:    COSCO Shipping, OOCL, CMA (APL), Evergreen

          2M:                       Maersk (Hamburg-Sud), MSC, Hyundai (limited slot charter participant only)

          Non-aligned:         Zim, Wanhai, PIL, SM Line

What can you do?  

1).  First thing is to study the deployments within the new alliances (we at Laufer have built a comprehensive network map for all service and alliances with transits, departure days, allocation guidance, and direct call networks) and see where you are most at risk of dropped direct calls, slower (or faster) transit times, reduced flexibility, etc.

2).  Try to look for existing services that are a carry-over from the previous alliance network (like COSCO’s CEN Service calling Prince Rupert) because disruption in cut-offs, transit times, and allocations will be minimal.

3).  Make sure you have options within all the networks, and if necessary, we can put together a Choices Program allowing you to select per booking from a group of services, including those that are not included in any alliance (Zim, PIL, SM Lines, Wanhai).  This will allow for the most choice, flexibility and control as we all try to navigate changes this summer. 

4). Study days of departure and arrival.  In many cases, you will experience a change in cut-off day at origin so many shippers who prefer a specific cut-off because of their production cycle may have to change their processes.  In addition, arrival days are critical for many importers and many of these will be different moving forward.  What impact does that have on your trucker network, dray scheduling, warehouse staffing and expectations?

5). Provide forecasts of future bookings. This will assist us secure space and equipment in advance to minimize disruptions from the changing alliances.

There is lots to digest here.  Our #1 priority as always is to help maintain our customers’ competitiveness, to keep your cargo flowing as quickly and as consistently as possible, and to continue to communicate effectively along the way.  Our nimbleness, market awareness, and “Built Different” philosophy enable us to do this - as your partner. 

Thank you very much for all your support.

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