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March 17, 2017

April 1st Alliance Restructuring and Impact on US Exporters

 

To Our Valued Customers: 

With ocean carriers restructuring their Alliances and routing networks on April 1, 2017, we expect significant challenges for US exporters, especially those exporting to Asia.  Virtually everything will change overnight on April 1st and we are already seeing carriers struggle with the execution of transferring their assets, routing guides, terminal selection, allocations and all components of their physical networks from one alliance to another.  Many of these carriers will be working with partners they have never worked with before so there is limited cultural or relationship affinity that can be leveraged to help these changes happen smoothly.

Terminal Changes:  Overnight, many carriers will be forced to switch from one terminal to another in key load ports.  This is having an impact on chassis and empty container availability where it’s needed or expected to be by truckers and exporters.  We also expect it to have an impact on terminal/carrier communication as many of the key operational team members on both sides will be working with new people, new operational guidelines, new carrier relationships, revised cut-offs, etc. 

New Sailing Schedules, Cut-offs, and Routing Networks:  Despite being two weeks away from the new Alliances going into effect, actual sailing schedules with revised departure days, cutoffs, and rail cutoffs are still not entirely finalized.  Some destinations that are serviced with direct calls today will be serviced through trans-shipment ports after April 1st and those trans-shipment schedules are not completely set.

Allocation Uncertainty:  Even at this late hour, we are being told of uncertainty with some carriers as to what their specific export allocations will be per service.  This is having an impact on booking levels being accepted by some carriers for April.

Blank Sailings:  In order for the carrier members of these new Alliances to provide service April 1st, vessels need to be repositioned from one alliance to another, and globally.  This is incredibly complex and for carriers that are changing from one alliance to another overnight, it is impossible to do that and have all vessels in the right location, at the right time immediately on April 1st.  So we are experiencing a significant amount of unannounced and unscheduled blank sailings in April that are having an impact on booking availability and uncertainty for exporters in April and through early May.   

General Rate Increases and April 1:  Many US export contracts expire on March 31, 2017 and without a renewal or extension, carriers are rejecting bookings for April (“no rate on file”).  Due to the strength of the US export market, especially to Asia, there are carriers pushing for a small GRI on April 1st

New Carrier Alliances on April 1, 2017:

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

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

               2M:                      Maersk (Hamburg-Sud), MSC, Hyundai (limited)

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

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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