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April 18, 2017

Transpacific Eastbound Market Update

 

To Our Valued Customers: 

Market Conditions – What’s Happening with Capacity and Demand?   Space conditions have tightened in April due to a combination of factors:  1) Increased demand, 2) Blank sailings limiting capacity, and 3) moving forward inventory replenishment following Chinese New Year.  Despite this, spot market pricing is expected to continue to erode slightly through the end of April prior to a corrective General Rate Increase proposed by carriers for May 1, 2017.

Blank Sailings:  Carriers have 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 early May in Asia, vessels will be in the appropriate locations and fully integrated into the new alliance rotations. 

General Rate Increase:  Carriers have filed a GRI for May 1, 2017 in the following amounts: $720/20’, $800/40’, $900/HQ and $1015/45’.  While we remain skeptical that carriers will be successful in obtaining such a sizeable GRI on May 1, 2017, we do anticipate some mitigated GRI to be implemented.

May 1, 2017 and International Labor Day:  China and Vietnam will close for up to five days beginning May 1 to celebrate International Labor Day. 

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

Impact of New Alliances:  In general, the carriers were not prepared for such a massive undoing of existing alliances and the formation of new alliances with new partners overnight on April 1, 2017.  Everything is different, including terminals, rotations, capacity, transit times, direct calls, cut-offs, and ports that specific carriers no longer service.  However, as much as the new alliances do change things, we expect the new services to be operating relatively smoothly by the end of May and that carriers in general will be ready for the traditional peak season starting later this summer.

Equipment Concerns:  One area of concern for 2017 is equipment availability, especially in Asia. There are a number of reasons for this but the primary two are Hanjin’s bankruptcy that is still limiting the return of Hanjin equipment to the marketplace, and a lack of investment in new equipment by carriers since 2008.  We are already seeing equipment scarcity in certain areas in China (Shenzhen area, Shanghai, and Ningbo specifically) and with certain carriers.

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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