Transpacific Eastbound Market Update
August 16, 2018
To Our Valued Customers:
Impact of Capacity Reductions in the Peak Season: With all three major carrier alliances removing west coast services in July and August, the market is experiencing a severe space shortage that is impacting space availability and increasing the frequency of rolled cargo. In addition, 2M (Maersk, MSC) announced a vessel sharing agreement with Zim to rationalize east coast services starting in early September. The result will be the loss of two weekly all water services (From seven to five between 2M and Zim). As a result of these service cuts, we are expecting to lose approximately 7% of west coast capacity and approximately 3-4% of east coast capacity.
The details of these service cuts are as follows:
2M (Maersk, MSC):
July cancellation of TP-1/Eagle Service
Kaohsiung, Yantian, Xiamen, Shanghai, Busan, Vancouver, Seattle
THE Alliance (ONE, HPL, YML):
August cancellation of PS8 Service
Xingang, Qingdao, Shanghai, Busan, Prince Rupert, Los Angeles, and Tacoma
OCEAN (COSCO, APL, OOCL, CMA, EMC):
August Cancellation of AAC Service
Lianyungang, Shanghai, Ningbo, Los Angeles, Seattle
All Water (MSC, Maersk, Zim):
In early September, the 2M Alliance and Zim will enter into a slot-sharing agreement and reduce seven services that are available today to five.
Peak Season Surcharge: Due to the strength in booking forecasts and vessel utilization quite strong in the TPEB trade, Carriers have all filed an applicable Peak Season Surcharge to be applied as quickly as July 15, 2018, by as much as $900/20’, $1000/40’, $1125/HQ, and $1270/45’.
Emergency Bunker Surcharge - Soaring bunker costs with oil approaching $70 a barrel will impact 3rd quarter BAF prices on long term fixed rate contracts and impact market rates in the short term. Bunker fuel costs YTD have increased by approximately 25%. As a result, carriers have announced to the market a global Emergency Bunker Surcharge effective July 1, 2018 to offset these sudden and higher costs. The EBS has been filed at $60/20’, $120/40’, $120/HQ, and $120/45’.
General Rate Increases – In anticipation of stronger volumes from July through October, carriers have announced General Rate Increases (GRI) on both August 15, 2018 and September 1, 2018 of $900/20’, $1000/40’, $1125/HQ, and $1267/45’) respectively. While we expect some of these GRI amounts to be mitigated or even postponed, we do expect that rate levels in the spot market will significantly increase through the summer until after National Day holiday in China October 1, 2018.
What you can do: Forecasts and Flexibility! There is still a high degree of uncertainty in the market (tariffs, space, capacity, demand) so it is difficult to predict space conditions through the balance of the year. However, the market is beginning to experience significant space shortages for volume departing in the month of August. With the additional cuts in capacity we expect conditions to deteriorate through October.
We at Laufer realize how important it is for all of our customers to have a consistent and predictable flow of space and equipment so you can satisfy your customer needs and requirements. That has always been and remains our priority. One thing we request from all of our customers is for future forecasts, especially for larger, seasonal flows of product. Early forecasts allow us to better prepare and communicate with all partners in the supply chain, and to support your business needs. In addition, we ask that all of our customers be flexible with routings and open up options via Canada, PNW, and PSW for all IPI destinations if and when applicable.
Should you need any additional information or assistance, please feel free to contact your Laufer sales or customer support personnel. Thank you very much for all your support!
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