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January 13, 2017    

Transpacific Eastbound Market Update

 

To Our Valued Customers: 

Market Conditions – What’s Happening with Capacity and Demand?   Transpacific eastbound space conditions are deteriorating quickly as we approach the Lunar New Year holiday on January 28, 2017.  Even with certain carriers adding extra loaders sailing week 4, the over-booking situation is quite bad.  The space situation is so difficult right now that it is quite reminiscent of 2009-2010 when carriers restricted capacity to create an industry imbalance in their favor.  Roll-overs are not uncommon, especially to non-primary destinations like Miami, Jacksonville, Boston and Baltimore.  In addition, some carriers are restricting IPI bookings to inland destinations.

General Rate Increases:  With space conditions so tight, carriers have been largely successful in driving the spot market up to levels not seen since 2015.  Since carriers were successful in implementing their January 1, 2017 GRI, the market was anticipating the January 15 GRI would have limited success.  However, with space so tight leading to Chinese New Year, carriers will be successful in increasing again on the 15th of January, and perhaps another GRI later in February.

Demand:  The current situation regarding space is not simply a capacity issue.  The industry at large is experiencing higher demand than had been anticipated, with importers reacting to strong retail sales in Q4, 2016 as well as robust inventory replenishment.  Demand is so strong that bookings for post-CNY are above expectations.  

Blank Sailings:  Carriers have confirmed a series of blank sailings starting in Week 5 and extending through Week 8.  It is too early to predict how this will impact space and equipment for the months of February and March.  

Carrier Alliances:  Carrier alliances are largely set for the spring of 2017 as follows:

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

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

                      2M:                       Maersk, MSC

                      Non-aligned:         Zim, Hyundai*, Wanhai, PIL, Korea Line

What remains to be determined is the exact transit times, terminal selection, and some rotation specifics, all of which we anticipate will be finalized and shared later in January.  Hyundai remains in a precarious position as a slot charter partner within the 2M Alliance to the US East Coast (and 2M members will take over the charter on those ships), and will be forced to run independent services to the US West Coast starting in March once they leave the G6 Alliance (one service to PSW, another to PNW).  Korea Line (SM Line) anticipates starting a US West Coast service from Asia in April.  The three Japanese carriers (KLine, NYK, MOL), have announced they will merge container services in 2018 to create a new, single Japanese carrier.

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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