Transpacific Eastbound Market Update

July 26, 2018

 

To Our Valued Customers: 

 

Additional Capacity Reductions in the Peak Season?  Unfortunately, yes.  All three major alliances have announced the removal of west coast services in July and August that will significantly reduce available capacity to the US West Coast effective immediately.  In addition, 2M (Maersk, MSC) just announced a vessel sharing agreement with Zim to rationalize east coast services starting in late August.  The result will be the loss of two weekly all water services (From seven to five between 2M and Zim).  With the announced service cuts, we are expecting to lose approximately 7% of west coast capacity and approximately 6% of east coast capacity. 

 

Even with capacity utilization relatively high and with strong peak forecasts from retailers and importers, all major carrier alliances will adjust their rotations immediately to remove some available capacity.  The details are as follows:

 

2M (Maersk, MSC):                                               July cancelation of TP-1/Eagle Service

Rotation:                                                                Kaohsiung, Yantian, Xiamen, Shanghai, Busan, Vancouver, Seattle

 

THE Alliance (ONE, HPL, YML):                          July/August cancelation of PS8 Service

Rotation:                                                                 Xingang, Qingdao, Shanghai, Busan, Prince Rupert, Los Angeles, and Tacoma

 

OCEAN (COSCO, APL, OOCL, CMA, EMC):      August Cancelation of AAC Service

Rotation:                                                                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, we expect a PSS to be applied quickly as the above capacity reductions take effect.  Carriers have all filed an applicable Peak Season Surcharge to be applied as quickly as July 15, 2018, by as much as $540/20’, $600/40’, $675/HQ, and $760/45’.

  

Emergency Bunker Surcharge - Soaring bunker costs with oil approaching $80 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 30%.  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 a General Rate Increase (GRI) on both July 15, 2018 and August 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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