June 28, 2017

Transpacific Eastbound Market Update


To Our Valued Customers: 


Market Conditions – What’s Happening with Capacity, Demand, and new Alliances?  The market is somewhat stable now as we are in a period between the formation of all new alliances on April 1 and the traditional transpacific eastbound peak season which we will start to see accelerate in mid-July.  We are no longer experiencing blank sailings as part of the alliance restructuring and we are seeing better vessel schedule integrity and predictability.  This was a major challenge to all in the market since mid-March and with the market beyond that transition now, we are gearing up for what some anticipate to be a strong peak season.


General Rate Increases:  Carriers have continued to file General Rate Increases monthly in an attempt to prop up spot rate levels in the transpacific trade.  So we see a familiar pattern, with a GRI on the first of the month (which gets mitigated), slow erosion in spot pricing through the month, and then another GRI to begin the next month.  We don’t anticipate that pattern to change in the foreseeable future.  As an example, carriers had attempted to achieve an $800/40’ GRI on July 1, 2017 which will be largely mitigated to $300-$400 range, and then they have filed another GRI on August 1, 2017 for $800/40’ as well. 


Peak Season Surcharge:  In anticipation of strong eastbound volumes starting in July as importers and retailers gear up for the holiday retail season, carriers have begun to file Peak Season Surcharges in excess of $600/40’ effective July 15, 2017.


TSA Quarterly BAF:  The Transpacific Stabilization Agreement (TSA) is still publishing a fuel index on their website for the market to monitor (tsacarriers.org), but they are no longer publishing a standard Quarterly Fuel Surcharge or Low Sulfur Surcharge for all carriers to follow.  Instead, carriers are free to determine and file their own quarterly fuel surcharges based on their own conditions, and have that surcharge be applicable to both tariff rate levels and service contracts.  From what we have seen, however, is that carriers in the transpacific trade are still using the previous formula to calculate their applicable fuel surcharge, and we at Laufer have followed their lead and filed an identical fuel surcharge accordingly.


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


Carrier Mergers/Acquisition Update:  Hapag Lloyd is in the final transition phase to fully absorb UASC which will be completed this summer.  So, from the third quarter of 2017 UASC will no longer exist.  In addition, there is widespread speculation and reporting that OOCL may be sold to COSCO Shipping, and that that deal may be announced as early as July 1, 2017 on the 20th anniversary of the transfer of sovereignty over Hong Kong from the United Kingdom to China.  In addition, the three Japanese carriers, MOL, NYK, and Kline are moving forward to complete their collective merger of the container businesses that belong to all three to create one single Japanese carrier.  This process has already begun (regulatory issues to be addressed first) and from what has been communicated, will complete in early 2018.  If the above goes through as anticipated, in the transpacific trade we will be left with 9 core carriers and 4 niche carriers by early 2018.


Equipment Concerns:  One area that remains a concern for 2017 is empty equipment availability, especially in Asia. There are a number of reasons for this but the primary three are Hanjin’s bankruptcy that is still limiting the return of Hanjin equipment to the marketplace, lack of investment in new equipment by carriers since 2008, and the requirement that equipment factories transition to use water-based, non-toxic paint.  We are already experiencing periodic equipment scarcity in China (Shenzhen area, Shanghai, and Ningbo specifically) and with certain carriers more than others.  We expect this situation to remain the same through the peak season.


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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