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July 27, 2017

Transpacific Eastbound Market Update

 

To Our Valued Customers: 

Market Conditions – What’s Happening with Space?  Space conditions in the Transpacific trade for late July and into early August have tightened.  Forward bookings from major retailers are quite strong through the balance of the traditional peak season and without any significant capacity increases, we expect space conditions to worsen as we continue through August and September.  We anticipate the ten weeks between now and the October 1, 2017 National Day Holiday in China to be this year’s most challenging in terms of space and equipment availability. 

 

General Rate Increases:   Despite some erosion in market rate levels in the second half of July, tightening conditions have given Carriers confidence they can push through a significant portion of their $800/40’ GRI on August 1, 2017.  In addition, some carriers have filed a supplemental GRI for September 1, 2017 for $800/40’.

 

 Peak Season Surcharge:  This year’s PSS has been postponed since early June, but we expect it to be fully implemented mid-August as space conditions continue to tighten.  We expect the Peak Season Surcharge to be in the $400-$600 per 40’ range and apply to all imports from Asia to the United States and Canada.

 

The Maersk Effect:   As has been well documented, Maersk was one of the many global companies impacted by the cyber-attack Petya in late June.  This attack disabled much of their IT infrastructure, both at Maersk and APM Terminals.  Maersk’s struggle to receive shipments, accept bookings, process files and communicate with customers during this time has impacted space conditions in Asia, as some of their cargo cascaded to other carriers which in some cases were already at full capacity.

 

Carrier Mergers/Acquisition Update:  Over the last twelve months we have seen significant M&A activity on the carrier side, as well as the loss of Hanjin Shipping to bankruptcy.  By mid-August UASC will be fully merged into Hapag Lloyd.  Hamburg-Sud has been purchased by Maersk.  COSCO has announced their purchase of OOCL, and we know the three Japanese carriers are merging themselves into one Japanese carrier to be called “ONE,” to be completed early 2018. 

 

Equipment Concerns:  One area that remains a concern for 2017 is empty equipment availability 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 in China transition to use water-based, non-toxic paint.  We are already experiencing periodic equipment deficits in China, Vietnam and Southeast Asia.  In addition, China’s announcement that they will no longer accept “scrap” commodities from early 2018 will create significant challenges for carriers who rely on the export of large volumes of recycled materials (waste paper, metal scrap, plastic scrap) to help them reposition equipment to Asia from the United States.  If that ban does go through, we expect the equipment availability situation to remain challenging well into 2018.

 

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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