Sep 07

Carriers Quickly Filling Gap Left By Hanjin

| Sep 06, 2016 5:01PM EDT

Trans-Pacific competitors of bankrupt Hanjin Shipping have wasted little time adding “extra loader” vessels to pick up Asian cargo the South Korean carrier’s collapse has left up for grabs, according to a non-vessel-operating common carrier.

Carriers that have advised customers of added capacity include 2M Alliance partners Maersk Line and Mediterranean Shipping Co., and CMA CGM, which has just completed its takeover of Neptune Orient Lines, owner of APL.

One NVOCC said CMA CGM had added a sailing with Sept. 22 to 27 loadings at the Chinese ports of Shanghai, Ningbo and Yantian to Long Beach. The NVO said 2M plans sailings next week from Yantian, Shanghai and Busan, and expects to add at least three other voyages. Port-to-port rates for the extra loaders were listed at $2,100 per 40-foot container.

Other carriers also are expected to add sailings to take advantage of the capacity gap and seize the opportunity for higher rates that Hanjin’s exit provides. Hanjin deployed some 240,000 twenty-foot-equivalent units of capacity in the trans-Pacific trade.

Hanjin carried 419,418 TEUs of Asia-to-US West Coast cargo, a 7.54 percent share, in the first seven months of this year, compared with 7.85 percent in the first half of 2015, according to PIERS, a JOC.com sister product within IHS.

The trans-Pacific isn’t the only trade lane where Hanjin’s halt has affected supply and demand. In the Asia-Mediterranean trade, Hanjin had a 9 percent share, with an estimated 150,000 TEUs a year of capacity.

For Hanjin’s competitors, the carrier’s woes provide at least a temporary opportunity to shore up rates and stanch red ink in what otherwise has been a disastrous year of overcapacity and falling revenue.

When carriers deploy extra loaders, they typically charge higher rates to cover the added expense of chartering or redeploying vessels, and because cargo interests are anxious for vessel capacity and are willing to pay.

That’s what happened during the West Coast port delays accompanying International Longshore and Warehouse Union contract negotiations in early 2015, when carriers added numerous all-water voyages linking Asia with US East and Gulf coast ports.

Hanjin’s Sept. 2 bankruptcy announcement sent Asia-Europe spot rates soaring 37 percent, to $949 per TEU, according to the Shanghai Shipping Exchange. It was only the third time this year the spot rate had topped $900.

In the trans-Pacific, where most cargo moves under annual contracts, Hanjin’s demise is supporting carriers’ efforts to make September and October general rate increases stick. In recent years, carriers have announced regular GRIs, only to see them crumble amid resistance from cargo interests.

The removal of Hanjin capacity comes just as the annual US import peak season is getting into gear. Shippers also are anxious to move goods in advance of China’s annual Golden Week celebration, which will shut factories during the first week of October.

Struggling to match capacity with tepid demand, carriers in recent weeks have been canceling voyages on main routes between Asia and Europe and North America. That, coupled with the recent pickup in peak-season shipments, has tightened capacity.

One forwarder said he had been advised that much of the space on the first 2M extra loader, an MSC vessel, had already been earmarked for cargo that had been “rolled,” or shut out due to lack of space, on previous sailings.

Sep 06

Some US Ports Are Charging $300-$400 To Release Hanjin Containers

JOC Staff | Sep 03, 2016 12:17PM EDT

Details are emerging on how much US ports and marine terminals are charging shippers to release stranded Hanjin Shipping containers after the world’s seventh-largest container line filed for bankruptcy.

The stranding of Hanjin containers is rippling through not just ports and marine terminals that were served by the ocean carrier and its fellow CKYHE Alliance members. Hanjin also had looser slot-sharing agreements with non-CKYHE members, but it’s unclear to what extent.

On the West Coast, terminal operators in Los Angeles and Long Beach are unloading all of the containers from the vessels. Containers that do not belong to Hanjin are processed according to normal procedures and terminals are holding onto import loads in Hanjin containers and will deliver the containers to truckers only if the beneficial cargo owners pay the terminal cargo-handling charges upfront. The terminals are not accepting Hanjin export loads and empty containers.

At the Northwest Seaport Alliance of Seattle and Tacoma there were no Hanjin vessels in port on Friday, according to spokesperson Tara Mattina. The Hanjin Scarlet is due to arrive at Terminal 46 in Seattle on Saturday, although the schedule may not hold up. As of Friday, the was anchored outside Prince Rupert, British Columbia, where its entry was refused, she said.

Terminal 46 is now accepting import containers, but is not accepting export loads and empties. Olympic Container Terminal in Tacoma is not accepting any Hanjin deliveries for now and the Husky Terminal is not accepting exports or empties, but is unloading imports and is encouraging truckers to bring their own chassis, Mattina said.

In Vancouver, Global Container Terminal said it will no longer receive Hanjin ships. One Hanjin ship is at the port waiting to be moved on.

On the East Coast, the largest terminal in the Port of New York and New Jersey, Maher Terminals, has made no statement on if, or how much, shippers must pay to get Hanjin containers. However, the terminal has told customers that Hanjin import deliveries must be pre-paid and that Hanjin exports won’t be accepted. One motor carrier told JOC.com he was required to pay $395.20 per container to cover stevedoring charges before he could remove a Hanjin box from the terminal.

Maher is the only New York-New Jersey terminal that receives Hanjin ships, and APM Terminals, Port Newark Container Terminal, and Global Container Terminals didn’t disclose how they are handling Hanjin containers.

Philadelphia reported no impact from Hanjin ships or containers. Boston does not receive Hanjin ships and wasn’t available to comment on how it’s handling potential Hanjin containers

Down the coast in Baltimore, Ports America Chesapeake, which operates the Seagirt Terminal in Baltimore didn’t disclose how it’s handling already received Hanjin containers. The terminal did say it will not accept any inbound Hanjin cargo, and they will continue receiving but not delivering Hanjin empty containers. The Maryland Port Administration said a barge loaded with Hanjin containers is sitting in the port.

At the Port of Virginia, Hanjin export containers may be picked-up at the terminals by the original shipper only with authorization from Hanjin. In these occurrences, all terminal service charges shall be waived and the shipper will be responsible for all associated chassis charges and fees. All import containers on terminal by Tuesday with the appropriate documentation will be available per normal policy. Starting Wednesday the charge to release Hanjin import containers will be $325, but all demurrage charges will be waived and shippers must have authorization from Hanjin.

At the Port of Wilmington, North Carolina, a Hanjin ship, Seaspan Efficiency, left late Tuesday and cargo from the vessel is being stored at the port. “North Carolina Ports will deliver all import loads and receive back all empties (originally discharged and currently at the Port of Wilmington), including Hanjin Shipping containers,” said spokesperson Cliff Pyron.

Further south, the South Carolina Ports Authority has has waived the non-vessel delivery fee for export loads out-gated and all import loads discharged on or after September 1 will be placed on hold until such time as all SCPA charges are settled. The South Carolina Ports Authority will collect all port and throughput charges totaling $350 per container from the BCO/responsible party with authorization required from Hanjin. This process will be further refined, but payment is required prior to manual release of hold and outgate.

The Georgia Ports Authority, which oversees the second-largest port on the East Coast, Savannah, wasn’t available to comment, nor was Port Miami. The Port of Jacksonville said it does not have any calls from Hanjin or other CKYHE Alliance members.

Along the Gulf Coast, Houston is holding containers until they receive $100 to cover the Port of Houston Authority’s terminal throughput charges, which are separate from stevedoring costs. The port authority is considering whether to also require guarantees or payment for stevedoring bills for Hanjin boxes that will be discharged from a China Cosco Shipping vessel expected in next week.

Mobile only had three Hanjin containers at the terminal so the operator there, APMT, is checking with the individual customers to see how they would like to proceed. New Orleans, like Jacksonville, has no Hanjin or other CKYHE calls.

Sep 02

Transpacific Spot Rates Soar After Hanjin Collapse

JOC Staff | Sep 01, 2016 4:44PM EDT

Trans-Pacific inbound container rates are soaring in the aftermath of this week’s collapse of Hanjin Shipping, but it’s unclear how high they’ll go over the next few months as new capacity gets deployed to handle the orphaned Hanjin Shipping cargo.

Prior to the Thursday bankruptcy of the world’s seventh-largest container line, which brought its worldwide operations to a sudden standstill on Wednesday, trans-Pacific carriers were planning to implement a Sept. 1 general rate increase of $600 per forty-foot-equivalent unit from Asia to the West Coast. But whereas in normal times the success of such a GRI would have been questionable at best, this time sources say it will without question take effect and that rates are likely to rise even further in coming weeks.

The Sept. 1 increase will take spot rates up to $1,700 per FEU, up from $1,100 or 54 percent prior to the increase. On top of that, carriers have announced a $600 peak season surcharge to take effect Sept. 15, which also stands a good chance of taking effect, and an Oct. 1 GRI on top of that. At the very least, sources say, the Sept. 1 GRI and PSS stand a good chance of taking effect, taking trans-Pacific spot rates to the West Coast up to $2,400 and East Coast rates up to $3,000 per FEU.

The Hanjin collapse “is definitely giving the carriers the confidence to stick with the GRI and understandably so; they are inundated with cargo requests,” said Kurt McElroy, executive vice president of APEX, one of the largest non-vessel-operating common carriers in the trans-Pacific eastbound market.

Others believe the same thing. “The complete halt in Hanjin Shipping’s operations is expected to cause serious capacity issues in the market. In light of this, we anticipate a strong general rate increase as of Sept. 1, 2016 and continued rate increases for the remainder of 2016,” OEC, another larger trans-Pacific NVO, said in an Aug. 31customer advisory.

Part of what is giving liners confidence is an already tight trans-Pacific market that sources say is at 90 percent utilization. The evidence for the tightness is clear from recent spot rates: spot rates to the U.S. West Coast have climbed from $753 per FEU in late June to $1,153 in the latest reading from the Shanghai Shipping Exchange’s Shanghai Containerized Freight Index, a 53 percent increase.

Following the Hanjin collapse, the Drewry rate assessment increased by 42 percent to $1,674 per FEU on the Shanghai-Los Angeles route and by 19 percent to $2,151 on the Shanghai-New York route.

Hanjin was carrying roughly 10,500 to 12,000 FEUs per week in the eastbound trans-Pacific, all of which will now have to find another home. Fellow Korean carrier Hyundai Merchant Marine plans to deploy 13 additional ships to handle the orphaned cargo, the Wall Street Journal reported and other carriers are said to be planning so called “extra-loaders” in coming weeks — ships deployed in addition to scheduled services.

“We’re already seeing indications that carriers are going to do extra loaders,” McElroy said, “Anyone who has access to available tonnage is undoubtedly going to evaluate the merits of extra loaders, and I think there is certainly enough demand for that capacity even at the higher spot rates.”

How the spot rate market plays out will depend on how quickly it adjusts to the shock of this week’s sudden withdrawal of the Hanjin capacity. There is no shortage of idled capacity that could quickly fill the void. Maritime analyst Alphaliner reported this week that the idle fleet is currently over 1 million TEUs and extra-loaders are to be expected in coming weeks. And with rates at higher levels carriers, can be expected to move quickly to get higher valued cargo onto their ships. This is especially so given the historically rock bottom rates, some as low as $700 per FEU, that cargo under annual service contracts is currently moving under.

McElroy said beneficial cargo owners are already knocking on the doors of NVOs like APEX seeking extra capacity. He said it’s likely that given the low service contract rates, carriers are likely to enforce limits on minimum quantity commitments, as they typically do in periods of high demand. For example if a shipper has a 1,000-FEU MQC contract, a carrier will allow only about 20 containers per week to be shipped at the contract rates, and will demand higher rates more aligned with current spot rates for any incremental volumes a BCO may need to ship.

The fate of an announced Oct. 1, $1,000 GRI is harder to determine at this point. If the Sept. 1 GRI and Sept. 15 PSS were to hold and then the Oct. 1 GRI was slapped on top of that, West Coast rates would stand at $3,400 per FEU, which would represent a huge increase versus current levels and a significant upward shift in the rate structure. Would the Hanjin withdrawal and the peak season be enough to support those types of rates?

Even if they weren’t, the current September increases look favorable, at least for carriers. “I definitely think a $2,400 rate is quite feasible for September given the situation,” McElroy said. Come Oct. 1, it is going to look different. There could be a decline in volumes coming and capacity coming in, possibly through taking idle tonnage for the displaced Hanjin tonnage. But right now I think that September is definitely going to see higher rates and (the carriers will) keep those rate levels at least through September and well into October as well.”

Aug 31

Hanjin Upate 2016-8-31

www.joc.com   JOC Staff | Aug 31, 2016 10:40AM EDT

The bankruptcy and apparent unraveling of Hanjin Shipping on Wednesday, the world’s seventh-largest container line, following the withdrawal of support from its creditors after a lengthy period of financial distress, will cause an immediate upward adjustment in US import rates, sources told JOC.com Wednesday.

A set of sharp trans-Pacific spot rate increases will take effect on Thursday, as the ocean carrier announced it has put a hold on container loadings on ships, and forwarders and Hanjin’s alliance partners cancel bookings with the Korean liner and frantically seek to divert freight to other container lines and the alliances in which Hanjin does not participate. JOC.com was told that Cosco and Evergreen Line, partners of Hanjin in the CKYHE Alliance, have ceased making bookings on Hanjin ships, as did a major forwarder according to what it told JOC.com.

Trans-Pacific eastbound rates were already trending higher in recent weeks due to higher utilization amid the peak holiday shipping season, and now they will go higher still. According to one large forwarder, carriers as of Sept. 1 will implement a $600 increase per 40-foot-equivalent unit for freight all kinds (FAK) cargo to a level of $1,700, representing a 54 percent rate increase from Asia to the U.S. West Coast. The rate to the East Coast will go up by $800 per FEU to $2,400, a 50 percent hike. Similar increases were announced to Vancouver, Prince Rupert, Houston, Mobile, and inland ports such as Chicago, Detroit, Memphis, Fort Worth, and Kansas City. This comes on top of recent increases that have largely held; spot rates to the U.S. West Coast have climbed from $753 per FEU in late June to $1,153 in the latest reading from the Shanghai Shipping Exchange’s Shanghai Containerized Freight Index, a 53 percent increase.

Carriers will likely achieve these increases, and perhaps more to come, given that Hanjin, according to one larger forwarder, was carrying 20,000 TEUs to 25,000 TEUs in the trans-Pacific eastbound trade. The withdrawal of its capacity will create a rush of volume to other carriers who are already operating at 90 percent to 100 percent utilization.

According to the Agriculture Transportation Coalition in a member advisory on Wednesday: “There is currently, overall for all carriers, about 8,000 to 10,000 TEU unused capacity transpacific eastbound. So if Hanjin ceases operations, suddenly we are in massive demand-over-supply situation. Impact on westbound shipments will be significant, but may be less than for eastbound imports.”

The rate increases come as the Hanjin business appeared to be coming apart on Monday. One larger forwarder on Monday told JOC.com it was immediately cancelling all bookings with Hanjin. Another forwarder said it was told by Hanjin officials that the company is entering bankruptcy and to cease booking with the carrier. One forwarder told JOC.com on Wednesday that it is “devanning containers that are loaded at origin to get it on other carriers.”

In a customer announcement on Wednesday Hanjin said “All containers intended to load on vessel are put on-hold for loading as per instruction of our Head office to avoid further problem that may incur at transshipment port.” It further stated, “Advance booking confirmation which has been released will also be put on-hold. Kindly refrain from sending out truckers to our CY (container yard) for empty container withdrawal, our CY has been advised not to release empty containers to truckers.”

Some saw the writing on the wall and took action in advance of the bankruptcy. Two non-vessel-operating common carriers doing business with Hanjin dramatically pulled back their exposure to the ailing carrier in June, according to an analysis of the latest data available via PIERS, a sister product of JOC.com within the maritime and trade business of IHS Markit. Between May and June, Seattle-based Expeditors, the largest trans-Pacific NVOCC, went from shipping nearly 2,100 TEUs to moving under 100.

Vilden Global Transportation Solutions also pulled back its exposure in the same period, going from 2,334 TEUs to 663 TEUs. Expeditors and Vilden didn’t respond to requests for comment. Unlike Expeditors and Vilden Global Transportation Solutions, the third- and fifth-biggest movers of NVO cargo for Hanjin, Orient Express Transport, Orient Star International and an undisclosed NVOCC that commands the top spot increased their exposure. Translink, the third biggest bringer of NVO business, reduced its monthly volume from 1,750 TEUs in May to 1,374 TEUs in June

United Arab Shipping Co., a fellow CKYHE Alliance member of Hanjin, told customers Tuesday it was closely monitoring their cargo that is aboard Hanjin ships and has taken emergency contingency planning of such cargo.

China Cosco Shipping told JOC.com Wednesday morning that it hadn’t heard of any of its customers’ cargo on Hanjin ships being seized.

“We are trying to get all the information we can. Our first objective is to protect shippers,” said Howard Finkel, executive vice president of China Cosco Shipping Americas. “We have to find out legally what we can and can’t do.”

“We’re going into brand new territory so there are a lot of questions that need to get answered,” Finkel said.

The bankruptcy begins what will be a “complex insolvency process,” said the UK law firm Psydens, which issued an initial advisory with preliminary details on shippers’ options.

“In a receivership situation, the party going into receivership cannot trade once they know they are insolvent. Hanjin appeared to find this out on Tuesday when it was reported that key lenders had withdrawn their support,” Psydens said.

Aug 31

Hanjin Files for Receivership

From: www.joc.com   Xiaolin Zeng, east Asia correspondent | Aug 31, 2016 12:43AM EDT

Hanjin Shipping has decided to file for court protection after losing the support of its banks in South Korea, sending shockwaves through the shipping and financial world.

The writing was on the wall after the country’s largest shipping line had trading of its stocks suspended on the Korea Exchange yesterday after a liquidity plan submitted to Korea Development Bank on Aug. 26 was rejected.

The KDB felt that the plan, which involved cash injections of up to 500 billion South Korean won, was insufficient to solve the liquidity shortfall facing Hanjin Shipping, which had already raised more than 1.7 trillion South Korean won since former chairwoman Choi Eun-young handed over the reins to her brother-in-law, Korean Air Lines chairman Cho Yang-ho.

The Financial Services Commission’s earlier assessment was that Hanjin Shipping would lack 1.2 trillion won over the next two years. Hanjin Shipping had been in the red for four of the last five years, dealing a blow to its equity even as it soldiered to raise funds.

While Hanjin Shipping has yet to issue any official confirmation of its application for receivership, the FSC has already issued a statement to the same effect. The latter statement stated that at a presentation yesterday, Hanjin Shipping’s creditor banks decided that they could not accept the liquidity plan.

Considering the impact on the economy, the Seoul Central District Court is expected to approve Hanjin Shipping’s receivership application.

The impact on the liner shipping industry is expected to be significant and will affect Hanjin Shipping’s CKYHE Alliance partners, its future THE Alliance partners, slot sharing with other carriers, its charter contractors and countless shippers with cargo moving on major trades on its 98-ship fleet.

In the meantime, Hanjin Shipping’s debt repayments are expected to be stayed and creditors would be precluded from seizing the company’s assets. Once the receivership application is granted, Hanjin Shipping would continue rehabilitation procedures under the direction of the court and KDB, its main creditor.

The company could implement layoffs and asset sales while its banks reschedule loan repayments. Hanjin Shipping on Monday said it had made significant progress in its negotiations to lower charter costs and delay loan repayments to foreign banks. The company’s counterparties include Seaspan, Doun Kisen, Ciner Ship Management, HSH Nordbank, Credit Agricole and Commerzbank.

In a manner similar to Pan Ocean, which was in receivership from June 2013 to early 2015, Hanjin Shipping could sell vessels that are not part of its core business of container shipping, in addition to terminals in South Korea and elsewhere.

Cash injections from Hanjin Shipping’s banks are unlikely as KDB and other South Korean banks have been massively burdened by the downturn in the shipping and shipbuilding industries. There also will not be any government bailouts, although debt-for-equity swaps could be possible, as seen with Pan Ocean and Korea Line Corporation. If debt-for-equity swaps are executed, the Hanjin Group could lose control of its shipping subsidiary and a new management team is likely to be appointed.

The FSC, South Korea’s financial watchdog, has moved to mitigate the impact of Hanjin Shipping’s situation on the latter’s associated companies, banks and investors.

The FSC said: “While Hanjin Shipping will be applying for receivership soon, the restructuring efforts that the company undertook in the meantime should limit the impact on the financial market.  Firstly, although Hanjin Shipping dos not carry heavy weight on the stock market, the company’s stock price has already adjusted downwards since the start of the year. Furthermore, the credit rating of Hanjin Shipping and Korean Air Lines has been adjusted to reflect the negative market conditions, and this should mitigate the impact on the corporate bond market .”

On the other hand, the FSC acknowledged that a significant proportion of Hanjin Shipping’s bank debts may become unrecoverable, and to this end, the company’s banks have been making provisions.

“Following Hanjin Shipping’s filing for receivership, we have been assessing the total possible amounts that the banks can absorb,” said FSC.

Aug 10

Space Concerns Arising in the Trans-Pacific Eastbound Route

LONG BEACH, California — U.S. importers, anxious because vessels in Asia are starting to fill up, are working to secure peak season space on the trans-Pacific, even though spot rates this week actually dipped slightly.

Beneficial cargo owners are concerned that a brief uptick in rolled cargo that affected non-vessel-operating common carriers in recent weeks could spread to their contracted shipments if vessels are overbooked later this month.

About a quarter of the 20 U.S. importers informally surveyed by JOC.com report an increase in rolled cargo over the last three to four weeks. Those who have been affected note the increase in contracted cargo delayed from loading in favor of more profitable spot freight has been minimal. Shippers expect further cuts to capacity as carriers, sore from a brutal trans-Pacific contract season, work to boost spot rates as shippers stock up for the holiday shopping season.

“We have experienced some intermittent rolling of cargo in the last three to four weeks, nothing too severe — one or two bookings per week, tops,” said an importer whose home decor freight headed to Long Beach was rolled in Ningbo and Qingdao. “We provide a rolling eight to nine-week window for a forecast, so that has helped us.”

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Other shippers, such as a major apparel importer, haven’t had any cargo delayed, a result of having strong service agreements. The importer said it gives carriers an eight-week, rolling, 40-foot-equivalent unit forecast and will reject bookings if cargo doesn’t ship when scheduled.

“I do expect there to be some tightening occurring as they accelerate their laying up of vessels and their redesign of the current strings in those trade lanes,” said another shipper who hasn’t seen any of their cargo headed to Canada and the U.S. rolled. “I’m waiting for the shoe to drop and there to be some space issues moving into late summer.”

The spot rate for shipping a 40-foot container from Shanghai to the West Coast this week fell 3.4 percent to $1,277 from $1,322 last week, according to the Shanghai Containerized Freight Index, as displayed on the JOC.comMarket Data Hub. The spot rate to the East Coast fell 3.8 percent to $1,884 per FEU from $1,958 last week.

It could be crunch time soon. “August and September. This is when the crush is supposed to be on,” Hayden Swofford, independent administrator of the Pacific Northwest Asia Shippers Association, said Friday. He is aware of a few cases of rolled cargo that occurred last month, but knows of no significant rolling the past week or so, he said.

Former shipping executive and president of Griffin Creek Consulting Ed Zaninelli said carriers are reporting vessel utilization percentages in the mid-90s, so the expected spike in cargo volume in the coming weeks will lead to full ships and possibly some rolling of cargo to subsequent voyages on the busiest trade lanes. These factors will push freight rates higher.

“The NVOs are starting to panic. Rates are up. Their customers are surprised,” Zaninelli said. Nevertheless, the expected peak-season rally will probably not be as robust as it was in past years. “No one is saying this will be a strong peak season,” he said.

Another indicator space is tight is that some importers are increasing the minimum quantity commitments they make to carriers for a specified time period in order to secure a favorable rates. One carrier reported the MQCs are being increased not so much for rate purposes, as to ensure sufficient space now that vessels in the eastbound trans-Pacific are filling up. The concerns over space availability are also a reaction to the mergers and acquisitions that are taking place this year, and the impact these are having on established shipper-carrier relationships. An executive from another major container line said the sought after MQC increases were more of a sign of a healthier late peak season than shippers moving away from certain carriers.

NVOs are not taking much solace from the drop in spot rates this week because the rates are much higher than they were during the spring, when the spot rates were about $1,500 per FEU to the East Coast and $800 to the West Coast. NVOs and their customers had gotten used to the ultra-low freight rates, and there is some pushback now that rates are at higher levels, Zaninelli said.

NVOs are concerned because when vessels fill up, the lowest-paying containers are the first to be bumped off of ships and “rolled” to subsequent voyages. Several importers reported to JOC.com there were some instances of cargo rolling two to three weeks ago, but the situation cleared up quickly when it became evident that proposed general rate increases did not materialize.

Some container lines in early July individually announced GRIs of $600 to $1,000 effective Aug. 1. The SCFI spot rates jumped double-digits in mid-month, and some shipments were rolled, but the increases were not sustained.

similar pattern of volatile price swings from week to week has taken place in the Asia-Europe trades. The SCFI spot rates to Northern Europe and the Mediterranean dropped by double digits this week after large increases the previous week.

Cargo volumes so far this year have not been bad. West Coast ports, which account for more than two-thirds of U.S. containerized imports from Asia, reported an increase of 3.1 percent year-to-date through June, according to the Pacific Maritime Association website. While nowhere near the 10 percent-plus increases that were common 10 years ago, the trans-Pacific is a mature trade now and industry analysts expect 3 percent to 5 percent annual increases in containerized trade to be the new normal.

However, carriers continue to struggle with overcapacity in the major east-west trade lanes, due to huge vessel orders the past five or six years that have resulted in deliveries far beyond what the trades can absorb. Carriers in the eastbound Pacific this summer have taken the unusual step of removing vessel strings as the peak season approached rather than adding peak-season only strings, but capacity has continued to outstrip demand. The Ocean Three Alliance last month announced the removal of two weekly services, and the G6 Alliance merged two weekly services into one.

A similar story is unfolding in the trans-Pacific trade to Canada where the Canadian International Freight Forwarders Association reports that after some sporadic incidents of cargo rolling in recent weeks, it looks like the peak season is indeed at hand. A CIFFA member forwarder echoed the views of some forwarders when he told Ruth Snowden, executive director, “Vessels are full now, and forecasts for the next four weeks are strong.”

Carrier behavior in the Canadian trans-Pacific trade is the same as through U.S. ports. Importers and NVOs that played the spot market and enjoyed especially low rates this spring and early summer are now being told they have to pay higher rates or their shipments will be left behind, but loyal customers that are paying market rates have had no problem so far getting their containers on vessels.

“Certainly the feeling is that loyalty, commitments, revenue do play a factor, and that where forwarders and carriers have established commitments and a strong relationship, service is not being seriously impacted,” Snowden said.

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Contact Bill Mongelluzzo at bill.mongelluzzo@ihsmarkit.com and follow him on Twitter: @billmongelluzzo.

Aug 10

High Capacity Utilization is this Week’s Theme in the Trans-Pacific

www.joc.com

High capacity utilization levels on the major east-west trades in the beginning of the third quarter are a result of supply-side adjustments rather than stronger demand for containerized cargo shipping in the peak season, according to Alphaliner.

The shipping industry analyst said average linehaul capacity utilization in the third quarter so far was reported to be in the mid-90 percent level, with only the Asia-Mediterranean routes at below 90 percent, due in part to capacity additions implemented by the CKYHE carriers earlier this year.

With freight rates falling to record lows in the first half, carriers introduced significant capacity cuts on the trans-Pacific and Asia-Europe routes.

Alphaliner said the adjustments were most apparent on the trans-Pacific, from which the Ocean Three partners withdrew two Asia-U.S. East Coast strings and one Asia-U.S. West Coast string in June, and the G6 Alliance withdrew one Asia-U.S. West Coast string. According to Alphaliner data, average weekly trans-Pacific capacity was down by 2.7 percent year-over-year in August.

On the Asia-Europe route, weekly capacity rose by only 2.3 percent year-over-year. The analyst said supply growth from the continued injection of new ships with capacities of 14,000 twenty-foot-equivalent units to 20,000 TEUs ships was largely counterbalanced by a reduction on the number of weekly services, as each of the four alliances has removed one Asia-Europe string since September last year.

There is little expectation that a strong peak season will follow weak cargo volumes recorded on the two main trades in the first quarter. Volumes on Asia-Europe westbound grew by 1.3 percent in the second quarter of 2016 and by 1.2 percent in the first half. While not much to write home about, the volumes were a vast improvement on the first half of 2015 when demand fell into negative growth at 3.2 percent.

Eastbound trans-Pacific volumes fell by 0.7 percent in the second quarter, although the first half recorded a 3.7 percent increase in demand that was a slight improvement over the same period last year, according to the latest trade data from Container Trade Statistics and PIERS, a sister product of JOC.com within IHS Markit.

While the demand for containerized cargo remains volatile, when looked at over the past 24 years, the trend is towards slowing growth in global container trade. Data from the International Monetary Fund and Drewry shows that average container growth from 1992 to 2001 was 8.5 percent, it was 10.8 percent from 2002 to 2008, and fell to 5.1 percent from 2010 to 2016.

In its interim results briefing, Orient Overseas (International) Ltd., the Hong Kong-listed parent of Orient Overseas Container Line, said while global GDP growth remained uninspiring and there was muted demand for containerized transport, there were positives to be found.

OOIL Chief Financial Officer Alan Tung said the recent consolidation activity that has seen CMA CGM acquiring Neptune Orient Lines (parent of APL), and mergers between Hapag-Lloyd and United Arab Shipping Company and Cosco and China Shipping Container Lines, was good for the industry.

His comments on consolidation also extended to with the four major shipping alliances, which will become three from the beginning of April 2017. Scrapping was another positive trend, with capacity cut in this manner expected to exceed 450,000 TEUs by the end of the year, up 2.2 percent year-over-year.

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Another positive was the gradual rebalancing of supply and demand. OOCL compiled the forecasts of a wide range of maritime analysts and the average demand growth for 2016 was estimated at 3 percent with a 4.3 percent average supply growth. The gap narrowed to 3.9 percent demand growth in 2017 and 4.5 percent growth in average capacity supply.

Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler.

Jul 25

Trans-Pacific Spot Rate Update 2016-7-25

joc.com

Container lines in the eastbound trans-Pacific this week were unable to hold on to their rate increases of last week, reflecting liners’ inability to pull out enough capacity to meet demand ahead of peak season.

The spot rate for shipping a 40-foot-equivalent unit from Shanghai to the East Coast declined 7 percent to $1,744. The spot rate to the West Coast dropped 9 percent to $1,296 per FEU.

That’s despite total slot capacity in the trans-Pacific this month being 1.6 percent less than in July 2015, according to the weekly report from industry analyst Alphaliner. The Ocean Three Alliance withdrew one Far East-U.S. West Coast string and one Far East-U.S. East Coast string. Also, the G6 Alliance announced it is merging two weekly trans-Pacific strings from Central China into one.

Ocean carriers are attempting to match vessel capacity with demand for merchandise imports from Asia, but demand simply isn’t increasing fast enough as the peak-shipping season approaches. Therefore, carriers are taking the unusual step of removing strings from service even as the peak season approaches.

The past month has been one of ups and down in the largest U.S. trade lane, according to the Shanghai Containerized Freight Index, as displayed on JOC.com’s Market Data Hub. Spot rates to the East Coast in late June jumped 19 percent in anticipation of a July 1 rate hike, but declined 3 percent the next week. The spot rate to the East Coast increased 8 percent last week, only to decline this week by 7 percent.

The same trend played out to the West Coast, only the swings were wilder. The spot rate surged 61 percent in late June, dropped 4 percent the next week, increased 22 percent last week and this week declined 9 percent.

Containerized imports from Asia have been growing modestly this year, although not enough to absorb the vessel capacity already in the trade. According to the website of the Pacific Maritime Association, containerized imports moving through all West Coast ports increased 2.8 percent in the first five months of 2016 from the same period last year. The West Coast accounts for 66.1 percent of U.S. imports, according to PIERS, a sister product of JOC.com within IHS Markit.

If past is precedent, supply and demand should be more balanced beginning in August and continuing through October. In recent years August has been the busiest month of the year for West Coast ports, with another bump occurring in October. East Coast vessels normally fill up in August and stay that way into October.

Unless space tightens and beneficial cargo owners get anxious because their cargo is being “rolled” to subsequent voyages, they are unwilling to pay general rate increases or peak-season surcharges to get their containers onto ships. If space tightens sufficiently, spot rates of $2,000 per 40-foot container or higher could be seen this fall.

While the current conditions in the eastbound Pacific are not robust, they are certainly much better than they were during the winter months when spot rates on the SCFI reached new lows of $750-$800 per FEU.

Contact Bill Mongelluzzo at bill.mongelluzzo@ihsmarkit.com and follow him on Twitter: @billmongelluzzo.

Jul 13

US imports forecast to rise slightly in second half

JOC.com

Laden U.S. containerized imports should slightly rise over the second half of 2016 compared with the same period in 2015 as retailers’ stocking for the back-to-school season provides a short-lived bump to container volumes before dipping and then building again in the late fall for the holiday shopping season, according to the monthly Global Port Tracker.

Inbound laden container traffic will increase by 0.5 percent year-over-year during the next six months, reflecting a return to normal trends after the 2014 and 2015 West Coast port crisis shook up normal import flows. The Global Port Tracker, which is compiled for the National Retail Federation by Hackett Associates, expects imports to rise 1.4 percent year-over-year this month before declining in August and September by 2 percent and 2.6 percent, respectively.

“Trade is holding on to a small margin of growth, but this growth comes in the face of some adverse statistics as well as positive ones,” Hackett said. “The good news is that retail sales have remained positive as the consumer continues to cautiously spend. The hope is that this spending will continue.”

The Global Port Tracker said laden import container volumes on a year-over-year basis will increase 4.4 percent in October and 2.8 percent in November. Imports of loaded containers grew 1.1 percent year-over-year in May. The May figure was up 12.8 percent from the prior month, the report said.

Year-over-year comparisons are difficult, however, because numbers in the first half of 2015 were affected by the slowdown at West Coast ports, as some container shipments were delayed before volumes increased once the slowdown ended, the NRF said.

In 2016, Global Port Tracker has been noticeably less bullish in its import projections than Mario Moreno, IHS Markit chief economist, who forecasts U.S. containerized imports this year will rise 5.7 percent, to 20.9 million TEUs, while exports will increase 1.3 percent, to 11.6 million TEUs. Indeed, the Port of Long Beach on Tuesday released actual laden import numbers for June, and the second-largest U.S. port reported an increase of 5.5 percent from June 2015.

The Pacific Maritime Association, which tracks all West Coast ports, reported that in the first five months of 2016, laden import container volume increased 2.8 percent compared with the same period in 2015. Global Port Tracker has total U.S. containerized imports increasing 1.5 percent compared with the first five months of 2015. This could indicate that West Coast ports this year are attracting back market share they lost last year to East Coast ports.

Laden import TEUs through West Coast ports increased by 2 percent in May, compared with the same month in 2015, to 939,858 TEUs, according to PIERS, a sister product of JOC.com within IHS Markit. The volume of laden container imports through East Coast ports fell by 2 percent to 755,404 TEUs and laden import traffic at Gulf ports fell by 13 percent year-over-year to 100,023 TEUs.

Contact Hugh R. Morley at Hugh.Morley@ihs.com and follow him on Twitter: @HughRMorley_JOC.