USPTI Company News

USPTI Market Update

September 2017

The Trans-Pacific import market remains volatile. As carriers continue to attempt to artificially adjust supply and demand rates remain at competitive levels. Carriers continue to file rates increase but have had limited success in implementing the increases in their entirety. The consolidation of carriers (mergers and acquisitions) noted below continue to impact both the quantity of space available and overall service (port of call, etc.)

  1. COSCO acquires OOCL
  2. COSCO and China Shipping merge
  3. APL is acquired by CMA/CGM
  4. Hapag Lloyd and United Arab Shipping merge
  5. Hanjin files for bankruptcy
  6. NYK, MOL and K Line announce new joint venture combining the three companies liner operations

USPTI opines that the strong/peak season will be short lived. We anticipate potential volumes to decrease from early October. To date space has been tight from certain origins (Shanghai for example) but still available creating the need for carriers to maintain relative low rate for peak season. We anticipate rates to stabilize for a few months in the $1300 to $1350 range to the west coast and $2300 to $2400 to east coast.

USPTI continue to actively negotiate with our core carriers to insure that we can provide our customers with quality reliable service at market driven rates.

Please contact your USPTI representative for update rate quotes and resolution of any supply chain issues.

July 20, 2017

Over the past several months the landscape of international ocean carriers has changed dramatically. Mergers, acquisitions and bankruptcy combined with ocean carrier alliances restructurings have been at the fore front of international trading news. Most recently COSCO announced the acquisition of OOCL. A brief summary of carrier activities is as follows:

  1. COSCO acquires OOCL
  2. COSCO and China Shipping merge
  3. APL is acquired by CMA/CGM
  4. Hapag Lloyd and United Arab Shipping merge
  5. Hanjin files for bankruptcy
  6. NYK, MOL and K Line announce new joint venture combining the three companies liner operations

Market share of top 4 carriers ( Maersk Line, CMA/CGM/APL, Med Shipping and COSCO/China Shipping after takeover of OOCL) is approximately 54% of global capacity. The container shipping industry has “officially” become an oligopoly.

The fight for market share is going to continue, there is still a significant amount of new vessel supply that is coming into the market over the next two years. Vigorous competition among carriers will continue with carriers protecting and attempting to increase market share at the expense of profit. Carriers continue to sell based on price and therein continues the problem of lower rates that are not sustainable.

Carriers continue to file monthly rate increase and peak season surcharges. To date carriers have had limited success in implementing increase but one can anticipate that as we move into the historical peak season cost will increase consistent with trading conditions. USPTI will continue to work with our carrier base to insure our clients quality and reliable service at market driven rates.

The carrier industry is historically a supply and demand business whereas rates rise when cargo is readily available and decline when trading conditions are poor. The jury is still out on future trading conditions. Globalization, protectionism, politics and general economic conditions are all impacting the perception and forecasted volume in the Trans-Pacific import market.

Logistic Partners Guidelines

A logistics company partner is often required in order to effectively run all aspects of a business within the transportation industry. However, logistics companies must be organized and consistently improving in order to meet client needs. USPTI proposes the top three ways in which to enhance operations:

1. Communicate well. Both internal and external communication is vital to running any successful company. All departments must work together to deliver optimal results for clients. Be sure to stay in touch with clients on a daily or weekly basis to let them know how things are going. This also provides opportunity for you to address any questions or concerns.

2. Comply with mandates. Always stay educated on what is going on regarding the various regulations and expectations for the transportation industry. These rules may present challenges for you or your clients, so you must beware of every aspect of these mandates in order to come up with a solution.

3. Encourage feedback. Your company’s success relies exclusively on whether or not your clients are happy with your work. Always ask for feedback on each assignment in order to assure you are on the right track and performing your services to perfection. Receiving feedback also an excellent way to ensure you are promoting a positive work environment for strong work ethics and output

April 2017

Even before last October’s announcement that the three Japanese shipping companies would merge their container operations, and the December announcement that Maersk would acquire Hamburg Sud, 2016 was already the most transformational year in the 60 years of container shipping. COSCO and China Shipping merged. CMA CGM acquired APL, Hapag-Lloyd agreed to acquire UASC and Hanjin collapsed. That led to a massive restructuring of global vessel-sharing alliances that will take effect in just weeks. Meanwhile, with ocean carriers still struggling with overcapacity that most analysts say will remain at least for the next two years, if not longer, shippers are facing a new environment with many unknowns.

Trans-Pacific spot rates were more than two-and-a-half times the level in June and they’ve held fairly firm as carriers increase scrapping levels and idle ships. Throw in the new Trump administration and its protectionist rhetoric that appears to be turning into policy, and the trans-Pacific is in the midst of a sea change. Given all these moving parts, what is the pricing and demand outlook for 2017? How will the new alliance rollouts impact service? And how will the new administration’s policies impact US importers and exporters?

The implementation of the new alliances will create disruptions to service as carrier reposition vessels to corresponded to new sailing schedules, port rotations and terminals. The phase in will be longer than normal due to the shear scope and number of carriers in each alliance.

The political impact to trading conditions cannot yet be determined although the current administration policies seem to favor protectionism over free trade.

Once again 2017 will be a challenging year and USPTI is prepared to assisting and resolving any issues impacting your import program.

Thank you for your support and USPTI looks forward to a long term relationship of service.

Feb News !

Despite an apparent recovery in the container shipping industry as seen in higher spot rates and shipping company share prices, there remain parallel, divergent narratives as to how strong the market truly is.

Several observers, analysts and carriers are convinced the market is recovering off an extremely weak 2016; trans-Pacific spot rates are up more than 50 percent since early December.

The massive industry consolidation initiated in 2016, which will eliminate seven of the top 20 carriers, has led many to believe that carriers will have a better shot at higher rates this year after a disastrous 2016 when contract and spot rates hit record lows and carriers collectively lost billions.

“The latest read on key indicators such as freight rates, ordering activity, idle capacity management, scrapping, and charter rates suggest stable to improving trends, which bode well for sector earnings,” JP Morgan wrote in a Feb. 2 research note.

“I do feel that in 2016 we found the bottom,” Dave Arsenault, the former US president and CEO of Hyundai Merchant Marine and now a consultant stated recently. “Last year, you had overcapacity and completely crazy pricing.

This year, you will still have overcapacity, but pricing will be more realistic,” states Philip Damas, director of Drewry Supply Chain Advisors. He said that in trans-Pacific annual tenders with which Drewry is assisting beneficial cargo owners, “we’re seeing rate increases of 40 percent.

“If you were a BCO last year you were a hero because you secured huge reductions in your freight. This year it is going to be a lot harder to be a hero in your organization as a BCO,” Damas said.

But others remain skeptical, citing multiple mega-ship deliveries yet to occur and at least two years of overcapacity still likely remaining in the market, despite much higher levels of scrapping last year and returns of unneeded chartered tonnage to owners.

So obviously with this there will surely be some optimism on the part of the carriers. But the days of destructive rate competition are not over. One view is we are still in the midst of a major battle within the container shipping market.

The relative calm that we are seeing right now was really the result of the Hanjin bonus, because the removal of Hanjin really helped the rest of the market,” he said.

The fight for market share is going to continue, there is still a significant amount of new vessel supply that is coming into the market over the next two years seen to continue for too long.

Vigorous competition among carriers could therefore still be seen in the trans-Pacific this year at rates that have adequate returns when there is an uncertainty about what it is that they are really going to be selling.

Carriers are forced to sell based on price and therein continues the problem of lower rates that are not sustainable which can ultimately lead to further consolidation. Please notify to your vendors to place booking as early as possible. Thanks !

The Trans Pacific inbound market remains volatile.

During the months of October and November we saw not only increased demand for space but also increased rates. For December we anticipate rates to stabilize in the first half of the month consistent with current supply and demand. One should anticipate increased freight charges in the last half of the month as volumes surge prior to Chinese New Year.

Chinese New Year (Year of the Rooster/ Fire Chicken) will be celebrated on January 28, 2017. Factory closures will most likely begin around January 15 and full production not resumed until early February. One can anticipate a shortage of available container capacity in late December and early January and thus you should plan your import volume accordingly. Additionally many carriers will void sailing on or around Chinese New Year since factories are closed and volume will not be at normal levels.

Merger and acquisitions continue with ocean carrier industry. In addition to previously announce mergers and acquisitions ( China Shipping and COSCO, CGM/CMA and APL, Hapag Lloyd and USAC, MOL,K-Line and NYK, etc.) in was announced on December 1 that Maersk will purchase Hamburg Sud. The acquisition is consistent with Maersk announced strategy of growth by acquisition and will increase Maersk global capacity share from 15.7% to 18.6% or to an estimated global capacity of 3.8 million TEUs. Mergers and acquisitions coupled with changes in the various alliances will reduce the number of carrier options and services available to the international trading community in 2017.

USPTI will continue our efforts to insure we are fully prepared to handle your transportation requirements by maintaining relationships and contractual arrangement with various ocean carriers. Our goal is to provide you with quality reliable transportation services at market driven rates.

We look forward to a long term relationship of service.

If you have any questions or concerns please contact your USPTI representative