Container lines

The port of call change on the Chennai Express Service (CHX) — prompted by Chennai’s chronic congestion — took effect with the Maersk Leonidio docking at the Adani Ennore Container Terminal (AECT) on Saturday.

The acquisition by E2open allows INTTRA to tap into a base of manufacturers and other shippers, a customer segment with which INTTRA has struggled over its history.

The chaos of the trans-Pacific peak season has set the stage for tough annual service contract negotiations in the spring between container lines and US importers from Asia.

Many questions remain concerning the low-sulfur rule that goes into effect on Jan. 1, 2020: how best to comply, how to manage fuel supply after IMO 2020, how to estimate changes in fuel costs, and how to plan for enforcement.

"I’m not optimistic we are going to see a grand bargain with all the tariffs coming off,” Lance Noble, senior analyst at Gavekal Dragonomics, said at the TPM Asia Conference on Oct. 10.

It has now been 12 consecutive weeks that spot rates on imports from Asia have been higher than $2,000 to the West Coast and $3,000 to the East Coast, according to the Shanghai Containerized Freight Index. This is the longest sustained period of elevated spot rates since 2013.

The carrier raised its stake in the logistics service provider a week after CEVA Logistics rejected a $1.5 billion takeover bid from rival DSV.

The ocean carrier — which launched in April and comprises “K” Line, MOL, and NYK Line — said in its half-year earnings report that it collectively expects to lose $310 million in the first half of the year, on revenue of $5.03 billion.

Although still in the early schedule-setting process, a likely new joint venture will leave Asia-east coast of South America shippers with fewer, larger ships and one less service, so says a shipping industry expert.

The Geneva-based carrier said it will roll out the “smart” containers in the coming months, enabling users to follow the movement of containers in real time through the Internet of Things.

Among the major unknowns on the minds of ocean carrier executives: will the low-sulfur fuel supply be adequate? How high will fuel prices go? How will the new rule be enforced?

Spot rates in the eastbound Pacific show no sign of softening, and shippers may end up paying high spot rates through the end of the year, if imports remain strong. New US tariffs beginning Jan. 1 definitely have something to do with the above.

CMA CGM’s investment in CEVA is consistent with a customer-centric vision announced in March to move away from commodity container shipping and increasingly tailor end-to-end logistics solutions for customers.

“The reality is that we are being suddenly exposed to $15 billion in additional spend, so we have to reduce consumption and try to convince customers to pay more,” APL CEO Nicolas Sartini told JOC.com.

“Retailers are continuing to import merchandise in order to meet consumer demand even though tariffs are now in place on roughly half the goods imported from China and the trade war is still escalating,” Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation, said Tuesday.

Conceptualized in India, the program complements Maersk’s global technological ecosystem and open innovation efforts.

Many shippers have created their own bunker adjustment factors (BAFs), but smaller beneficial cargo owners typically have to accept the BAFs proposed by ocean carriers. However, widespread distrust of the carrier fuel surcharge mechanism may have the effect of pushing more shippers towards coming up with their own BAF formula to have greater control of a process.

While Loadsmart is far from the only startup to take on the idea of automating certain parts of the truck brokerage business — Convoy, Transfix, and Uber Freight are the most notable names in this movement — the former has been on a different growth path.

End-to-end visibility will make supply chains more efficient, Chicago-based project44’s President Tommy Barnes says, but only if shippers use data received to collaborate with partners.

The Container Shipping Lines’ Association of India, in its latest report to the Ministry of Shipping, argued that cabotage relaxation has paid off with significant transshipment gains for Indian ports during September.

The Eagle GO Guaranteed Service — targeting shippers willing to pay premium rates for a faster and guaranteed service that provides a complete refund if the ocean carrier fails to meet the delivery date — will expand from 29 Asia ports to 150 Asia and Middle East ports.

As uncertain as trans-Pacific rates have been, they are up 56 percent to the West Coast and 67 percent to the East Coast, compared with early Oct. 2017. However, more price volatility is anticipated as the peak season ends, importers prepare for the Chinese New Year, and proposed 25 percent Trump administration tariffs take effect on Jan. 1.

A survey conducted by global shipping consultancy Drewry found considerable unease among global shippers and forwarders ahead of the low-sulfur fuel implementation. Concern was expressed by respondents about ocean carriers’ methods of fuel cost recovery with more than half, 56 percent, stating that they did not consider their service providers’ existing approaches as either fair or transparent.

Further, two key decision-makers, one each from the Port of Los Angeles and the Port of Long Beach, agreed that the early building of peak-season inventory this summer will be followed by slower growth in the fourth quarter of the year.

The ocean carrier found that existing rules regarding the stowage of dangerous goods cargoes, which create their own oxygen and can’t be extinguished using standard carbon dioxide-based on-board firefighting equipment, to be inadequate and has implemented new procedures across its fleet.

The new bunker fuel adjustment factors will provide more insight concerning whether ocean carriers can recoup what they argue are increased operational costs for bunker fuel and for meeting the Jan. 1, 2020, low-sulfur mandate.

However, analysts and stakeholders say shippers should not focus on the rate drop, but rather, they should prepare for unprecedented turmoil in the eastbound Pacific that is affecting cargo loading at Asian ports and delivery and storage in the United States.

Already chaotic and upended, the Trump administration’s proposed Jan. 1, 2019, 25 percent tariff on imports from China is causing importers to scramble for ocean, truck, and rail capacity — with the next ramification being the warehouse variable: will there be any space after the front-loading of imports?

“Unfortunately, a no-deal scenario is still quite possible,” according to European Council President Donald Tusk. “But if we act responsibly, we can avoid a catastrophe.”

So far, India's cabotage reform has boosted transshipment business for private ports more than anticipated.

The focus now turns to how dramatic the post-peak season decline will be, and if it will take place earlier than normal after shippers front-loaded their supply chains to avoid US tariffs.

Estimates on the cost of the container shipping industry meeting the mandate range from $5 billion to tens of billions of dollars, but ocean carriers are uniform regarding one aspect of this substantially higher cost.

Extra-loaders have made their presence felt, but is that extra capacity capable of ending the escalation in trans-Pacific spot rates long term?

The spot market between Asia and Europe remains stronger than at the same time last year, but the rate is beginning to follow a pattern that will likely concern ocean carriers.

The plan calls for targeting transshipment cargo at the east coast ports of Visakhapatnam, Chennai, Krishnapatnam, Kattupalli, and Ennore through expanded feeder networks.

One overriding factor is underpinning the sailing cancellations.

Initial integration problems of Ocean Network Express had an impact on the first-half share of US trade, both exports and imports, carried by the Top 5 US trade carriers.

Ocean carriers plan October blank sailings even as they introduce extra-loader vessels to handle an import surge in September.

As with other ocean carriers, rising bunker fuel prices weighed on CMA CGM’s second-quarter results. Even so, its CEO and chairman remained positive regarding 2018’s second half, citing the rise in freight rates and sustained volumes, in addition to the quality of its service offering.

Its status may change in the future, but at least for now, instant pricing is a bit of a two-edged sword for ocean carriers.