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July 23 2018

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6 The Journal of Commerce | July 23 2018 www.joc.com Spotlight www.joc.com Executive Editor, The Journal of Commerce and JOC Events: Chris Brooks 609 649 2181, chris.brooks@ihsmarkit.com Executive Editor, The Journal of Commerce and JOC.com: Mark Szakonyi 202 872 1234, mark.szakonyi@ihsmarkit.com Managing Editor: Barbara Wyker 908 777 3217, barbara.wyker@ihsmarkit.com Senior Editors: William B. Cassidy Trucking and Domestic Transportation 202 872 1228, bill.cassidy@ihsmarkit.com Bill Mongelluzzo West Coast 562 428 5999, bill.mongelluzzo@ihsmarkit.com Hugh Morley Northeast, Mexico 646 679 3475, hugh.morley@ihsmarkit.com Eric Johnson Technology 213 444 9326, eric.johnson@ihsmarkit.com Greg Knowler Europe Editor, Maritime & Trade, IHS Markit +44 7976798770, greg.knowler@ihsmarkit.com Turloch Mooney Global Ports, Maritime & Trade, IHS Markit +852 9011 9109, turloch.mooney@ihsmarkit.com Associate Editor: Ari Ashe Southeast Ports, Intermodal Rail 202 548 7895, ari.ashe@ihsmarkit.com Web Editor: Joseph Lazzaro 917 309 0148, joseph.lazzaro@ihsmarkit.com Data Analyst: Dustin Braden 646 679 3450, dustin.braden@ihsmarkit.com Senior Content Editor: Alessandra Gregory Barrett, 860 248 5238 alessandra.barrett@ihsmarkit.com Senior Designer: Sue Abt, 862 371 3534, sue.abt@ihsmarkit.com Designer: Bryan Boyd, 908 910 7849, bryan.boyd@ihsmarkit.com Publisher: Tony Stein, 770 295 8809, tony.stein@ihsmarkit.com Sales: Cindy Cronin, Strategic Account Manager Southeast, Gulf, Canada sales, 954 551 8305 Zachary Gorman, Account Executive Northeast, Illinois sales 646 679 3466 Jean Gibbons, Senior Sales Executive West Coast, Midwest sales, 706 469 7160 Ria Van den Bogaert, Sales Representative Europe, Middle East sales, +32 2 569 8905 Alex Remstein, Associate Sales Specialist Reprints/Classifieds/Copyrights, 646 679 3418 For Magazine Subscription Customer Service: www.joc.com/help 450 West 33rd St., 5th Floor, New York, N.Y. 10001 973 776 8660 • 800 952 3839 Executive Director, Editorial Content, Maritime & Trade, IHS Markit, Peter Tirschwell Executive Director, Media & Events, Maritime & Trade, IHS Markit, Amy Middlebrook Manager, Production, Carmen Verenna Product Manager, JOC, Jesse Case ©2018 The Journal of Commerce — All Rights Reserved For more information, visit our website, www.joc.com. The Journal of Commerce Container shipping outlook darkens The likelihood of the container shipping industry hitting two straight years of total profitability is fading fast, with rising tit-for-tat tariffs, bunker prices up by half from a year ago, and challenges carriers face in raising spot and contract rates to a degree expected through recent consolidation. Hapag-Lloyd's July 2 declaration that it was lowering its full-year financial outlook — even aer being one of the few carriers to report a first-quarter operating profit — was the latest reminder of the difficulties facing container shipping in its search for sustained profitability. Aer industrywide profitability in 2017, only three container lines managed to stay in the black during the first quarter of 2018, led by Hapag-Lloyd, which posted operating profit of $66 million on revenue of $3.2 billion for a margin of 2.1 percent. CMA CGM and Wan Hai also managed to turn in positive operating margins of 1.6 percent and 1 percent, respectively. Industry analyst Alphaliner noted that the remaining eight carriers all reported negative margins, with Hyundai Merchant Marine remaining at the bottom of the list for the eighth consecutive quarter with a margin of minus-15.6 percent. The global container fleet is forecast to increase 5.4 percent this year as container volume rises 5.3 percent, according to IHS Markit's Container Ships Forecast. But this balance between supply and demand will be undermined by rising bunker prices, declining volume between China and the US, and growing uncertainty about the impact of widespread US trade tariffs and retaliatory measures being taken by US trading partners. The average price per metric ton through June for bunker fuel across the ports of Shanghai, Rotterdam, and New York-New Jersey is 53 percent higher than it was in June 2017. Alphaliner said fuel costs, which only accounted for about 8 percent of carrier operating costs in 1998, now account for 15 percent. ELD rule rolls past petition for relief The US electronic logging device (ELD) trucking mandate is more entrenched, and routes for opponents to overturn or delay the rule are narrower after US regulators rejected a petition calling for an exemption for small businesses. That signals to shippers any capacity easement will come from declining freight volume and/ or massive driver hiring, not regulatory tinkering. The Federal Motor Carrier Safety Administration (FMCSA) reportedly has denied a broad challenge to the ELD mandate, although challenges to the rule remain in play at the federal transportation agency and on Capitol Hill. Meanwhile, truckers, logistics operators, and shippers continue to adjust to the effects of the ELD era, which include longer transit times, fewer weekly turns and miles for drivers, some disruption to delivery schedules, and a need for transportation networks to be reset to a new clock. The Owner- Operator Independent Drivers Association (OOIDA), an opponent of mandatory electronic logging for more than a decade, said the FMCSA had denied its petition for a small business exemption to the ELD mandate, which took effect Dec. 18. In its petition, the OOIDA, which took its battle against the ELD mandate to the US Supreme Court, asked for a five-year exemption for motor carriers classified as small businesses by the Small Business Administration, with a proven safety history, no attributable at-fault crashes, and without an Hapag-Lloyg

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