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August 20 2018

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August 20 2018 | The Journal of Commerce 13 Cover Story especially agricultural exports, are tied to the harvest, and rates for low-margin, relatively consistent exports such as scrap paper can be adjusted monthly, he said. Shippers and carriers agreed that with rates to Chinese base ports as low as $300 per FEU for the low-priced commodi- ties, about $400 to $500 per FEU to Southeast Asia, and $800 per FEU to India, freight rates aren't a game- changer in the export market. JOC email: twitter: @billmongelluzzo Shippers Association newsletter. Freight rates are adjusted at different times of the year based on the export products, Goldman said. Consistently moving exports such as chemical products usually ship under annual contracts. Seasonal products, "The market took a small increase of $20 to $55 per TEU on July 1, most- ly to reflect increases in bunker fuel costs for carriers," Abbe said. "Some carriers are charging a bunker sur- charge, while others build it into the rates. Maersk announced an $80-per- TEU/$100-per-FEU GRI [general rate increase] hike for Sept. 1. Others suggested that westbound GRIs likely won't occur until the fourth quarter of the year. Rate increases tend to happen more at that period, around the post-harvest shipping period," Abbe stated in the Midwest With trans-Pacific eastbound spot rates showing rare strength, the temptation is rising for carriers to roll contracted US import cargo or even turn away export cargo to reposition empty containers for imports. Spot rates from Asia broke through the psychological barrier of more than $2,000 per FEU to the West Coast and $3,000 to the East Coast in the week ending Aug. 4, according to the Shanghai Containerized Freight Index. Carriers are likely to push any advantages they have in getting higher spot rates this peak season because the service contracts they signed in the spring with their largest customers were a disappointment. Carriers entered the contracting season with hopes for meaningful price increases, but instead they ended up signing contracts in the range of $1,100 to $1,200 per FEU to the West Coast and $2,100 to $2,200 per FEU to the East Coast, which is actually about $100 lower than last year's service contract rates to both coasts. Unsurprisingly, the New York Shipping Exchange (NYSHEX) said it's seeing strong usage of its platform that fosters contract reliability between carriers and shippers. In short, since its launch a year ago, users have a nearly 100 percent track record of ensuring that the carrier takes the cargo when agreed upon and shippers deliver the freight for the sailing they booked. Through NYSHEX, shippers and carriers face penalties if they fail to hold up their side of the bargain. Non-vessel-operating common carrier (NVO) Dunavant said it's seeing more interest from importers and exporters to book via NYSHEX as capacity has tightened. "Can an NVOCC like Duna-vant sell a space- guaranteed, premium service now that NYSHEX is available? We seem to think so," said David Underwood, vice president of global operations. For an NVOCC, it's a matter of finding a client willing to look at this option from a service perspective, and convincing them to use it at least as a strategy to hedge against risk within their supply chain." The risks are rising as capacity decreases despite steady volume growth. Carrier alliances announced the suspension of three weekly services to the West Coast, for a total capacity reduction of about 6 percent, effective July-August, according to Alphaliner. The 2M Alliance plus Zim Integrated Shipping Service announced the suspension of one weekly service to the East Coast, effective in September, for a 1.3 percent capacity reduction in that lane. Pricing, while always important when booking transportation, isn't the key to NYSHEX's strategic value because the market sets the prices. When space in the eastbound Pacific is tight, as it is now during the peak shipping season, carriers will post premium prices on the exchange. When space is more plentiful, as it usually is during the slack winter months, prices will be discounted. BCOs that are booking through NYSHEX today are developing strategies that fit their shipping needs, according to Kimberly Cockrell, vice president of strategic accounts at NYSHEX. They can observe posted rates for voyages that are months away, and when they are more certain about their volume requirements, they will make the bookings they are confident they will be able to fill. The bookings become binding when they are accepted by the carriers. The carriers are confident the cargo will be there when it's supposed to be, and the shippers can be assured the cargo won't be rolled. Cockrell anticipates that import bookings through NYSHEX will continue to increase as the peak season develops. "It's there when you need that extra guarantee," she said. It's not just importers concerned about rolled cargo during the peak season ahead of the winter holidays. Exporters turn to NYSHEX because they fear carriers will prioritize repositioning empty containers for import loads out of Asia over their commodities, such as cotton. And while many ag commodities are in their slack season and/or feeling the pain of Chinese tariffs, NYSHEX said export usage in the second quarter exceeded its expectations as many farmers prepare for their peak season of October through December. "To work with NYSHEX is specifically for the reasons of making sure cargoes get on ships because, when we do get rolled, we could be out of contract," said John Fornazor, CEO of agriculture exporter Fornazor International. "Our letter of credit could expire, and that could be a really big problem, especially if the market drops." ― Bill Mongelluzzo Booking for certainty Carriers are confident the cargo will be there when it's supposed to be, and the shippers can be assured the cargo won't be rolled. "You might have five or six carriers on a ship to India. The ships fill up."

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