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October 15 2018

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October 15 2018 | The Journal of Commerce 17 www.joc.com International Maritime T:4.625" T:7.375" Biggest on the East Coast? You betcha. The Port of New York and New Jersey provides customized solutions for shippers of every size. We off er more service variety than any other port on the East Coast. And to keep your supply chain running effi ciently, we are investing an additional $1.2 billion in Port infrastructure. With six operators, two rail services, multiple trucking services, and the ability to handle every type of cargo, we can accommodate your business needs. And we have achieved navigational clearance at the Bayonne Bridge of 215 feet to receive larger ships of 18,000 TEUs. That's what we call delivering the goods. room for error. When integrators announce a price increase, it translates to increases in EBITs [earning before interest and taxes] the following years. That doesn't happen in the container shipping market." Glynn said efforts by CMA CGM (which bought a 25 percent stake in CEVA Logis- tics), Hapag-Lloyd (which is attempting to long-haul legs. Customers [like Amazon and Alibaba] are becoming competitors," he said. Sanders noted that the battle for inter- net business is not only what online retail- ers have in their shop, "but the ability to execute flawlessly. To say, 'we can deliver in a certain period of time wherever you live.' That's become a competitive weapon for them. Amazon will move forward in the value chain because they need to. They need to protect that as a competitive advantage. Same with Alibaba." Venture capital funds soar Sanders also noted what he called "dig- ital attackers" that present a new threat to liner carriers. "There are staggering numbers of [venture capital] money," he said. "The last couple years, the curve has gone way up." BCG estimates that $4.2 billion in venture capital funding has been invested in shipping and logistics technology between 2012 and 2017. "The money that new entrants are pouring into digital investments is a factor larger than those made by traditional transport and logistics companies. They think differently." These investments stand in contrast to what ocean carriers have put into assets that have largely failed to provide returns. "Look at return on sales and return on assets [in liner shipping]; historically they are horrible," Sanders said. "They've been trying to shave cost out and that doesn't work over time. They need to rethink how they come at the value chain to get what I'd call decently average returns." While Sanders did say that "shipping lines are being forceful, thinking different- ly," he said, "the fundamentals of liner ship- ping are just supply and demand. The race for the last box comes at a marginal cost. Some capacity almost comes for free. That pricing decision is very commodity driven." Growth at the top The key, Sanders said, will be whether this period of carrier consolidation leads to more pricing power, through more direct contact with customers in lieu of forwarders eating away at those relation- ships. Sanders pointed out that the top five ocean carriers increased their control of global capacity from 45 percent in 2014 to 64 percent in 2017. That's up from 36 percent in 2004 and 27 percent in 1996. But Neil Glynn, head of European trans- port at Credit Suisse, said, "Small move- ments in pricing can produce big move- ments in earnings. Most industries we cover are capital-intensive. There's very limited tap into more shipper market segments through an instant online quoting tool) and Maersk (which is rolling the lucrative origin-destination business from its sub- sidiary Damco more directly into its ocean freight product) to seek a bigger share of shipper wallets are commendable. "I'm a big believer in every little bit

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