Digital Edition

July 6 2020

Issue link:

Contents of this Issue


Page 16 of 47

July 6 2020 | The Journal of Commerce 17 Top Trans-Pacific Carriers and Ports Cover Story Special Report they added ships back later," he said. As for any attempt by carriers to act in unison on capacity reductions, Arse- nault added, "I see no massive carrier conspiracy." Carriers, in fact, have reinstated several sailings that had been blanked earlier. Another option for handling an unexpected spike in demand is to deploy single-voyage extra-loaders, although carriers haven't deployed any so-called sweeper ships yet this spring. Carriers can also upsize an exist - ing vessel string, as Evergreen Marine Corp. is doing by replacing 8,500-TEU vessels with 12,000-TEU ships on an all-water service from Asia to the US East Coast. An Evergreen spokesperson said the Ever Faith will be the first of eight 12,000-TEU vessels to be deployed in the East Coast service string when it leaves Xiamen in eastern China on July 2, although the Taiwanese carrier is not upsizing the vessel string in direct response to the recent increase in east - bound volumes. Rather, the upsizing was planned several years ago when the orders for the 12,000-TEU ships were placed, the spokesperson said. Cargo owners and NVOs could face continued space constrictions on vessels leaving Asia throughout the summer. "Carriers are booked full until the end of June. With lines blanking sailings, merging and sus - pending services, we expect space will be tight in the third quarter," a senior Hong Kong–based executive with a European-headquartered freight for- warder told The Journal of Commerce. "Carriers are only releasing space to shippers according to their agreed allocation or on past utilization performance," the executive added. "Any urgent cargo is being charged a premium." If volumes continue to increase but carriers do not respond with added capacity, it could cause prob- lems for both beneficial cargo owners (BCOs) and NVOs. Retailers and other BCOs that have year-long contracts will be able to maintain their lower contracted rates each week only for their minimum quantity commit- ment. The MQC is determined by dividing the annual contract volume by 52, GIS's Tracy said. "Customers are not protected for any volume beyond the MQC," he said. NVOs have a similar arrangement the coronavirus disease 2019 (COVID- 19), the prudent action was to cancel sailings for May and June. "June is always a weak month," a carrier spokesperson told The Journal of Commerce. "The only way to miti - gate cost when volume is weak is to cut capacity." Carriers announced 74 blank sailings from Asia to North America for April and May, according to Sea- Intelligence Maritime Analysis. The senior vice president of sales at a trans-Pacific carrier said that line's eastbound volumes were down 16 to 17 percent in May year over year, and volumes were down 10 percent so far in June. It is no surprise, then, that carriers have significantly reduced capacity this spring. While conceding that blank sailings were a "critical factor" in pushing spot rates higher when imports from Asia unexpect - edly spiked in late May and early June, the liner executive noted that the decisions to cancel the sailings had been made three to five weeks earlier. NVOs told The Journal of Commerce they believe carriers slashed too much capacity, intending not only to keep spot rates from falling, but actually to push rates higher than is warranted by current market conditions. "Carriers have deployed a strat - egy where they are keeping capacity below demand," said industry consul- tant Dean Tracy, managing director of Global Integrated Solutions and a former logistics manager at Lowe's. "Carriers are managing space too tightly, causing container rolling," said Jon Monroe, who is a consultant for US- and China-based NVOs. Esti- mates of how much capacity has been cut below current demand in the eastbound trans-Pacific range as high as 10 percent. As-needed capacity Given the widespread uncertainty among carriers and their customers as to import volumes this spring, carriers probably blanked more sail- ings than was necessary, knowing they could reinstate some sailings if needed, said David Arsenault, pres- ident of Logistics Transformation Solutions and former president and CEO of HMM America. "Rather than waiting to the last minute to blank sailings, they knew they would receive less criticism if Spot rates from Asia to the US West Coast hit a 10-year high of $2,755 per FEU on June 12 despite volumes plunging 18.5 percent in May.

Articles in this issue

Links on this page

Archives of this issue

view archives of Digital Edition - July 6 2020