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June 09, 2014

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Page 10 of 87 THE JOURNAL OF COMMERCE 11 HAPPY DAYS ARE here again, at least for non-vessel-oper- ating common carriers. After 2012 when their market share dropped in the trans-Pacific trade, NVOs are seeing that share rebound in line with the growth they are seeing on other global trade lanes. NVOs handled 5.2 percent more containerized volume last year than in 2012 in the trans-Pacific, and their share of overall cargo in the trade inched up by a percentage point to 36 percent, according to PIERS, the data division of JOC Group. N VO s m a d e h e a d w a y in w inning business back, especially among small and medium-sized importers. "Our trans-Pacific import volumes were up 6 percent last year, and we expect even better growth this year at 10 percent," said Michael Troy, founder and CEO of Troy Container Line, one of the largest U.S.-based NVOs. Rates have gone up in the trans-Pacific, so it means our less-than-containerload product is more affordable." After trans-Pacific rates plummeted in 2011, smaller shippers booked their cargo directly with carriers, because they could afford to pay for a full container, rather than the more expensive LCL product provided by NVOs. "Shippers don't want to give it to a con - solidator when they can afford a full box," Troy said. But when rates stabilize, as they have recently in the trans-Pacific, it becomes more economical for small shippers to buy the LCL product, which involves con - solidation of cargo from several shippers into a single container and accounts for 75 percent of Troy's volumes. Spot rates as measured by the comprehensive Shanghai Containerized Freight Index fell about 13 percent in 2011. In the trans-Pacific, the decline was even steeper, with average rates falling 16 percent, to $1,700 per 40-foot container. Trans- Pacific rates had rebounded to more than $2,220 by early this year, and in mid-May were aver- aging nearly $2,000 per FEU. T roy t h i n k s rates w i l l continue to increase in the trans-Pacific because carri - ers have learned not to ask for the kind of huge general rate increases of $400 to $500 per container that shippers reject, but are instead asking for GRIs of $100 to $200. "Carriers are taking levels up gradually, and they are sticking," he said. Large global logistics pro- viders that operate as NVOs also say they are gaining share among small and medium- sized shippers in those trades. "The carriers gave up the small and medium-sized business to a very large extent when they gave up the less-than-con- tainerload business," said Otto NVOS RIGHT THE SHIP Schacht, executive vice presi- dent of Global Seafreight for Kuehne + Nagel, the Switzer- land-based 3PL that generates 16.4 percent of its revenue from its U.S. air and ocean forward- ing business. "Luckily for NVOs, carriers don't see that many extreme small contracts that much," said Frank Guenzerodt, presi- dent and CEO of Dachser USA, the Atlanta-based division of German 3PL Dachser. He said shippers with annual volumes of 100 to 1,000 containers a year are turning to NVOs, while shippers with more than 1,000 containers are signing direct contracts with carriers. "Carriers' customer ser- vice is more and more focused on large customers, so your smaller shippers are turning to NVOCCs," he said. W h e n o c e a n c a r r i e r s slashed ship capacity in 2010 They may never regain their past glory in the U.S., but non-vessel- operating common carriers are staging a comeback By Peter T. Leach

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