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4 THE JOURNAL OF COMMERCE www.joc.com Editor's Letter ©2014 The Journal of Commerce — All Rights Reserved For more information, visit our Web site, www.joc.com. EXECUTIVE EDITOR Chris Brooks 973.776.7818 cbrooks@joc.com MANAGING EDITOR Barbara Wyker 973.776.7817 bwyker@joc.com SENIOR EDITORS Joseph Bonney, Finance and Economics 973.776.7809 jbonney@joc.com William B. Cassidy, Trucking and Domestic Transportation 202.499.2285 wcassidy@joc.com Bill Mongelluzzo, Trans-Pacific 562.428.5999 bmongelluzzo@joc.com Mark Szakonyi, Rail/Intermodal, Regulation, Policy 202.499.2295 mszakonyi@joc.com Greg Knowler, Asia +852 3975.2647 gknowler@joc.com SENIOR EDITOR, DIGITAL Harry G. Butler, 609.433.7215, hbutler@joc.com EDITOR-AT-LARGE Peter T. Leach, Trans-Atlantic 212.755.0940 pleach@joc.com RESEARCH EDITOR Marsha Salisbury 973.776.7828 msalisbury@joc.com ECONOMIST Mario O. Moreno 973.776.7850 mmoreno@joc.com SPECIAL PROJECTS EDITOR Alessandra Gregory Barrett 973.776.7808 abarrett@joc.com SPECIAL PROJECTS EDITOR, ASIA Annie Zhu +86 (21) 60396986 azhu@joc.com SENIOR DESIGNER Sue Abt, 973.776.7825, sabt@joc.com DESIGNER Bryan Boyd, 973.776.7827, bboyd@joc.com WEB PRODUCER David Pulis, 973.776.7807, dpulis@joc.com ASSOCIATE WEB EDITOR Grace M. Lavigne, 973.776.8506, glavigne@joc.com ASSOCIATE WEB EDITOR Corianne Egan, 862.368.4054, cegan@joc.com PUBLISHER Tony Stein Georgia and Asia sales, 678.456.8530 SALES Cindy Cronin, Senior Account Manager Pacific Northwest, Midwest, Gulf, Canada sales, 954.551.8305 Zachary Gorman, Account Executive Northeast sales, Classifieds/Reprints/Copyrights 973.776.7820 Ria Van den Bogaert, Account Executive Europe, Middle East and Africa sales, +32 2 569 8905 For Magazine Subscription Customer Service: Domestic (Toll-Free): 877.675.4761 International: 847.763.4932 E-mail: JOC@halldata.com 2 Penn Plaza East, 12th Floor, Newark, N.J. 07105 973.776.8660 • 800.952.3839 CHIEF EXECUTIVE OFFICER, Gavin Carter CHIEF OPERATING OFFICER, Rhiannon James EXECUTIVE VICE PRESIDENT/CHIEF CONTENT OFFICER, Peter Tirschwell CHIEF FINANCIAL OFFICER, Ian Blackman VP, PUBLICATIONS, Amy Middlebrook VP, HUMAN RESOURCES, Cindy Mevorah GENERAL MANAGER, Julia Murphy DIRECTOR, PRODUCTION, Carmen Verenna SENIOR MARKETING MANAGER, Jesse Case Chris Brooks The Journal of Commerce (USPS 279 – 060), ISSN 1530-7557, June 9, 2014, Volume 15, Issue No. 12. The Journal of Commerce is published bi-weekly except the last week in December (printed 26 times per year) by JOC Group Inc. 2 Penn Plaza East, 12th Floor, Newark, N.J. 07105. Subscription price: $344 a year. Periodicals postage paid at Newark, N.J., and additional mailing offices. © All rights reserved. No portion of this publication may be copied or reprinted without written permission from the publisher. POSTMASTER: Please send address changes to The Journal of Commerce, Subscription Services Department, P.O. Box 1059, Skokie, IL 60076-8059. LESS THAN A year ago, the outlook wasn't so bright for non-vessel- operating common carriers, those ocean intermediaries who pool cargo, ostensibly for smaller ship- pers looking for any freight rate brea k ava ilable — brea k s t hat t ypically go only to their larger brethren. "Why NVOs Are Con - trolling Less of This," the JOC's Sept. 30, 2013, magazine cover read, with an arrow pointing squarely at a shipping container. At the time, forwarders and NVOs, from giants such as Expedi- tors International of Washington to small mom-and-pop operations, were bleeding cargo in the east- bound trans-Pacific. Like so many of their vessel-operating counterparts, they were victims of the post-2010 rate slide brought about by the combination of middling growth in freight demand out of Asia and an armada of new mega-ships cascad- ing into the trans-Pacific. Rates fell to such low levels that even small shippers, the bread-and- butter of the NVO industry, could afford to negotiate directly with car- riers for full containers, removing the near-constant fluctuations on the spot market, where some beneficial cargo owners can pay up to $500 more per container than contract rates. Inundated with capacity, carriers opted to go aggressively after all the cargo they could get, leaving less of the pie for NVOs. The result: NVOs' share of eastbound trans-Pacific trade slid from 39 percent in 2011 to 35 percent in 2012, according to research by PIERS, the data division of JOC Group. But if an epitaph was being written for NVOs as a group, it was premature. As Peter Leach analyzes in this week's Cover Story, NVOs stopped the bleeding in 2013, when they increased their Asia-U.S. vol- umes by 5.2 percent and their share of the market to 36 percent. It's yet another sign of the stakes involved in a containerized shipping industry seeking sustainable growth that goes beyond mere stability. But unlike vessel owners that as a group have lost billions of dollars in four of the last f ive years, privately owned NVOs don't have the back- ing of national governments to keep them af loat. NVOs live and die by the cargo they generate, and that ca rgo increa singly must come from smaller BCOs shipping 1,000 20-foot-equivalent container units a year or less. "Wal-Mart will never have an NVO managing its freight," David Ross, managing director of global transportation at investment ana - lyst Stifel, told the JOC. The nation's largest retailer, Wal-Mart was the top-ranked containerized importer on the JOC's Top 100 Importers list, shipping 731,500 TEUs last year, vol- ume that certainly allows it to name its rate with carriers and avoid the frequent general rate increases that have dominated the market to ship- pers' great frustration over the past four years. But a ssuming t he economy gathers momentum, and rates hold or even increase slightly, NVOs will extend the gains they saw in 2013. There are, after all, more smaller importers than large ones. All told, the Top 100 Importers accounted for a little more than 6 million TEUs in 2013, a third of the 18.1 million TEUs in total U.S. containerized imports. Still, there is only so much cargo to go around, and with more and more of it consolidated into a shrink- ing number of profitable carriers in an increasing number of mega- alliances, the future of the NVO business is looking very much like that of the asset owners: The strong will dominate, and the little guy will be relegated to the scraps in niche markets — at best. JOC JUNE 9.2014 Rising From the Depths