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June 09, 2014

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TRANS-PACIFIC RATES HIT 2014 LOW MEMBERS OF THE Transpacific Stabilization Agreement need their planned general rate increase this month more than ever after spot rates plunged to the lowest point this year. Spot rates from Hong Kong to Los Angeles in the first week of June fell $50 to $1,750 per 40-foot container, the lowest they have been since mid- December. The decline has totaled $250 per 40-foot container in the past two weeks, the larg- est two-week loss in the past year. "We expect the benchmark to largely hold up before rising again on the back of the mid-June (peak-season sur- charge) of $400 per FEU, requested by the TSA carriers," Drewry said. The spot rate is now $100 below where it stood before the mid-May gen- eral rate increase by members of the TSA, which aimed to boost rates by $300 per FEU. WEAK PRICING COULD SPEED CHINESE EXPRESS CONSOLIDATION THE HUGE REVENUE being generated by China's fast-growing e-commerce business is masking a decline in the price per parcel that is expected to spur consolidation in the fragmented express courier market. There are an estimated 8,000 companies offering express delivery in China, ranging from one-man-and-a-moped outfits covering part of a city to logistics companies with nationwide networks. In 2013, these com- panies delivered 9 billion express items, up 44 percent year-over-year. The revenue achieved in the process rose 30 percent year-over-year to $23 billion, consultants Deloitte Touche Tohmatsu found in a study that covered China's e-commerce development. Few business sectors can generate those kinds of growth percentages, but Paul Vogel, director of global postal and logistics at Deloitte Touche Tohmatsu, said the rising numbers also reveal a growing problem. "The volume of e-commerce parcels is going up, and the revenue is also going up significantly. But something happened last year where vol- ume grew faster than revenue," he said at the Post Expo conference in Hong Kong. Vogel said lower prices per parcel could be a result of fierce competition and consumers demanding free delivery, and falling profitability will place the multitude of express delivery companies under pressure. He said most would not survive, because they don't have the wide reach neces- sary to cope with the growing market. "It is quite apparent what is going to happen in China as vol- umes increase greater than the revenues." With 8,000 express couriers in China, there is going to be a lot of bloodletting going forward because people are losing money, said John Parkes, execu- tive vice president for LF Logistics. IT'S ALL UP TO CHINA NOW: P3 NETWORK GETS EU GREEN LIGHT IT'S UP TO Chinese regulators when it comes to whether the P3 Network will set sail in Sep- tember. The European Commission said this month it hasn't found any anti-competitive issues with the vessel-sharing agreement involving Maersk Line, Mediterranean Shipping Co. and CMA CGM. Although the P3 was considered to be on solid ground in Europe because Euro- pean Union regulators don't consider it a merger, there was still lingering concern that authorities would find it violated anti-competitive rules and would reject the consortium. Euro- pean regulators can dissolve the alliance if they determine it violates Article 101 of the Treaty on the Functioning of the EU. The U.S. Federal Maritime Commission in March voted to allow the P3 to take effect in the U.S. The three carriers had announced in May they would delay operations until September until they received full regulatory approval and to avoid disrup- tion that would come from implementing the alliance during the peak holiday shipping season. The proposed alliance, which would initially involve 252 vessels totaling 2.6 million TEUs on east-west routes, would be the world's largest carrier alliance. Because the ships oper- ated by the P3 will be larger on average than ones operated by the other major alliances, includ- ing the G6 and CKYHE, it will put the carriers at a cost advantage over most of the rest of the industry. Spotlight 6 THE JOURNAL OF COMMERCE www.joc.com JUNE 9.2014 6 THE JOURNAL OF COMMERCE www.joc.com

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