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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 Peter T. Leach, Trans-Atlantic 212.755.0940 pleach@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 SENIOR EDITOR, DIGITAL Harry G. Butler, 609.433.7215, hbutler@joc.com RESEARCH EDITOR Marsha Salisbury 973.776.7828 msalisbury@joc.com ASIA EDITOR Annie Zhu +86 (21) 60396986 azhu@joc.com ECONOMIST Mario O. Moreno 973.776.7850 mmoreno@joc.com SPECIAL PROJECTS EDITOR Alessandra Gregory Barrett 973.776.7808 abarrett@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 PUBLISHER Tony Stein California, Minnesota, Georgia 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 Greg March, Asia Director Asia, Europe sales, 852.2585.6119 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 Chris Brooks The Journal of Commerce (USPS 279 – 060), March 3, 2014, ISSN 1530-7557, Volume 15, Issue No. 5. 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: $295 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. CALL IT THE "mega" age. The 13,000- TEU-plus vessels that have spawned the formation and expansion of alli- ances such as the P3, G6 and, most recently, Evergreen's joining the CKYH are the latest examples of a container shipping industry taking dramatic measures to control its fate. Those vessels and alliances, of course, are born out of the estimated $15 billion carriers have lost since the 2008-09 recession, their profitability wrung out by a combination of weak economic fundamentals and three years of record deliveries of ships capable of carrying up to 18,600 TEUs. The cost efficiencies those vessels and alliances offer are the driving force behind an industry that clearly can't continue to operate as it did in pre-recession days, when strong demand kept carriers so awash in profits that they could virtually order today's mega-ships at will. Lost in the transition to today's prolonged rate weakness is the sea change under way in what drives carriers to make such significant decisions. They are, perhaps for the first time, taking control of their own destinies — be it in the formation or expansion of alliances, integration of efficient mega-ships, slow-steaming or, in the U.S., ditching unprofitable programs such as free provision of chassis. And it's largely for one reason: Survival of the fittest. Change, it's said, never comes easy, and the effects of the changes ocean carriers are implementing are no exception, and will only intensify in the months ahead. The warning signs are all around: Chassis supply problems in Los Ange- les-Long Beach, massive gate delays at New York-New Jersey, Virginia and other ports, and mounting concerns over upcoming talks between the ILWU and waterfront employers that in the best case will lead to sleepless nights and in the worst will make this winter's gridlock look tame. It all adds up to a potential night- mare for beneficial cargo owners and other shipper interests that, for the better part of the past five years, have had, if not all the control, a good amount of it. Yes, they still have ulti- mate control over sourcing, carrier choice, the timing of moving their goods and, for those with the best supply chain strategies, the versatil - ity to shift their cargo between coasts to alleviate risk. But with carriers in the largest global trades operating fewer, though larger vessels, and limiting service operations through the formation of alliances, there can be no doubt: Ship- pers are losing some of the control they've enjoyed for years. With the largest ports on the East and West coasts struggling to keep up during the slowest shipping sea- son of the year — admittedly during an incredibly harsh winter — it will only get worse if the West Coast labor talks blow up this summer, just as more mega-vessels cascade onto the trans-Pacific, including through the Suez Canal to the East Coast. As Gary Ferrulli notes on page 114, getting loaded containers out of U.S. terminals is a challenge even under normal circumstances. Throw a labor slowdown or dispute into the mix and what should shippers expect? Several weeks of chaos, Ferrulli says. Bigger ships, bigger alliances, revolutionary equipment changes, a strengthening economy and potential labor troubles are elements of a potent mix that would wreak havoc on an already fragile U.S. supply chain and filter down to railroads and trucking companies nationwide. Indeed, no one will escape the fallout if that potent mix explodes. Port productivity — from loading and unloading of vessels to getting the cargo out of the gates and onto the road or rail to destination — has rarely been more in the crosshairs. With 2014 in a state of flux, shippers should prepare for it to get worse before it gets better. JOC MARCH 3.2014 Controlling the Chaos

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