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June29, 2015

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INTERNATIONAL MARITIME IMPORTING | EXPORTING | PORTS | CARRIERS | BREAKBULK | GLOBAL LOGISTICS 42 THE JOURNAL OF COMMERCE www.joc.com JUNE 29.2015 By Peter T. Leach NEARLY HALF OF more than 100 beneficial cargo owners surveyed by The Journal of Commerce plan to shift cargo from the U.S. West Coast to ports in the east, under- scoring the ongoing fallout from severe congestion that plagued Los Angeles-Long Beach and other harbors last fall and win- ter. But for many, permanent diversion will represent just a small portion of their overall freight moving through the West Coast. In all, 43 percent of 112 shippers who have negotiated annual trans-Pacific con- tracts said they would shift shipments to East Coast ports, according to the survey conducted in early June. But of those who said they would reroute cargo away from the West Coast, half said that less than 5 percent of that freight would be diverted perma- nently through new 2015-16 contracts. Despite the higher rates BCOs must pay for East Coast routing, about a third of sur- veyed shippers said trans-Pacific contract rates were relatively unchanged from the last round. Still, one-third of shippers said they left the bargaining table with contracts call- ing for rate increases of more than 3 percent. Shippers appear to have pulled back on how much cargo they plan to reroute away from the West Coast. In late February, 65 per- cent of shippers said they would reroute more cargo away from West Coast ports this year and next. Of those, 23 percent said they planned to shift between 10 and 30 percent of their freight away from the coast. Although the scale of the shift may have eased, the same can't be said for ship- per frustration and anger over West Coast delays during the prolonged contract negoti- ations between the International Longshore and Warehouse Union and the Pacific Mari- time Association. The two sides formalized a five-year agreement on May 22. One shipper responding to the survey said he would look to shift as much production as possible away from China to Mexico. Trans-Pacific freight rates remained relatively unchanged from the 2014-15 contracts, according to 32 percent of respon- dents, but 31 percent reported increases of more than 3 percent. Another shipper said it had negotiated contracts with carriers that had no increases on eastbound cargo from Asia to the West and East coasts. Contracts with two of its five carriers call for increases of $150 per 40-foot-equivalent unit on eastbound cargo to Asia, which brought those carriers up to the level of the other three carriers. "We were able to secure very attrac- tive rates to the West Coast, but East Coast rates went up a lot, and interior locations were significantly increased," said one Mid- west shipper association, which responded anonymously. Some of the larger shippers in the association are using non-vessel-oper- ating common carriers to take advantage of "extremely low spot rates" to all coasts and interior locations that are lower than 2014-15 contract rates. "All the bravado from the car- riers about how they had to have the higher pricing ends up to be hogwash," the shipper said. "West Coast rates are under pressure because the carriers are trying to get their customers back, so those rates are pretty stable," said Dennis Melgert, director of global logistics for Octal, an Oman-based resin manufacturer. "Unfortunately, one of my big trade lanes is the trans-Atlantic, and carriers are in a better position to get increases on imports because of the strong IS TIME HEALING THE PAIN? Survey finds many shippers still plan to divert cargo from the West Coast, but their vigilance appears to be easing Trans-Pacic contract rates in wake of West Coast port congestion *112 shipper responded to a JOC.com survey between May 29 and June 4. Although some shippers didn't answer all the questions, there were no fewer than 86 responses to each question. Trans-Pacic contract rates in wake of West Coast port congestion How much did your rates change from last year? Does your contract provide for shifting more of your Asia cargo to the East Coast and away from the West Coast than in prior years? 12% 6% 18% Yes - 44% No - 56% Did you expand the number of carriers who you are contracting with? Yes - 54% No - 46% Rose more than 3% Rose 1 to 3% Relatively unchanged Shrank 1 to 3% Shrank more than 3% 32% 31% Trans-Pacic contract rates in wake of West Coast port congestion How much did your rates change from last year? Does your contract provide for shifting more of your Asia cargo to the East Coast and away from the West Coast than in prior years? 12% 6% 18% Yes - 44% No - 56% Did you expand the number of carriers who you are contracting with? Yes - 54% No - 46% Rose more than 3% Rose 1 to 3% Relatively unchanged Shrank 1 to 3% Shrank more than 3% 32% 31% How much did your intermodal rail rates change from last year? 5% 5% 21% Rose more than 3% Rose 1 to 3% Relatively unchanged Shrank 1 to 3% Shrank more than 3% 38% 31% Trans-Pacic contract rates in wake of West Coast port congestion How much did your rates change from last year? Does your contract provide for shifting more of your Asia cargo to the East Coast and away from the West Coast than in prior years? 12% 6% 18% Yes - 44% No - 56% Did you expand the number of carriers who you are contracting with? Yes - 54% No - 46% Rose more than 3% Rose 1 to 3% Relatively unchanged Shrank 1 to 3% Shrank more than 3% 32% 31% How much did your intermodal rail rates change from last year? 5% 5% 21% Rose more than 3% Rose 1 to 3% Relatively unchanged Shrank 1 to 3% Shrank more than 3% 38% 31% Trans-Pacic contract rates in wake of West Coast port congestion How much did your rates change from last year? Did you gain more favorable terms relating to demurrage, detention or both? Does your contract provide for shifting more of your Asia cargo to the East Coast and away from the West Coast than in prior years? 12% 6% 18% Yes - 44% No - 56% Did you expand the number of carriers who you are contracting with? Yes - 54% No - 46% Yes - 27% No - 73% Rose more than 3% Rose 1 to 3% Relatively unchanged Shrank 1 to 3% Shrank more than 3% 32% 31% How much did your intermodal rail rates change from last year? 5% 5% 21% Rose more than 3% Rose 1 to 3% Relatively unchanged Shrank 1 to 3% Shrank more than 3% 38% 31%

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