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Sept.7, 2015

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US BORDER TRADE VIA TRUCKS DECELERATES TRUCK TRAFFIC CROSSING the U.S. borders with Mexico and Canada is brisk but not like it was a year ago, a reflection of slower economic growth. The number of trucks that passed through the five largest U.S. border crossings rose 5.6 percent from the first quarter to the second quarter of 2015, as the U.S. economy defrosted and expanded at a faster pace, according to U.S. Bureau of Transpor- tation Statistics data. The five largest U.S. ports of entry for trucks — Laredo, Texas; Detroit; Buf- falo, New York; Otay Mesa, California; and Port Huron, Michigan — accounted for 53.8 percent of total U.S. border crossings by truck in the second quarter, according to the BTS border crossing data. The quarter-to-quarter increase, which followed a 0.6 percent sequential decline in the first quarter, reflects the moderate uptick in the U.S. economy as a whole, the strength of demand for Mexican produce in the U.S. this spring, as well as an increase in shipments of higher-value manufacturing and consumer goods across the U.S. border. The BTS data tell a story of differ- ent borders, economies and trade relationships. Over the long term, cross-border truck traffic with Mexico is climbing, while U.S.-Canadian truck crossings have declined. Since the second quarter of 2005, Mexican cross-border traffic has grown 19 percent, while trucks crossing the northern border dropped 16 percent. Truck cross- ings at both borders have increased since 2009, with Mexico approaching parity with Canada. IT'S NOT LOOKING good for carriers seek- ing Asia-Europe general rate increases on Sept. 1. As of Aug. 21, the average spot rate from Shanghai to the Mediterranean plum- meted 32 percent to $449 per TEU, while spot rates from Shanghai to North Europe fell 27 percent to $469 per TEU, according to the Shanghai Containerized Freight Index. Spot rates on the Shanghai to Mediterranean and to North Europe routes are down 69 percent and 59 percent, respectively. Carriers' need to secure rates in the $1,000 per TEU range to break even. Carriers seeking Sept. 1 GRIs include Maersk Line and Evergreen, $1,000 per TEU each; United Arab Shipping Co., $950 per TEU; CMA CGM, $950 per TEU; and MOL, $500 per TEU. The rate push comes after the cancellation of a series of sailings, an effort to bring capacity closer to demand. G6 Alliance carriers in late August withdrew two more sailings on the busiest trade lane, bringing the number of their canceled sail- ings in the last three months to 16. The 2M Alliance of Maersk and Mediterranean Ship- ping Co. dropped one of its joint services on the route. The Ocean Three and CKYHE alliances also have canceled Asia-Europe sailings. "Any success would likely be short- lived as demand is expected to fall sharply in October, when China's week-long National Day 'Golden Week' holidays will mark the end of the summer peak season," consultant Alphaliner said. Carriers have attempted nine previous GRIs this year. The two most recent, in July and August, achieved some initial suc- cess but collapsed as carriers reduced rates to attract and keep cargo. The weak Asia- Europe market has hit carriers hard. Maersk Line in mid-August posted its first year-over- year decline in quarterly profit since 2012. Maersk Group CEO Nils Andersen admitted the carrier had overestimated Asia-Europe demand, and said the carrier would respond by adjusting its capacity while defending its market share. One of the few positive signs for carriers is the plunging prices for bunker fuel, the largest operating costs for container lines. Bunker fuel prices in Singapore, the world's biggest bunkering port by sales vol- umes, in late August fell to their lowest point since 2005. The price of CST380 heavy fuel oil fell to $205 per metric ton, and prices could fall below $200 per ton as oil prices show no sign of recovering, traders said. "There is just too much oil in the market and OPEC shows no sign of cutting output. It is inevitable that HFO prices will continue falling. If sanctions on Iran are lifted, more oil will be available," one trader said. CHANCES SLIPPING AWAY FOR CARRIERS TO RAISE ASIA-EUROPE RATES Spotlight 6 THE JOURNAL OF COMMERCE SEPTEMBER 7.2015 6 THE JOURNAL OF COMMERCE "There is just too much oil in the market and OPEC shows no sign of cutting output." Source: U.S. Bureau of Transportation Statistics TOP 5 U.S. BORDER CROSSINGS n Truck Traffic Share ■ Laredo, Texas ■ Detroit, Michigan ■ Buffalo, New York ■ Otay Mesa, California ■ Port Huron, Michigan ■ Rest of U.S. crossings 17.7% 46.2% 13.2% 8.5% 7.3% 7.1%

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