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Sept.21, 2015

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BACK-TO - BACK INCREASES IN freight rates on the Asia-Europe trade lane the last week of August and first week of September, and the announcement of proposed increases in the eastbound Pacific to the U.S. indicate that peak-season volumes are finally starting to materialize in the important east-west trade lanes. And spot rates are rising, albeit from a low level. In the Asia-Europe trade, carriers are using intentionally canceled sailings, known as void or blank sailings, to prop up freight rates because of significant overcapacity (Related story, page 18). In the eastbound Pacific, carriers are relying on the normal increase in imports that occurs in late September and October each year to fill up their ships and nudge rates higher. These developments imply a return to normal seasonal developments. European imports of holiday season merchandise usually leave Asia first, followed by U.S. imports a few weeks later as retailers prepare for the official start of the holiday shopping season the day after Thanksgiving. Carriers have had so many blank sailings since January that they ran full schedules in only four of the first 25 weeks of the year. While these blank sailings affected indi- vidual voyages on an ad-hoc basis, the Ocean Three Alliance of China Shipping Container Lines, CMA CGM and United Arab Shipping Co. in June announced it was suspending an entire weekly service, which removed about 4 percent of the total capacity in the Asia- Europe trade. These capacity reductions, com- bined with the normal seasonal increase in cargo volumes, are beginning to produce results for carriers in the Asia-Europe trade. The spot rate of $763 per TEU from Shanghai to North Europe in the week ending Sept. 4 was up 29.1 percent from the previous week, according to the Shanghai Containerized Freight Index. However, as an indication of just how weak the carrier negotiating position is this year, the Sept. 4 spot rate was down 32.4 percent from the same week last year, when the rate was $1,129 per TEU. At least a half-dozen carriers previously announced proposed increases to take place in September, ranging from $550 to $1,000 per TEU, in the Asia-North Europe trade. Carriers this year have announced about 10 GRIs, only to watch the increases deteriorate rapidly. Activity also is picking up in the U.S. import trade from Asia, indicating carriers may be able to implement some rate increases this month and in October. Overcapacity continues to plague carriers in the eastbound Pacific, just as it has done all year in the Asia-Europe trades. The spot rate to the U.S. West Coast in the week ending Sept. 4 was $1,456 per 40-foot con- tainer, according to the SCFI. That was down 1.7 percent from $1,481 the previous week and 36.8 percent less than during the same week last year. The spot rate from Shanghai to the East Coast was $2,672, down 2.2 percent from the previous week and 42.4 percent lower than the $4,636 spot rate in effect in September 2014. With the beginning of the holiday shopping season in sight, carriers in the eastbound Pacific could be announcing more GRIs. Higher-value merchandise including apparel and electronics normally moves from late September into early November. Much of the lower-priced holiday merchandise such as Christmas tree ornaments may already have arrived in the United States. Truckers and warehouse operators in Southern California report warehouses are full and they are awaiting instructions from retailers to begin moving product to regional distribution facili- ties and stores. TRANS-PACIFIC, ASIA-EUROPE PEAK SEASON AWAKENS Spotlight 6 THE JOURNAL OF COMMERCE SEPTEMBER 21.2015 6 THE JOURNAL OF COMMERCE

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