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Apr.4,2016

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BENEATH THE SURFACE 32 THE JOURNAL OF COMMERCE www.joc.com Gary Ferrulli APRIL 4.2016 READING TPM TEA LEAVES A S E X PEC TE D, TH E 16th Annual TPM Conference was another well- attended and busy event. Rates and weights were the topics garner- ing the greatest buzz. The first person I ran into after arriving in Long Beach was JOC.com Execu- tive Editor Mark Szakonyi, who asked, "What do you hear about rates?" Believing he meant the state of negotiations between carriers and larger beneficial cargo owners, I could only speculate that, based on recent spot rates, it must be a difficult discussion for the carriers. Existing service contract rates are hundreds of dollars higher than the spot market. But, as with similar matters involving revenue, costs and other things that affect the bottom line, the carriers are their own worst enemies at times. Unfortunately for the carriers, it's one of those times. Although supply and demand ratios seem to be carr ying the day on rate levels, the issue of free days for chassis is still alive and well for some. For those who thought the closing of TPM might end the discussions on rates, CMA CGM offered up more fodder, telling attendees it would serve the trans- Pacific eastbound market with a string of 18,000-TEU ships, start- ing at the end of May. This seems to indicate that the two recent calls of the 18,000-TEU Benjamin Franklin were scouting expeditions to see if the three major West Coast ports — Los Angeles, Long Beach and Oakland — could handle limited volumes generated by mega-ships. To be sure, those calls were not close to being full; the upper tiers of a full vessel can't be reached by any West Coast crane. Apparently, CMA CGM saw the ship calls as successful, based on its announcement of more to come. There is already speculation that CMA CGM is trying to gain mar- ket share with the big ships, almost forgetting that U.S. West Coast terminals are incapable of handing the giant vessels at anywhere near their practical capacity. They will be able to handle more than the 8,000- TEU ships, of course, but how many containers can be handled produc- tively is a terminal-by-terminal situation. So why is CMA CGM deploying the 18,000-TEU monsters in the trade? I can only speculate. Based on some math, it makes CMA CGM the biggest carrier in the Pacific. Might other carriers rethink their service contract negotiating strategies? In this instance, instead of trying to manage capacity and possibility sta- bilize rates, the mega-ship decision may just make things worse. Again, carriers at times are their own worst enemies. As to the weighty issue of SOLAS compliance, well, most went to TPM somewhat confused and looking for answers. They left TPM confused and still looking for answers. It seems the U.S. Coast Guard is tak - ing the position that none of this has anything to do with shippers of goods. Regardless of the lan- guage, the IMO weight verifica- tion regulation only affects vessels, according to the Coast Guard. This may be OK, but why did the Coast Guard wait until now to tell the world? Chris Koch, the former pres- ident and CEO of the World Ship- ping Council, noted that the Coast Guard had been involved intimately in the process, including the draft- ing of the language we now see, yet said nothing about the application to U.S. shippers until a day into TPM. The WSC has sent a letter to the U.S. Coast Guard asking for reconsideration and awaits the reply. In the interim, many shippers are taking the stand that they're apparently not affected. What about terminal operators, ports and carri- ers? According to the Coast Guard, it's the vessel and, I suppose by implication, the captains who have accountability for the total weight in the containers. Not to worry, we have 60 days or so before we really need answers. I can't end without comment- ing on the West Coast labor issue. International Longshore and Ware- house Union and Pacific Maritime Association leaders sat on the TPM stage affably and discussed the possible extension of their existing West Coast contract, apparently not wanting to disrupt the flow of com- merce again. Unfortunately, no one addressed the issue of productivity. U.S. West Coast ports and ter- minals lag some other U.S. ports in productivity by 25 to 42 percent, and multiples of that compared with world-class ports and terminals. With volumes climbing even 5 per- cent a year, the congestion will get worse, truck lines will stay long and shippers will have to wait for their cargo far longer than they should until productivity is successfully addressed. Work rules and gate hours must be addressed for U.S. West Coast ports to step up to 2016 realities. Why can't they make a commitment to work toward 40-moves-per- hour-per-cra ne a nd 24/7 gate hours within three years? That would solve many of the so-called problems in and around the ports. It also would retain work for the ILWU. JOC Gary Ferrulli is president-North America for Unicon Logistics. Contact him at mrgtf4811@mindspring.com.

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