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Aug.8, 2016

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EXPANDED PANAMA CANAL TRANSFORMING US SERVICES THE PANAMA CANAL is shaking up container service routings just a month after its larger locks — able to handle up to 14,000-TEU ships — opened. The Cent ra l A merica n waterway has ousted the Suez Canal as the leading route for all-water container services between the Far East and the U.S. East Coast, as its share of the trade rose to 57 percent, compared with 48 percent at the beginning of the year, according to industry analyst Alpha- liner. The overall all-water weekly capacity currently stands at 145,000 20-foot-equiva- lent units, up 1.7 percent from a year ago, the industry analyst said. It is unclear what has driven this shift because the transit time for a direct voyage from Hong Kong to New York is the same through both the Suez and Panama canals, although actual times depend on port coverage and intermediate stops. Panama has an advantage for origin points north of Hong Kong. Even more capacity is set to shift. 2M Alliance partners Maersk Line and Mediter- ranean Shipping Co. in September will move a jointly operated service from a Suez to a Panama routing, giving U.S. importers using North Atlantic ports transit time savings of days if not a week. The rival Ocean Alliance also plans to capitalize on the expanded Panama Canal by deploying the most expan- sive all-water trans-Pacific service network to U.S. East and Gulf Coast ports that has been seen in years, according to U.S. Federal Maritime Commissioner William Doyle, who reviewed the proposed vessel-sharing agreement. Ocean Alliance members CMA CGM, China Cosco Shipping Lines, Orient Overseas Container Line and Evergreen Line will deploys ships to 18,000 TEUs on the net- work connecting to the U.S., according to the proposed VSA. THE Alliance, partnering the Japanese trio of "K" Line, MOL and NYK Line with Hong Kong- based Orient Overseas Container Line. The THE Alliance is scheduled to begin operations on the key east-west trades in April. Meanwhile, CMA CGM closed its all-cash offer for NOL after acquiring shares equivalent to approximately 97.83 percent of the Singapore-based parent of container shipping line APL.CMA CGM said it had crossed the compulsory acquisition owner- ship threshold in NOL on June 28 and confirmed it intends to exercise its rights to compulsorily acquire all the shares held by NOL shareholders who have not accepted its offer. MUCH-NEEDED INTERMODAL GROWTH ELUSIVE FOR RAILS THE INTERMODAL VOLUME growth U.S. and Canadian railroads need to shore up weak car- load business has yet to be seen. The first major U.S. and Canadian railroads to report second- quarter earnings detailed year-over-year traffic declines, which contributed to a decrease in overa ll prof itabilit y. CSX Tra nspor tat ion profit fell nearly 20 percent to $445 million, as intermodal volume dipped 4 percent. Kansas City Southern Railway fared far better in profit g row, with earnings jumping 10 percent to $120.1 million. But intermodal volume, includ- ing cross-border traffic, dipped 1.5 percent. Canadian Pacific Railway's domestic intermo- dal volume was flat, but its international traffic plummeted 13 percent in the April-through- June period. CP's second-quarter profit fell 16 percent year-over-year to $251 million. Even Canadian National Railway, which has been able to continuously grow intermodal volume as more U.S. importers tap its network to pull through Canadian ports, took it on the nose. The largest Canadian railroad blamed weak demand and capacity restraints at a Vancouver container terminal. The 7 percent decrease in intermodal traffic helped pull down CN's profit 3.16 percent year-over-year in the second quar- ter to $651 million. CONTAINER CARRIER CONSOLIDATION CREEPS FORWARD SHIPPERS WILL SOON have two less container line options after a major merger went through and an acquisition deal crept closer to finality. Hapag-Lloyd and United Arab Shipping Co. last month signed a merger agreement that will create the world's fifth-largest container shipping line and strengthen the competitive- ness of the THE Alliance. The sovereign wealth funds of Qatar and Saudi Arabia, which con- trol UASC, will own 14 percent and 10 percent, respectively, of the merged carrier. The merger, which is subject to regulatory and contractual approvals, is expected to be finalized by the end of the year, Hapag-Lloyd said. The merged company will be a major player in the new Spotlight 6 THE JOURNAL OF COMMERCE AUGUST 8.2016 6 THE JOURNAL OF COMMERCE

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