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Aug.7, 2017

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OCEAN CARRIERS ON TRACK FOR $5 BILLION PROFIT SPOT RATES IN the major east-west trades will emerge soon from their slump as the peak sea- son begins, driving carriers to an industrywide profit of about $5 billion this year, according to research analyst Drewry. After six consecutive years of financial losses, the container shipping industry is experiencing a "big shift in the market cycle" marked by carrier consolidation, diminish- ing orders for new vessels, and improving freight rates, Philip Damas, director of London-based Drewry Supply Chain Advisors, said during a July webinar. Drewry's views track what carriers have been saying since late 2016: that rapid consolida- tion in the industry, slower capacity increases, and improved supply-demand fundamentals point to stronger pricing potential this year and next. Capacity in the global fleet is projected to increase 3.4 percent this year, 4.7 percent next year, and just 0.1 percent in 2019, according to maritime analyst Alphaliner. That will end a streak of rapid capac- ity increases that saw the global container fleet double to 5,066 vessels in 2016, and a quadrupling of capacity to about 20 million TEU, according to IHS Markit research. Although spot rates in the Asia-Europe and eastbound trans-Pacific trades softened a bit after a July 1 spike, demand growth in 2017, driven by restocking in Europe and North America, will end up being 4 percent, said Mar- tin Dixon, Drewry's director of research projects. That will support an average 16 percent increase in freight rates this year on all of the global routes — east-west, north-south, and backhaul — as well as head routes, he said. In the trans-Pacific, Mario Moreno, senior economist for the Maritime & Trade unit of IHS Markit (the group that also includes The Journal of Commerce), in the spring increased his 2017 projection for growth in US imports to 6.6 percent from his earlier forecast of 6.1 percent. According to PIERS, a sister product of The Journal of Commerce, US containerized imports in the first half of 2017 were up 4.2 per- cent year over year. Carriers will look to general rate increases and increases in spot rates during the August-October peak season to push them into profitability for the year. With rates expected to continue rising in 2018, procurement executives at beneficial cargo owners should take note of this cyclical change and adjust their contracting strategy accordingly, Damas said. Spot rates in the Asia-US trades in late July were $2,233 per FEU to the East Coast, up 28 percent from the same time last year, and $1,226 per FEU to the West Coast, down 5 percent, according to the Shanghai Con- tainerized Freight Index. The spot rates appear to be at a seasonal tipping point. Vessel capacity normally tightens in August, and ships usually remain close to full utilization with holiday season merchandise through October. EXECUTIVE EDITOR, THE JOURNAL OF COMMERCE AND JOC EVENTS Chris Brooks 609 649 2181 EXECUTIVE EDITOR, THE JOURNAL OF COMMERCE AND JOC.COM Mark Szakonyi 202 872 1234 MANAGING EDITOR Barbara Wyker 908 777 3217 SENIOR EDITORS Joseph Bonney, Breakbulk/Project Cargo, Gulf Coast 973 508 2417 William B. Cassidy, Trucking and Domestic Transportation 202 872 1228 Bill Mongelluzzo, West Coast 562 428 5999 Hugh Morley, Northeast, Mexico 646 679 3475 Greg Knowler, Asia Editor, Maritime & Trade, IHS Markit, +852 3975 2647 Turloch Mooney, Global Ports, Maritime & Trade, IHS Markit, +852 9011 9109 ASSOCIATE EDITOR Reynolds Hutchins, Intermodal, Government/Regulation, Southeast Ports 202 572 1487 ASSISTANT WEB EDITOR Dustin Braden 646 679 3450 SENIOR ECONOMIST, MARITIME & TRADE, IHS MARKIT, Mario O. Moreno 973 204 7796 SENIOR CONTENT EDITOR Alessandra Gregory Barrett 860 248 5238 SENIOR DESIGNER Sue Abt, 415 312 2691 DESIGNER Bryan Boyd, 908 910 7849 PUBLISHER Tony Stein 770 295 8809, SALES Cindy Cronin, Strategic Account Manager Southeast, Gulf, Canada sales, 954 551 8305 Zachary Gorman, Account Executive Northeast sales, Classifieds/Reprints/Copyrights 646 679 3466 Misty Belser, Senior Sales Executive 919 869 7404 Ria Van den Bogaert, Sales Representative Europe, Middle East sales, +32 2 569 8905 For Magazine Subscription Customer Service: 450 West 33rd St., 5th Floor, New York, N.Y. 10001 800 952 3839 MANAGING DIRECTOR, MEDIA AND EVENTS, MARITIME & TRADE, IHS MARKIT, Rhiannon James SENIOR DIRECTOR, CONTENT, MARITIME & TRADE, IHS MARKIT, Peter Tirschwell DIRECTOR, MEDIA & EVENTS, MARITIME & TRADE, IHS MARKIT, Amy Middlebrook MANAGER, PRODUCTION, Carmen Verenna MARKETING PROGRAMS MANAGER, JOC, Jesse Case ©2017 The Journal of Commerce — All Rights Reserved For more information, visit our website, Spotlight 6 THE JOURNAL OF COMMERCE AUGUST 7.2017 6 THE JOURNAL OF COMMERCE

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