Digital Edition

May 28 2018

Issue link: https://jocdigital.uberflip.com/i/983357

Contents of this Issue

Navigation

Page 3 of 103

4 The Journal of Commerce | May 28 2018 www.joc.com Mark Szakonyi SINCE ITS JULY launch, the New York Shipping Exchange (NYSHEX) has shown that its tech-support- ed model is capable of fostering contract reliability between carriers and shippers. Now comes the harder part: The platform's ability to scale its modest volume hinges on the industry evolving so its allure expands to a broader base of benefi- cial cargo owners (BCOs). NYSHEX has secured $16 mil- lion in funding from GE Ventures, Goldman Sachs, and others, and says it has attracted as regular us- ers five carriers — CMA CGM, Ha- pag-Lloyd, Maersk Line, MOL, and OOCL — and roughly 100 shippers. The exchange has won accolades for reducing no-show — that is, when a carrier fails to take booked cargo or when a shipper does not deliver the freight, via contracts and penalties when parties do not fulfill their commitments. The exchange's pilot launched in June 2016 and completed its first contract in August. Whether NYSHEX will continue to provide virtually 100 percent contract reliability to a small seg- ment of the market or be able to reach its goal of eventually serving 15 to 20 percent of the market remains uncertain. Volume booked is building, according to the compa- ny, albeit at a growth rate paralleling the incline in demand of most new exchanges, particularly those trying to change an established way of working, CEO Gordon Downes told The Journal of Commerce. For example, the Interconti- nental Exchange (ICE), like NYSHEX, attracted some of the largest players, though oil producers rather than car- riers, but it took time to take o˜ after its 2000 launch, Downes said. ICE had $5.8 billion in revenue in 2017. In NYSHEX's case, it's about encouraging carriers and shippers to move past a system driven by uncertainty: BCOs face no penalty for booking a certain volume of cargo on a ship, and then failing to send it, and carriers face few consequences for leaving containers on the dock after they have committed to move them on a designated sailing. Container lines have attempted and failed to levy penalty fees on shippers that failed to deliver cargo as booked. Last August, Hong Kong-based 300Cubits unveiled a di˜erent plan to induce carriers to avoid overbook- ing and shippers from no-shows. The company, started by former Maersk veteran and industry analyst John- son Leung, released a cryptocur- rency designed to underpin con- tainer bookings. The concept was simple: The carrier and party book- ing a container slot commit a token to the transaction, and if either party fails to hold up their end, the other party gets both tokens. If the transaction occurs as planned, both parties keep their tokens. NYSHEX is "trying to change an industry that has been doing contracting the same way since 1998 in the United States," Downes said. "We know this and are prepared for a long runway [roughly two years] with the capital we have raised." Volume booked and delivered on the exchange averaged about 660 TEU per month in NYSHEX's first five months, according to the company. The exchange handled 2,658 TEU in April, up from 644 TEU in March, Downes said. NYSHEX isn't making its volume goals public, saying only that volumes are growing, and the key metric is that its "fulfillment rate is north of 99.8 percent." Such a guarantee, however, isn't enough to spur them to book on the exchange, a half-dozen shippers told The Journal of Commerce. Their reasons vary, from balking at having to pay a penalty if they don't deliver goods, to finding the prices o˜ered higher than what they can contract directly with a carrier. Two shippers said the requirement of having to pay in advance doesn't work with their accounting arms, while one major retailer said the insurance protection provided by the exchange falls short of their company's requirements. There is also reluctance among some big shippers because their volume already gives the leverage they need from the ocean carriers to get cargo loaded on ships as desired, while some have well-developed part- nerships that involve regular ship- ment forecasts. Some shippers also want to use positive reinforcement with carriers rather than the negative approach of applying penalties. At the TPM Conference in March, Mike Burns, vice president of global transportation and omnichan- nel logistics at Big Lots, likened NYSHEX's model to his ability to get his flight changed at the last minute because of his frequent flyer status with an airline. "I think NYSHEX has an interesting model for a certain part of the marketplace. For larger shippers with complex supply chains, I'm not sure it's the right model," Burns said. Downes said he's aware of the various reasons for shippers' reluc- tance to book with NYSHEX on the trans-Pacific, on which the exchange solely operates, but noted that trying to make the exchange work for everyone would undermine the Next for NYSHEX The Journal of Commerce (USPS 279 – 060), ISSN 1530-7557, May 28, 2018, Volume 19, Issue No. 11. The Journal of Commerce is published bi-weekly except the last week in December (printed 25 times per year) by JOC Group Inc., 450 West 33rd St., 5th Floor, New York, N.Y. 10001. Subscription price: $595 a year. Periodicals postage paid at New York, N.Y., and additional mailing o–ices. © All rights reserved. No portion of this publication may be copied or reprinted without written permission from the publisher. POSTMASTER: Please send address changes to The Journal of Commerce, Subscription Services Department, 450 West 33rd St., 5th Floor, New York, N.Y. 10001. NYSHEX is "trying to change an industry that has been doing contracting the same way since 1998 in the United States." Continued on page 6 Letter From the Editor œžŸ¡ JOC Top Ÿžž Importers and Exporters

Articles in this issue

Links on this page

Archives of this issue

view archives of Digital Edition - May 28 2018