Asia-North America Congestion Continues

October 28, 2009

This has been a very difficult year for carriers particularly in the Trans Pacific Eastbound (TPEB) lane. Despite the amount of effort that is put into planning capacity/vessel rotation/space sharing and allocation, the carriers continue to have difficulty getting it right.

Fully expecting soft volumes once China returned from the one week national holiday celebrated during the first week in October, carriers began negotiating an end to the Peak Season Surcharge earlier than the originally announced expiration date.

But soft volumes were not what greeted carriers when China opened again for business on October 5th. Large retailers such as Wal-Mart, Sears, Target, all of which were scheduled to have light loadings after the China holiday week, stunned the carrier community with the heavy volumes of cargo they booked immediately and there is no end in sight for at least the next few weeks.

One carrier has admitted they left 800 containers behind in Shanghai last week and it will take them a few sailings to ?catch up.? Had the carriers only been able to anticipate this volume, they clearly would have extended the Peak Season Surcharge into November?and perhaps beyond if the volumes continued to hold. But the PSS has largely been lifted and space is at a premium.

Last week I was in Hong Kong and met with about ten carriers. ALL carriers in the TPEB trade are just about at capacity. Shanghai and other north/central China ports seem hardest hit with containers being left behind weekly. Southern China is also under pressure although not quite as severely as central and northern China. It would appear the strings that are least impacted by space issues are the all water services to the East Coast where we are experiencing only random space issues.

While we can expect containers volumes to drop off in mid to late November after the ?pre-holiday? rush this reduction in cargo volume is expected to coincide with the deployment of the winter schedule by carriers that will further reduce capacity.

What can be done to help our customers and what can customers do to help themselves?

1. Plan delay time potential in your logistics timeline. While we do everything possible to avoid delays the impact can be minimized if there is some cushion in the schedule.
2. Ask suppliers to book containers as early as possible. This will enable our offices at origin to book containers with carriers for upcoming vessels.
3. Share information with GLL. If we know you have purchase orders that should be ready for transport in the next few weeks we can have our origin offices contact the suppliers. The more communication the better.

Ocean carriers are loosing millions of dollars each month. While rate restoration in lanes other than the TPEB has resulted in stemming the heavy losses (Asia-Europe and Asia-Latin America as examples) the TPEB continues to be an economic drain on assets and profitability. Carriers hope to better manage their financial result with a combination of continued rate increases and prudent management of capacity?prudent from their perspective, not necessarily shared by customers who continue to be victimized by circumstances beyond their control.

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