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Sunday, May 1st, 2011

Pacific Steam

Trans Pacific Ocean Shipping Market Update – March 2011

Dear Valued Business Partner,

I just returned from the Transpacific Maritime Conference in Long Beach, California.

We had the opportunity to hear from various industry experts sharing their perspectives on how the TP market will play out in 2011, so here is our take:

Supply vs. Demand Forecasts:

Analysts predict 2011 Transpacific shipment growth will be between 6% and 9% for imports and 11% for exports above 2010. They are calling for continued growth in the US Economy as well as retail sales approaching levels not seen since prior to the world financial crisis of 2009. The U.S. Economy grew by 2.9 % in 2010 and some analysts are predicting 2011 growth to be at 3.2%

On the supply side, vessel capacity has been added, and will continue to be added in 2011 and beyond. Analysts estimate capacity growth of 7% to 9%. This prediction comes on the heels of Maersk Line’s confirmed order for 10 x 18,000 teu vessels. While these vessels will not be deployed till 2013 and 2014, a sufficient number of new vessels are scheduled for delivery in 2011. In addition to the current carriers deploying larger and additional vessels in 2011, at least 4 steamship lines have entered the Transpacific trade. The additional capacity being provided by carriers such as, The Containership Company (TCC), Grand China Line (GCL), Hainan PO Shipping (POS), and Horizon Line will no doubt increase capacity and affect the market. It is important to realize, that most of the “new” carriers only provide Long Beach CY service, therefore, the West Coast CY sector will be most affected by the “new” carriers.

Import Additional Factors:

a. Oil prices are going higher as evidence by the diesel fuel price index which has now past $3.60/gallon (up from 2.85/gallon in early February 2010). The factors driving the fuel price increase are a rebound in the world economy and instability in the mid-east and northern Africa oil producing regions.

b. Equipment shortages will play a major role in 2011 and 2012. The shortage of containers in the coming 2 years is a result of “slow steaming” by which vessels are moving at slower speeds to conserve fuel. In order for carriers to maintain consistency in sailing schedules, vessel operators need to deploy additional vessels to each service string where “slow steaming” takes place. By adding additional vessels, a need for additional containers is required. This coupled with the larger vessels being deployed and in 2009 container production was reduced, sufficient equipment required for the trade will be in shortage.

c. Intermodal costs will continue to increase due to increased utilization of the railroad and due to new federal motor carrier regulations, which will cause a reduction of active over the road trucks and drivers.

Rate Outlook:

Based on the above factors, as well as many discussions with industry members, it is our feeling that short term (till 5/1/2011) freight rates will decline for West Coast and East Coast CY moves and rates to inland points e.g. (Chicago, Kansas City, St. Louis, etc.) will remain consistent with current rates. In the longer run (from 5/1/11 to 10/31/11) we believe that coastal freight rates will remain consistent, however, increased fuel costs will result in overall increased costs to inland door points.

We will be closely monitoring the situation, and keep you updated of any changes.

About the Author

Max Kantzer is CEO of Transmodal Corporation, a Ramsey, N.J.-based international logistics company providing Customs Brokerage, NVOCC, Air & Ocean Freight Forwarding services. The firm is focused on delivering the highest level of global logistics services. Over the last 20 years, Max has traveled to all the major hubs of international commerce. If you would like to contact Max, or share any experiences, or have any questions, Max can be reached at max@transmodal.net.

Pt.2 1944 Union Pacific Steam Locomotive No. 844 Departing Bald Knob Arkansas June 8, 2011