Carriers meet to discuss exporters concerns
Representatives of major transpacific liner carriers met with U.S. exporters earlier this week to discuss the dilemma many are faced with getting their products to market because of a lack of capacity on containerships.
Widdows |
Ron Widdows, chief executive officer of APL, and chairman of the Westbound Transportation Stabilization Agreement (WTSA), said he was not able to offer any quick fixes for the problem, but thought the session helped shippers better understand the causes of the problem, and said carriers may look at whether network changes could help ease the capacity crunch exporters face.
About 25 shippers, as well as representatives from the National Industrial Transportation League and Agriculture Transportation Coalition, met June. 25 with eight of the 10 members of the WTSA, a discussion agreement of liner companies moving cargo from the United States to Asia.
“As you might expect, there were some folks in that room that were a little stressed — their rates are going up and they are having difficulty finding ship capacity for their products. It is quite a dilemma that has developed in a relatively short period of time,” Widdows said.
He said he also briefed the Federal Maritime Commission and Maritime Administration on the issue.
The lack of capacity for U.S. exporters has several causes, he said, primarily the extremely rapid growth in exports while imports to the West Coast have dropped.
“When we were growing 10 percent a year in transpacific, you had a fairly steady supply of ship capacity coming in the market, but now you don’t because the head-haul is not growing,” he noted.
With weak imports carriers are unlikely to add much capacity to the transpacific trade and Widdows said he does not expect material amounts of capacity to be added to the Asia/Europe trade until 2009 or 2010.
But carriers are beginning to examine whether there might be ways to reconfigure of services to help free up more capacity to Asia, he said. For example, more export cargo can be shipped on a vessel when it calls at a West Coast ports than if it is deployed on a trans-Panama Canal services to the East Coast because of the draft limitation imposed by the canal.
But the ability to move ships from the East to West Coast is also limited because of the large number of importers that have located distribution centers on the East Coast and rely on Asia/Europe services.
Some steamship lines might be able to accommodate some U.S. exporters if their trans-Suez services were to call at ports farther north into China. But he notes such service changes would probably also require a change in pricing.
Carriers have agreed to hold a series of meetings around the country and will meet with additional shippers and also see if it is possible to involve some carriers that are not members of the WTSA.
“It is no longer a head-haul mentality, you have to think about this on a round-trip basis, which is a bit different than the industry has thought about it to date, and that might cause some change in network configuration,” Widdows said.
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| Gatti |
Peter Gatti, executive vice president of the NIT League, said that while the information supplied during the session was useful, the druthers of the shippers would be to meet with carriers on a one-on-one basis rather than collectively. While all carriers face higher oil prices, he also noted that they have different costs, strategies and abilities to hedge oil prices, for example.
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| Friedmann |
Peter Friedmann, executive director of the Agriculture Transportation Coalition, expressed the same sentiment: “When carriers are in the same room as their competitors they may not be as focused on specific measures they could take with respect to their unique cost structures.”
On other topics, Widdows said he did not know if Neptune Orient Lines, the parent company of APL, would buy Hapag-Lloyd.
“There is a very public process taking place,” he noted. “We have a plan for growing our business going forward that we are comfortable with. It is premature to say whether this is an opportunity. It might be noting that larger companies have “economies of scale in terms of cost competitiveness.”
He said contract negotiations between employers and the International Longshore and Warehouse Union were “moving kind of slow,” but “nothing I have heard indicates a real serious problem.”
If a contract is not wrapped up by June 30 he expects talks would probably continue without a work disruption. ' Chris Dupin