Issue 26

March 20, 2009

Los Angeles and Long Beach Marine Terminals to Eliminate One OffPeak Shift Per Week

Cargo Volume Falls Dramatically

Marine terminal operators at the Port of Los Angeles and Port of Long Beach plan to eliminate one PierPass OffPeak shift per week due to declining cargo volumes. Starting April 6, terminal operators will close either one Thursday 6 p.m. to 3 a.m. shift or one Saturday 8 a.m. to 6 p.m. shift. Since each terminal can choose which shift to eliminate, it will have the flexibility to determine which day will be least disruptive to their customers and operations.

PierPass President and CEO Bruce Wargo said the decision comes after long talks with customers and other stakeholders. The terminal operators used an independent consultant to analyze the current costs of the OffPeak program and the impacts of ending either a Thursday or Saturday shift.

With the cost of operating OffPeak gates relatively fixed and volumes down 32 percent at the two ports during the fourth-quarter of 2008, the cost of operating five OffPeak shifts rose dramatically. The analysis showed the OffPeak program was costing terminal operators $70 per TEU, considerably more than the $50 per TEU traffic mitigation fee for picking up and delivering containers during regular peak hours.

By eliminating one shift per week, the terminal operators hope to save $17 to $25 per TEU.

For more information, please go to www.PierPass.org.

Transpacific Ocean Carriers Look to Raise Rates

Transpacific container lines say they must secure rate increases in the upcoming contract year to in order to avoid “unsustainable conditions which will threaten to destabilize the trade.”

The Transpacific Stabilization Agreement, a discussion agreement among 14 container carriers in the eastbound transpacific trade, said they will work "on an individual and non-binding basis" to let expire reduced short term/spot rates by the end of June and "establish rates going forward in 2009-10 contracting at levels $500 to $600 per 40-foot container (FEU) above the low levels that some rates deteriorated to over the last few months."

Ronald D. Widdows, TSA chairman and chief executive officer of Neptune Orient Line, parent of TSA member APL, said, "In spite of TSA members earlier announced intention to expire these unsustainable rates, carrier behavior not only failed to arrest the volatility in the trade, but contributed to further erosion in a number of cargo segments, most significantly in the spot market.

"There have also been isolated incidents where these non-compensatory rate levels have found their way into a small number of new contracts. Everyone involved in this trade faces the certainty of significant losses if quick action is not taken to approach the upcoming round of contract negotiations with a renewed focus on rates that will support continued servicing of this market. It will be evident shortly whether member lines individually can rise to the challenge.”

Back in December, the TSA announced plans to amend their agreement on file with the Federal Maritime Commission that would have allowed them to discuss controlling capacity in the Asia/U.S. trade. That sparked objections from groups such as the National Industrial Transportation League and National Customs Brokers and Forwarders Association of America, and requests for additional information from the FMC. The TSA withdrew the request in February.

According to AXS-Alphaliner, average weekly capacity in the Far East to North America trade was down 13 percent in March compared to October 2008. It estimates there are 60 dedicated liner services on the Far East-to-North America trade, down from 70 services in October 2008. It said 14 services have been withdrawn within the last six months while four new services were introduced, to partially replace the strings axed.

It said first quarter capacity was down 8 percent in January-March 2009 compared to the previous quarter.

"A significant number of the ships displaced have been sent into layup by the carriers as the industry grapples with the most serious downturn in its history. Industry players have warned that rates in the transpacific trade could fall dramatically, mirroring the rate reductions already seen on the Asia/Europe trade lane."

In addition to APL, TSA members are China Shipping Container Lines, CMA CGM, COSCO Container Lines, Evergreen Line, Hanjin Shipping Co., Hapag-Lloyd, Hyundai Merchant Marine, “K” Line, Mediterranean Shipping Co., NYK Line, OOCL, Yangming Marine Transport Corp., and Zim Integrated Shipping Services.