During the regular season, I can see with my own eyes who is performing well and who is stinking up the joint. But in July, everyone is several weeks, if not months, removed from shooting or dribbling a basketball, and so it's hard to tell what's real and what's not.
Because of that, July is when the shell games begin. The agent for an average player will play teams off one another, trying to increase their leverage and net the best deal for his client. What's often lost in this whole shuffle is that the money in the ensuing contract doesn't come close to matching the player's production.
Things aren't so different in the world of ocean freight transportation. You might say that the 'free agent signing period' is over and the 'regular season' is just about to begin, with lines hoping (and praying) that shippers make enough fall and pre-Christmas orders to fill ships and net sustainable rates.
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| 'All carriers are hoping for these days is one decent quarter, something to hang their hats on. But in the meantime, subterfuge rules the day.' | |
As an example, there's been talk of late that carriers have subtracted too much capacity from key Asia/Europe services ' in essence, swinging the pendulum back too far ' as load factors creep up. But are shippers really concerned about not being able to find slots? Or are these messages being put out there by carriers hoping to create an impression of tightening supply?
By many analysts' measure, more global capacity needs to be withdrawn to align supply with demand, even as idle capacity has inched down in the last few weeks.
Shippers, meanwhile, don't seem to be blinking in this poker game. They know it's a shippers' market for rates and it would take a pretty na've transportation buyer to be swayed by reports of tight capacity.
More than that, shippers seem determined to hold the line on what they're paying.
In recent conversations with carriers and forwarders, there doesn't seem to be a lot of willingness from shippers to pay slightly higher rates to get enhanced service. Low rates are low rates, and they make those transportation buyers look pretty good these days. A shipper who is extra-conscious of its bottom line right now is going to appreciate cost savings much more than supreme service.
On the other side of the misdirection coin, shippers are surely walking into negotiations with carriers saying that another carrier has offered them such and such a rate. Whether that rate exists or not is for the carrier to decide, as is whether the rate the shipper is proposing makes financial sense to the carrier.
The question is, how much has the 'free agent' talk really muddied the waters? Are shippers ' even large volume ones ' really worried about capacity guarantees? Are they really that concerned about locking in slots when spot market rates from Asia to anywhere are so low?
Are carriers believing shippers when asked to match another line's low rates? It all revolves around what is said over the phone or face-to-face between a carrier and a shipper. This is not an inclusive arrangement where everybody gets to listen in and plan accordingly, so the waters will continue to be muddy.
Express or bus stop?
One of the casualties of the global recession and container demand downturn has been the temporary demise of the 'huge ship-few stops' model.
When the world's biggest lines started introducing mammoth containerships, the idea wasn't for these leviathans to stop at every port between Shanghai and Rotterdam, but to hit four of five mega-hubs, load, unload quickly and provide fast transit times.
That model depended on carriers being able to sweep up huge amounts of cargo from two or three production centers in Asia and drop them off at two or three mega-ports in Europe or North America.
But 12,000-TEU ships aren't filling themselves these days. And so even the largest ships in operation are reverting to the more familiar bus-stop model. They're adding calls wherever reasonable and stopping in new hubs to gather cargo that would have been bypassed a year ago.
Example No. 1: More and more strings are calling at multiple terminals in the same port complex. Nowhere is this more evident than in South China, where a typical service might call at three terminals within an hour's drive from one another.
A fresher example is the double call the New World Alliance's PCX loop makes in the Southern California port complex. Los Angeles and Long Beach literally sit side by side, yet ships on that service are calling at both ports.
An executive with one of the NWA carriers intimated to American Shipper that the double call was made to accommodate calls at NWA members' dedicated terminals in the two ports.
But the reality is also that carriers are looking to sweep up cargo from every nook and cranny they can find.
Example No. 2: Carriers are looking at ways of routing vessels that allow for an absolute maximum of revenue-earning opportunities. A stop in Tangier on the way from the Far East to Europe allows cargo to be collected from Africa to be sent to Europe. It also allows cargo from Asia to be sent to Africa, and vice versa.
CMA CGM routed the return leg of one of its transpacific all-water services eastbound around Africa not just because Panama Canal tolls were a high proportion of revenue, but also because it gives them a chance to pick up cargo in Africa on the way back to Asia.
You're also seeing carriers join up to rationalize services and provide port coverage through service relays. In other words, carrier X's existing service might hit Singapore, Yantian, Shanghai and Busan before coming to Long Beach, while carrier Y's existing service might call at Ninbgo, Shanghai and Busan.
Rather than provide two calls at the same ports, the carriers might split up the calls to link only at Shanghai, so that carrier X will only call at Singapore, Yantian and Shanghai, while carrier Y will cover Ningbo and Busan and join up at Shanghai.
There are many options, but no sure bets as carriers script new models on the fly.
