• ITVI.USA
    14,270.140
    -77.460
    -0.5%
  • OTRI.USA
    22.470
    0.090
    0.4%
  • OTVI.USA
    14,258.910
    -85.130
    -0.6%
  • TLT.USA
    2.790
    0.030
    1.1%
  • TSTOPVRPM.CHIATL
    3.280
    -0.100
    -3%
  • TSTOPVRPM.DALLAX
    1.460
    -0.040
    -2.7%
  • TSTOPVRPM.LAXSEA
    2.990
    -0.310
    -9.4%
  • TSTOPVRPM.PHLCHI
    1.970
    0.010
    0.5%
  • TSTOPVRPM.ATLPHL
    2.650
    -0.300
    -10.2%
  • TSTOPVRPM.LAXDAL
    2.490
    -0.200
    -7.4%
  • WAIT.USA
    127.000
    0.000
    0%
  • ITVI.USA
    14,270.140
    -77.460
    -0.5%
  • OTRI.USA
    22.470
    0.090
    0.4%
  • OTVI.USA
    14,258.910
    -85.130
    -0.6%
  • TLT.USA
    2.790
    0.030
    1.1%
  • TSTOPVRPM.CHIATL
    3.280
    -0.100
    -3%
  • TSTOPVRPM.DALLAX
    1.460
    -0.040
    -2.7%
  • TSTOPVRPM.LAXSEA
    2.990
    -0.310
    -9.4%
  • TSTOPVRPM.PHLCHI
    1.970
    0.010
    0.5%
  • TSTOPVRPM.ATLPHL
    2.650
    -0.300
    -10.2%
  • TSTOPVRPM.LAXDAL
    2.490
    -0.200
    -7.4%
  • WAIT.USA
    127.000
    0.000
    0%
American Shipper

A fair play for no-shows

   Maersk Line made news in late June when the container line said it will begin assessing a $100-per-container no-show fee on bookings that fail to materialize.
   Unlike simple no-show penalties of the past, the new initiative is an attempt at quid pro quo. If Maersk has overbooked on a sailing and has to hold back a box, it will compensate the shipper by the same $100 per container.
   The measure is in sync with Maersk Chief Executive Officer Eivind Kolding’s recent manifesto about changing the way the container-shipping industry operates. Maersk executive John Nielsen told American Shipper the no-show/overbook penalty system is not about being punitive or driving revenue — it’s about changing inefficiencies in the way the industry operates.
   It’s a laudable effort, though, only time will tell if it’s effective. The fee seems high enough to change behavior. After all, when shippers were faced with a $50-per-TEU fee to use Southern California ports during daytime, weekday hours, more than half altered their cargo movement patterns to nighttime shifts at the ports. Money talks.
   “Eventually, there has to be some kind of monetary inducement,” Nielsen said. He admitted there was no complex science involved in determining the penalty required to change behavior — more like trial and error. A $10 no-show fee Maersk had previously assessed on export cargo moving from the Pacific Northwest to Asia didn’t work. It wasn’t costly enough.
   Nielsen spoke of no-show (or downfall, as it’s more commonly known) rates of up to 35 percent to 40 percent on some trades, with equivalent levels of overbooking to ensure slots didn’t go unused. The global average is about 20 percent.
   The causes of no-shows are numerous — production delays, inclement weather, port congestion. In times of high demand, shippers or their agents may book space on multiple carriers to ensure capacity. Knowing this, carriers then overbook, knowing if downfall is lower than expected, it will have to roll cargo and answer to some unhappy customers.
   It’s a crazy pattern, expecting some certain percentage of cargo not to show and double-booking one of every five slots on your ships. But as with many aspects of the shipping industry, old habits are hard to break, even bad ones.
   A real issue is that shippers with low downfall rates are hurt by those with high rates. Everybody double books, but is every carrier sophisticated enough to know which of their customers rarely no-show, and able to afford them the courtesy of not rolling their cargo?
   “It is a good idea — it happens in air freight sometimes, to deter overbooking by shippers and freight forwarders,” said Nicolette van der Jagt, secretary general of the European Shippers’ Council, adding these were her opinions and not necessarily those of the council. “It does focus the mind on making sure you only book what you need, but it is difficult to accurately predict volumes all the time. It might drive more freight to the spot market to cover the margins of uncertainty. For example, if you are not sure, then book the minimum and leave the rest to the spot market, and if you hedge the rate then you still know what you are going to pay regardless of the volatility.”
   She stressed that many times shippers are not in control of no-shows, like if a feeder vessel is late in connecting to a mainline service.
   It’s unclear what other lines are doing to tackle the issue.
   “In general, we don’t impose fees or penalties on shippers for no-show cargo, and we do not pay any compensation for rolling cargo,” OOCL spokeswoman Rebecca Hui said. “For contracted customers, we will negotiate with them individually and come up with terms and conditions to control no-show and rolling cargo.”
   Nielsen said Maersk’s first preference is to meet customers with high no-show rates and figure out changes.
   “We intend to be flexible with this, as it’s not a money maker, it’s a behavior changer,” Nielsen said. “We go to a shipper with large downfalls, and discuss it with them and say this surely must be a problem internally for you as well. We’d like to get to a place where the customer can see the benefit to their bottom line.”

Activity aplenty on Asia/South America
   Not to say we told you so, but the Asia/South America trade is well worth watching these days (“Asia’s emerging to emerging growth,”).
   Dominant South American players Hamburg Süd and Maersk Line have restarted the second loop of their ASIA/ASAS service to the East Coast of South America to account for higher seasonal demand from Asia.
   In coming weeks, the existing loop will be a showcase for 12 of Hamburg Süd’s and Maersk’s new high-capacity ships (7,100 to 7,500 TEUs, with large reefer capacity) specially designed for South American shallow-draft ports. The second loop will run with vessels in the 4,200-TEU range. The first loop will cut calls in South Africa, providing faster transits and more capacity from Asia to South America.
   It’s a show of the two European lines’ might in the trade (“Maersk’s firm grip on America Süd,” ), and it will be interesting to see who can keep up.
   Schedule research shows a consortium of NYK Line, “K” Line, Hyundai Merchant Marine and PIL have dropped one loop on their two-string service on the trade. To compensate, the four carriers have joined an MOL Asia/East Coast South America service as slot buyers, a move <i>ComPair Data’s</i> Francis Philips characterized as the “first signs of rationalization on the trade.”
   CSAV, CMA CGM and China Shipping jointly operate a two-string Asia/East Coast South America service, both incorporating some of CSAV’s larger new ships (about 7,000 TEUs). A a consortium of Hanjin Shipping, Zim, Wan Hai, Hapag-Lloyd and CCNI provides another service, while Evergreen and COSCO run one as well.
   All of those services rely on ships in the 3,400- to 4,800-TEU range, outside of a handful of larger ships from MOL and the aforementioned CSAV vessels.
   The vessels Hamburg Süd and Maersk are deploying can theoretically provide similar unit cost advantages from Asia to South America as the super-post-Panamax vessels do on the Asia/Europe trade. And deleting South African calls will provide competitive transit times from Singapore to Santos (the biggest port in South America).
   Conspicuous by its absence on the trade is Mediterranean Shipping Co., the biggest of the five lines in the global top 20 without a direct Asia/East Coast South America presence (APL, OOCL, Yang Ming and UASC are the others). With bullish growth forecasts, it’s hard to imagine any lines being able to leave this dynamic trade completely out of their portfolios in the future.
   But Maersk, via its partnership with Hamburg Süd, has a significant leg up.