2-17-2015 CB Newswire Courtesy of Cargo Business News

Shippers Face Choppy Waters

By William DiBenedetto, CBN Features Editor
With the West Coast congestion crisis threatening to explode into a full-scale lockout, shippers
seem locked in a lose-lose-lose dance with carriers and ports.
Add to that the uncertainties surrounding decisions to divert cargoes, the low price of fuel and
what that means for slow steaming, carrier reliability and the price of doing businessand its
likely that once the congestion eases, the endgame is likely to be lengthy, complex and
unsatisfactory.
Frustration is the watchword. One large group of shippers, the National Retail Federation, has
run out of patience. In a statement late last week, the NRF asserted: "Enough is enough. The
escalating rhetoric, the threats, the dueling press releases and the inability to find common
ground between the two sides are simply driving up the cost of products, jeopardizing
American jobs and threatening the long-term viability of businesses large and small.
Our message to the ILWU and PMA: Stop holding the supply chain community hostage. Get
back to the negotiating table, work with the federal mediator and agree on a new labor
contract.
And thats just one issue facing shippers; they are also dealing with unacceptable
performance and reliability levels on all trades by container operators, according to Simon
Heaney, Senior Manager of Supply Chain Research at Drewry Supply Chain Advisors. He said the
latest data reveals that reliability ended 2014 on a downer.
Heaney added that container operator performance is unacceptably low. For instance, EastWest trade schedule reliability from July through September last year was 58.9 percent, and it
improved only marginally between October and December to 61.9 percent. Even worse news
for shippers is that there is no link between reliability and freight rates, he said.
Its vital for shippers to know the reliability performance of their providers, he continued.
Predictability and reliability are key for shippers; they are already used to extended load times
under slow steaming, but even with slow steaming pretty much engrained, the on-time trend
for container operators is worryingly poor.
Heaney said that shippers should keep a close eye on reliability and should insist on
performance incentives and penalties for non-performance. Incentives? Penalties? Heaney
noted it is a fairly rare occurrence, and even when they are included in a contract most of the

time they are not acted upon. Most shippers dont have the stomach to follow through, he
said.
Can shippers expect carriers to speed up now that fuel prices are so low? If they do it wont be
by very much, Heaney says. I expect carriers to speed up slightly, but it wont start just yet
because its useful to keep load levels at reasonable levels.
The mega-alliances such as the 2M have increased their speeds slightly to 18.5 knots from 17.8
knots, Heaney said, as a consequence of low bunker fuel costsand perhaps more important
in order to impress shippers by getting their new services off to a good start. Going faster
would put extra capacity on trade routes, so it is unlikely that carriers will increase speeds
anywhere near their top speeds of 24-25 knots.
Another factor, barring an increase in speeds, is that many operators have modified their
vessels to travel at slower speeds. It would be too expensive to make the modifications needed
to increase speeds. They are also hesitant to speed up because slow steaming allows them to
employ their excess capacity; going faster could force them to lay up vessels.
Slow or fast, it is all problematic for shippers and supply chains. At the moment carriers seem
more interested in cutting capacity on oversupplied trade lanes. Maersk Line said it would cut
the capacity on the struggling Europe-South America trade lane as it battles with an oversupply
situation.
Next: Dealing with the EUs new shipper rules and the capacity crunch.