Trans-Pacific Maritime Conference 2017 and the outlook for contract rates.

BCS Placement is always excited to attend the TPM Conference and discuss the future rates and services as the economy and industry recovers. Import numbers are improving and the forecast for the first half of 2017 shows growth, which, coupled with shipping alliances that go into effect this year, are expected to raise rates for shippers booking cargo in the region. As capacity has diminished slightly due to increased scrapping in 2016, supply and demand for space may be equalizing, finally.

Trans-Pacific container lines are under intense pressure in 2017 as they’ve had five years of losses totaling tens of billions of dollars annually. From the release of the post-Panamax supersized vessels that made their appearance last year to the market staggering collapse of Hanjin, predicting an upward trend on just the reduction of capacity is dangerous, but sound. The difficulty arises when carriers try to convince their customers that prices need to increase. Luckily, issues and delays from bargain rate carriers offer some proof that paying more for better service is where the market needs to go.

“When the carriers started increasing rates aggressively after the Hanjin exit, I originally thought it might last a month until the dust settled, but for the first time in my memory, the carriers are showing tremendous discipline in terms of making sure rate levels remain at a level that I would consider sustainable,” said David Bennett, president of the Americas at Charlotte, North Carolina-based third-party logistics provider Globe Express Services.

Some carriers are not so steadfast in their outlook, worrying that new alliances will be eager to undercut each other at rock bottom prices to gain crucial market share. “There is certainly a sense of optimism on the carriers’ part,” Tan Hua Joo, executive consultant at industry analyst Alphaliner, remarket. “If we look at Asia-Europe contracts signed in early January, a number of them took at least an 80 to 100 percent increase. So, obviously with this, there will surely be some optimism on the part of the carriers.”

He went on to warn that the days of painful price drops are not exactly behind us. “The battle hasn’t ended, there is still significant competition as far as new capacity coming that hasn’t been factored in,” he said, noting that the industry is in the midst of momentary tranquility post-Hanjin.

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