Don't worry if you can't remember all of the new changes by major container ship lines to their east-west services. There will be another set of them when scores of huge new ships hit the water later this year.
The first half of 2006 will be a transition period for ocean carriers as they digest recent acquisitions, react to rivals' mergers, and learn to work with new alliance partners. Carriers are adjusting their schedules, mostly through new direct services from China and through introduction of larger vessels.
But the real excitement may come during the second half of the year. That's when container lines will determine what to do with the approximately 120 ships of 6,000- to 9,500-TEU capacity they plan to add this year.
Carriers in recent weeks have made a slew of announcements about new east-west vessel deployments. Many of the changes stem the acquisition of P&O Nedlloyd by Maersk and of CP Ships by the parent company of Hapag-Lloyd.
P&O Nedlloyd was an important member of the Grand Alliance. The alliance's other carriers, NYK Line, Orient Overseas Container Line and Hapag-Lloyd, filled the gap with additional ships and through cooperation with the New World Alliance, whose members are Hyundai Merchant Marine, APL Ltd. and MOL.
Maersk, which now controls nearly 20 percent of world container ship capacity, is big enough to effectively be its own global alliance. The Danish carrier, which changed its name to Maersk Line last week, is the only line that can blanket every trade lane in the world with its own ships. Maersk had been operating under the Maersk Sealand name since its acquisition of the international services of Sea-Land Service in 1999.
Since its acquisition of P&O Nedlloyd last year, Maersk has redesigned its schedule. The company's Web site, www.maersksealand.com, lists 11 trans-Pacific services, the exclamation "NEW!" after each one. The list could grow this year. Maersk is considering adding two all-water Suez services from Asia to the U.S. East Coast.
The important point about Maersk's new schedule is that it offers direct, rapid transit times from growing ports in China, including Dalian, Ningbo, Qingdao, Shanghai, Xiamen and Xingang, said Robert Kledal, senior vice president and North America area line and operations manager. Maersk is also expanding service to U.S. ports such as Norfolk and Savannah, increasing its calls through the Panama Canal to twice each week.
A clear trend has emerged as many carriers and carrier alliances have reworked existing services to offer direct services from a half-dozen cities in China to key load centers in the U.S. and Europe.
Chris Sur, director and vice president of marketing and sales at Hanjin Shipping Co., does not see many new services being launched in U.S. trade routes during the next six months. Instead, carriers and carrier alliances are taking the dozen or so weekly services they each have and are redesigning them so that more ports in Asia have direct services with fast transits to the U.S. West and East coasts.
The CKYH alliance of China Ocean Shipping Co., "K" Line, Yang Ming Line and Hanjin is an example. Sur said the member lines are attempting to reduce overlapping services from traditional Asian ports. They are redesigning the services to include ports in central and northern China, providing customers with direct calls from those growing regions.
This strategy makes sense, because ports such as Shanghai, Ningbo, Dalian, Qingdao, Xiamen and Xingang now have sufficient volumes to support weekly services to key U.S. markets, said Ray Keene, chief operating officer at MOL America.
In the previous decade, before China became the factory to the world, trans-Pacific services had to call at several ports to fill the ships, Keene said. The additional stops in Japan or South Korea slowed transit times.
Now the flood of Chinese exports has made direct services worthwhile. The Yangtze River valley in central China is one of the fastest-growing manufacturing regions in the world.
Individual carriers and alliances are offering direct calls from Shanghai and Ningbo, with transit times to the West Coast as short as 10 or 11 days.
Similarly, northern China is on the rise as manufacturers resurrect what used to be considered China's rust belt. Carriers are responding with direct services from ports such as Dalian and Qingdao.
Another important development in the new schedule alignments is that to avoid a bunching of vessels at U.S. ports on the weekends, lines are beginning to offer mid-week arrivals on the West Coast. This should help to relieve congestion on the intermodal rail networks as well as the marine terminals.
Carriers and alliances are able to offer more direct services because they have expanded their fleets through the acquisition of other carriers or through the steady introduction of new ships during the past two years.
The Grand Alliance's new global service schedule includes a close working relationship with the New World Alliance in the Asia-Europe trade. The Grand Alliance plans by mid-year to start a joint Panama Canal service from Asia to the U.S. East Coast. That would be the Grand Alliance's fifth all-water service from Asia.
Although the Grand and New World alliances did not announce any immediate cooperation in the Asia-West Coast trade, they are discussing areas of possible cooperation. The Grand Alliance has redesigned its own trans-Pacific services to provide 11 weekly services, seven to the West Coast and four to the East Coast.
The message from the carriers is that the Grand Alliance has weathered the loss of P&O Nedlloyd and will offer extensive port coverage with more rapid transit times serving the fastest-growing ports in China. "We are not reducing port coverage," said Frankie Lau, director of marketing at Grand Alliance member OOCL.
Besides its cooperation with the New World Alliance, the Grand Alliance received an infusion of ships through the acquisition of CP Ships by Hapag-Lloyd. Lau said the Grand Alliance's Asia-to-U.S. capacity will increase by about 12 percent this year.
The expanded port coverage will include fast transits from ports in China, including a 10-day service from Ningbo to Los Angeles, said Mike DiVirgilio, senior vice president of trade management at NYK. The revised schedule of services emphasizes the growing markets of central China, he said.
While the CKYH alliance has yet to announce significant changes in its services, its members are discussing vessel deployments and are likely to announce enhancements in the coming months, said Howard Finkel, Cosco's senior vice president of trade. Cosco has been calling at Shanghai for years, and the CKYH group will likely further enhance its offerings from central China, he said.
Four large independent operators in the trans-Pacific - Evergreen Marine Corp., Mediterranean Shipping Co., CMA CGM and China Shipping Container Line - could have a major impact on the busiest U.S. trade lane. The three lines will add a total of more than 60 vessels ranging in size from 5,500 TEUs to 9,500 TEUs by year-end. These vessels are too large to fit through the Panama Canal.
These lines generally operate independently, although they occasionally will cooperate with another carrier or carriers on selected trade lanes. CMA CGM and Mediterranean Shipping, for example, operate a joint weekly service from South China to Long Beach with 8,000-TEU class vessels. The lines are reportedly preparing to start a second weekly service with mega-ships, but Frank Baragona, president of CMA CGM's North American operations, said the lines haven't finalized plans for such a service.
The key to developments in the U.S. trades for the second half of 2006 will be the growth of trade volumes and the direction of freight rates in the two largest trade lanes in the world - Europe-Asia and the trans-Pacific.
European investment bank UBS projects that capacity increases on both trade lanes will be about 14 percent this year. Trade volume in the eastbound Pacific is projected to increase 9 to 10 percent, with the Asia-Europe trade growing slightly faster.
Shippers, already sensing overcapacity, have begun to press for lower freight rates. The pressure is being felt first in the Asia-Europe trades, where service contracts tend to last no more than three months and most of the biggest new ships are being deployed. Freight rates also have begun to drop in the trans-Pacific in anticipation of the May 1 deadline for annual service contracts.
If this scenario intensifies, carriers in late 2006 may divert some of their new capacity to the U.S. trades, where the rate scenario is not as grim for the carriers. The increased capacity could take the form of large new vessels being introduced into West Coast services, or Panamax vessels redeployed from carriers' global fleets into additional all-water services from Asia to the East Coast.
The popular all-water services are fully booked for much of the year, and rates are relatively firm, so the carriers could score a quick hit with new services. East Coast ports are preparing for as many as five new all-water services from Asia, mostly in the last quarter of the year. However, with the Panama Canal nearing capacity, some of the services are likely to use the Suez Canal, which has significant capacity and can accommodate ships too big for the Panama route.