|Gary Ferrulli, president of Global Logistics Consulting, and a panelist on the JOC webcast “Today’s Container Shortage Ordeal: Assessing Where You Stand with Carriers and Exploring Options,” answers your questions on ocean carrier contracts and agreements.|
Q: I have heard several different opinions on the October GRI from West Coast North America to Asia, but in your opinion will the GRI pass? And if so, when will we see reductions in pricing on theses lanes?
A: I take it you are talking the TransPacific trades? If so, we already see a softening in the rate levels (spot markets) and if the market continues to soften, then the rate increase will be mitigated or not taken. Likely depends on how soft the market gets.
As for reductions, that is traditionally a market situation of supply/demand. The year 2010 has proven thus far to be an anomaly to that tradition as the carriers, out of desperation after loosing over $15 billion in 2009, did things to artificially take capacity out of the market. First they parked more than 525 container ships and then they reverted to slow steaming and super slow steaming to soak up new capacity coming into the trade.
They were stunned when the market grew by more than 20 percent in the first few weeks of 2010 (volume usually declines 10 to 15 percent during that time of year) and they couldn't handle all of the cargo being offered, allowing them to increase rates, take Peak Season Surcharges, etc.
But with the previously mentioned softening of the market so early in the year, the question becomes, is this a look into 2011?
If so, how will the carriers react? Will they take all that capacity out of service again? Or will they revert to the "old days" of fighting for market share? Time will tell, but I would not look for significant cuts in rates, again. The carriers just lost billions nine months ago.
--Contact Gary Ferrulli at email@example.com.