U.S. Lines redux

U.S. Lines redux

Small shipping lines have fared poorly in the trans-Pacific trade, where global carriers dominate. No new carriers have entered the Asia-U.S. market since 1999. Edward Aldridge is hoping to break that pattern.

Aldridge, a former Sea-Land Service and APL Ltd. executive, is chief executive of United States Lines, a trans-Pacific niche carrier that began service this month. Its namesake was the venerable carrier that went bankrupt in 1986 after launching a globe-circling route using what were then the largest container ships afloat. Aldridge bought the rights to the name, but it's a completely different company, operating chartered non-U.S.-flag ships.

U.S. Lines offers port-to-port service from Shekou, China, and Hong Kong to Long Beach. At least initially, the carrier won't solicit westbound export cargo. The new carrier's service can be compared in the trans-Pacific to Great Western Steamship Co. and Wan-Hai Lines, both of which offer direct but limited weekly services in the most heavily traveled segment of the trans-Pacific trade.

The dominant business model in the trans-Pacific is to offer five or more sailings each week from Asia, extensive inland intermodal service in the U.S. and competitive, though not necessarily profitable, westbound services. Carriers in the trade operate vessels that average 4,000 TEUs, although that figure will increase rapidly as larger ships, including 8,000-TEU-plus behemoths, enter the market during the next three years.

U.S. Lines' plan is to offer one sailing each week from the booming Hong Kong-South China region to Southern California with 1,700-TEU vessels. "We're not all things to all people," Aldridge said. "We're not chasing volume. We don't have to." He said U.S. Lines' first sailing, which left Hong Kong on Dec. 30, was booked to 75 percent of capacity.

After operating every two weeks during a start-up phase, U.S. Lines will begin fixed-day, weekly service in late February after taking possession of its fourth and fifth vessels.

U.S. Lines will continue to operate in the eastbound market only. Freight rates on that route are strong, boosted by U.S. consumer demand for Chinese goods. Carriers have a good chance of securing another rate increase this spring. Most of the lines belong to the Transpacific Stabilization Agreement, a carrier discussion group whose members will seek a general rate increase of $450 per FEU beginning May 1, with an additional $400 surcharge for the summer-fall peak season.

Because the niche carriers do not control enough volume to affect rate levels in the eastbound Pacific, TSA lines will set the benchmark and the independent lines will undercut them by as little as necessary to fill their ships. "We will price according to our business model - responsible, not cheap," Aldridge said.

Small and mid-size importers, cargo consolidators and shippers associations are interested in what U.S. Lines has to offer. "Hong Kong is my biggest port. If they come in with a really attractive rate, I'll take a look at them," said Ray Camero, chief executive of Streamline Shippers Association.

"If they are willing to drop their prices, shippers' associations and shippers of commodities that are not time-sensitive will find the service attractive," said Art Hollenbach, a former footwear industry executive who is now a transportation consultant to footwear importers.

U.S. Lines is advertising its service as 14 days from Hong Kong to Long Beach. Aldridge said that while bigger lines boast 11- and 12-day services, the vessels often arrive on Friday night and cargo is not available until Monday morning unless the receiver wants to pay for weekend deliveries.

U.S. Lines will arrange drayage of containers to local distribution warehouses, but it will not offer extensive intermodal service similar to the large carriers. Camero said that does not bother him. "Sixty percent of what I do is CY to CY (container yard or marine terminal in Asia to container yard on the West Coast). It stops here," he said.

Unlike Great Western, which relies upon a dozen or so large shippers for most of its cargo, U.S. Lines is marketing its service to large and small shippers and cargo consolidators. "We intend to take a little piece of a lot of different customers," Aldridge said.

U.S. Lines has little interest in the westbound route from the U.S. to Asia. Westbound rates are expected to stay low because capacity far exceeds demand, which is dominated by low-value commodities such as wastepaper. Instead of waiting for low-paying U.S. export cargo, Aldridge said, U.S. Lines will try to return its boxes to China as quickly as possible.