In a past late-night television era, Johnny Carson, playing "Carnac the Magnificent," could humorously predict the answers to questions—sealed inside envelopes—concerning unexpected and monumental changes in government, commerce and society.
The Federal Maritime Commission recently approved the P3 Alliance, a consortium of Maersk, MSC and CMA-CGM that will control nearly 40 percent of transpacific cargo.
By Patrick Burnson
Published: May, 2014
In a past late-night television era, Johnny Carson, playing "Carnac the Magnificent," could humorously predict the answers to questions—sealed inside envelopes—concerning unexpected and monumental changes in government, commerce and society.
In the shipping industry, we have our own Carnac in Peter Friedmann, the affable and capable leader of the Agriculture Transportation Coalition (AgTC). He won’t be donning a turban for his crystal ball prognostications at the group’s annual meeting next month in San Francisco, but a certain amount of levity may be needed when addressing the issues that keep shippers up past their bedtimes.
Friedmann has already told his constituents that new contract talks between the International Longshore and Warehouse Union and the Pacific Maritime Association will be stalled beyond the June 30 deadline, thereby requiring an extension.
"We can learn from the recent past," said Friedmann. "Over the past 12 months, all container terminals on the West Coast have been shut down by ILWU for varying lengths of time—from a few hours in Tacoma to five days in Los Angeles/Long Beach—and this was without any contract expiration in sight."
He added that the ILWU locals, to varying degrees, have demonstrated their eagerness to stage wildcat strikes. "So we should not be surprised to see disruption and slowdowns at all the West Coast marine terminals," he said.
Shippers will also learn more about the projected impact of the P3 Alliance, comprising Maersk, MSC and CMA-CGM. This consortium—recently approved by the Federal Maritime Commission—will control nearly 40 percent of transpacific cargo.
According to Friedmann, the cultural dissonance may further complicate matters as "schedule discipline" is not part of every carrier’s makeup. He points out that the three carriers currently each maintain their own sales, documentation and customer service networks.
"But it is logical to ask whether some of these services will be combined, once the operations consolidation is fully implemented," he said. "We do expect that there will be fewer but larger ships, resulting in reduced frequency of port calls, although with the same or even greater total vessel and equipment capacity. We are going to be monitoring this closely."
Meanwhile, six ocean carriers are forming the G6 alliance, which has raised fewer concerns because they are already operating in vessel-sharing mode in the transpacific, without detrimental impact to shipper interest.
Vessel operators will be paying close attention at the AgTC meeting too, as it features the annual Ocean Carrier Performance Survey. Here, ag shippers measure companies in 11 categories of service. This includes the coveted "best vessel schedules and transit days" ranking.
Finally, a highly anticipated presentation on ocean cargo rates will be provided by Brian Conrad, executive administrator of the Transpacific Stabilization Agreement (TSA). Conrad has compared the recent imposition of general rate increases in the trade lane to decisions by governments worldwide to defer needed infrastructure investment.
"We are in effect negotiating the annual operating budget for a major piece of global transportation infrastructure that happens to be privately financed," he said. "Competitive pressures to match the lowest short-term rate levels and lock them into 12-month service contracts across the board reflect a significant deferred investment in the trade."
Conrad maintains that TSA carriers will eventually have to stop pricing based solely on supply-demand and pay more attention to long-term service reliability and flexibility. If this fails to develop, Conrad’s own crystal ball shows more acute problems surfacing, at significant cost to agricultural shippers.
Patrick Burnson is the past president and current board member of the Pacific Transportation Association, based in San Francisco.
The P3 consortium is expected to result in fewer but larger ships, reducing the frequency of port calls.
