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FMC Chief Sees Mixed Bag for Maritime Cargo Transportation

Thursday, March 10, 2016
Sandler, Travis & Rosenberg Trade Report

Federal Maritime Commission Chairman Mario Cordero told a Senate Panel March 8 that increasing waterborne trade volumes are an encouraging indicator of the strength of the U.S. economy and that the current volumes of vessel and container capacity mean that ocean shipping costs will likely remain reasonable. On the other hand, he added, congestion at U.S. ports presents a serious potential impediment to the nation’s continued economic growth and competitiveness.

Cordero said that in 2015 the number of containers imported into and exported from the U.S. totaled 31.5 million 20-foot equivalent units, a two percent year-on-year increase. However, the imbalance in the container trades grew for the second year in a row, with 20 million TEUs imported and 11.5 million TEUs exported, a five percent drop.

Vessel capacity in the global fleet “seems more than sufficient,” Cordero said. Nominal capacity grew by about nine percent in 2015 and at the end of the fiscal year there were 5,143 containerships with a capacity of 19.7 million TEUs. Additionally, there were orders for 511 new containerships with an aggregate capacity of 4.1 million TEUs, which would represent a 21 percent increase over existing capacity. The result, Cordero said, is that shippers will likely see continued low transportation rates for international maritime cargo.

This year could see a further consolidation of this growing capacity among carriers, Cordeo added. CMA-CGM is acquiring NOL and China Ocean Shipping Company is absorbing China Shipping, pending approval by regulators in the U.S. and other nations. Both resulting companies will grow in size, capabilities, market share and possibly market power, and the FMC plans to keep a close eye on these changes to analyze potential impacts on shippers.

One anticipated result of this merger and acquisition activity is a change in the number and nature of maritime agreements filed with the FMC. The Commission received 258 new and amended agreements in FY 2015, Cordero said, and that number is likely to increase substantially as carriers purchasing or merging with others modify their existing agreements or enter into new ones and competing carriers change their agreements in response. In addition, many of the agreements now filed at the FMC reflect a trend in which carriers and marine terminal operators increasingly cooperate with each other and share resources and assets. Cordero noted that the complexity and potentially anti-competitive effect of these agreements require consistent oversight and critical analysis and that as a result they are much more time-consuming to analyze.

Cordero also highlighted the continuing stress that the record-breaking volumes of containers landing in the U.S. place on ports and intermodal connectors already congested with trade traffic. The FMC’s response has been a two-year effort to gather input from stakeholders on the causes and effects of congestion and to help identify how private-sector solutions might be found. Most recently the FMC approved teams that will work to develop commercial solutions to supply chain challenges and related port congestion concerns at the combined port facilities of Los Angeles and Long Beach.

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