P3 will bring stability, says CSAV
CSAV has welcomed the tie-up of the world’s largest three carriers as the P3 network, hoping it will bring stability to the industry by reducing aggressive market behaviour.
What do you think?
Chaim Shacham • I tend to completely disagree with my esteemed colleague from CSAV when saying that the P3 alliance may bring stability to the industry by reducing aggressive market behavior. I think that the competition between the three largest carriers will only worsen, and as the JV is on Operations basis only, which means that the slot cost, the transit time, the service in general and other operational factors will now be the same for all three of them, the only thing that will differentiate them from each other, will be rates, which will continue to be the main point of competition. For as long as the supply of slots will be higher than the demand, and for as long the carriers will be more interested in quantity (Market Share) more than in quality (bottom line), there will be no stability in this industry.
Chaim Shacham • I would also like to hear (read) some others' opinions, but in the meantime I would add, that I think that the idea behind an Operations alliance is to improve the efficiency and reduce the costs. Now, the three carriers can (and most probably will) negotiate their rates and terms as a group, rather than single lines, and will offer their combined volumes as a leverage for better (cheaper) rates and improved terms.
If you consider that these carriers are operating the biggest container vessels available, with the lowest cost per TEU possible, no other carriers, whether standing alone or as part of other alliances, will be able to reach this efficiency, and the only way to compete in this tough market would be by reducing rates. This will definitely not bring any stability to this troubled industry.
Hans-Peter Becker • Fully agree with Chaim, the worst is still to come, even if the alliance will not get alive.
Hans-Henrik Skonning Hansen • Chaim, I do not know the intentions relating to procurement of the P3; however, I have tried being a supplier to all 3 and there will be high level managers in all 3 who will have to swallow 'some big camels' when deciding on negotiation strategy. Historically they have acted REALLY different.
I would almost say from 'You give us this price or...' to 'let us hold hands and find peace'.
From a macro economic view we have to hope for some stability but off hand I agree with your view on stability.
Richard Ward • I fully agree with Chaim, time and again we have seen through the formation of other alliances that stability is not created and this will continue to be the case. The carriers that will survive or proposer in the long run will be those that can manage this volatility efficiently. For the P3 lowered unit costs will no doubt offer some protection whilst other carriers not able to currently compete on such a scale can now manage their own risk and limit/reduce rate volatility through effective risk management tools, such as financial hedging.
Aditya Wardhana • Agreed with Chaim. Not sure how it is going to works. Carriers have the tendency when the sign of stability on the spot, carriers will put an additional tonnage/ new build & chase after market share and economic of scale
What do you think?
Chaim Shacham • I tend to completely disagree with my esteemed colleague from CSAV when saying that the P3 alliance may bring stability to the industry by reducing aggressive market behavior. I think that the competition between the three largest carriers will only worsen, and as the JV is on Operations basis only, which means that the slot cost, the transit time, the service in general and other operational factors will now be the same for all three of them, the only thing that will differentiate them from each other, will be rates, which will continue to be the main point of competition. For as long as the supply of slots will be higher than the demand, and for as long the carriers will be more interested in quantity (Market Share) more than in quality (bottom line), there will be no stability in this industry.
Chaim Shacham • I would also like to hear (read) some others' opinions, but in the meantime I would add, that I think that the idea behind an Operations alliance is to improve the efficiency and reduce the costs. Now, the three carriers can (and most probably will) negotiate their rates and terms as a group, rather than single lines, and will offer their combined volumes as a leverage for better (cheaper) rates and improved terms.
If you consider that these carriers are operating the biggest container vessels available, with the lowest cost per TEU possible, no other carriers, whether standing alone or as part of other alliances, will be able to reach this efficiency, and the only way to compete in this tough market would be by reducing rates. This will definitely not bring any stability to this troubled industry.
Hans-Peter Becker • Fully agree with Chaim, the worst is still to come, even if the alliance will not get alive.
Hans-Henrik Skonning Hansen • Chaim, I do not know the intentions relating to procurement of the P3; however, I have tried being a supplier to all 3 and there will be high level managers in all 3 who will have to swallow 'some big camels' when deciding on negotiation strategy. Historically they have acted REALLY different.
I would almost say from 'You give us this price or...' to 'let us hold hands and find peace'.
From a macro economic view we have to hope for some stability but off hand I agree with your view on stability.
Richard Ward • I fully agree with Chaim, time and again we have seen through the formation of other alliances that stability is not created and this will continue to be the case. The carriers that will survive or proposer in the long run will be those that can manage this volatility efficiently. For the P3 lowered unit costs will no doubt offer some protection whilst other carriers not able to currently compete on such a scale can now manage their own risk and limit/reduce rate volatility through effective risk management tools, such as financial hedging.
Aditya Wardhana • Agreed with Chaim. Not sure how it is going to works. Carriers have the tendency when the sign of stability on the spot, carriers will put an additional tonnage/ new build & chase after market share and economic of scale
Chaim Shacham - Maersk is, without any doubt or hesitation the leader of the shipping industry. As such any action they take will influence all of the other carriers, and the smaller the carrier, the bigger the influence and the affect. Maersk's slot cost in some of its services is much lower than the others and they can reduce their rates in order to keep, maintain or even grow their market share and still be profitable, while others will face losses, both of market share as well as their bottom line. I always advocated and said, in a very simplified way, that Maersk could have, if they only wanted to, pull the industry (carriers) out of the economical abyss they are in by raising their rates across the board by $500 per TEU, and stick to it for long enough to allow the others to follow. But why would they do it? Obviously, this is not their mission. The P3 joint venture between the three largest container carriers will only make the life of the smaller carriers more miserable and will further deepen the gap where these smaller carriers, unless will fight back with joint ventures of their own, will struggle even worse than they are today in order to stay afloat.
Chaim Shacham - Traffic serving the trade between South East Asia and the US East Coast, carried on Post Panamax vessels, will not be diverted away from the Suez Canal route to use the Panama Canal because of the Suez crisis, simply because these ships are too big to transit the Panama Canal. If my esteemed colleague, Niels, is referring to the not too far away future (2015) when the new set of locks in the Panama Canal, being now built, will allow bigger ships to transit, the above traffic will indeed move from the Suez Canal to the Panama Canal, but not because of the Suez crisis (which I hope will be resolved sooner), but because of the shorter transit time, hence the lower cost.
Even when the Panama Canal will allow, what is called these days, Post Panamax ships to transit, the size will still be limited to 12,600 TEUs (the last number I read), which means that bigger vessels will not, even if ports on the US East Coast will be capable to accept them, be able to serve this traffic. In this, presently theoretical situation, ships of over 12,600 TEUs will be able to serve the SE Asia to the US East Coast trade only by coming through the Suez Canal, or around the Cape.
Even when the Panama Canal will allow, what is called these days, Post Panamax ships to transit, the size will still be limited to 12,600 TEUs (the last number I read), which means that bigger vessels will not, even if ports on the US East Coast will be capable to accept them, be able to serve this traffic. In this, presently theoretical situation, ships of over 12,600 TEUs will be able to serve the SE Asia to the US East Coast trade only by coming through the Suez Canal, or around the Cape.
Maersk Line has increased the amount of an Asia to Europe GRI it first announced in September from $600 per teu to $950 per teu. Do you think these increases in GRIs will become more widepsread?
Chaim Shacham - October 9, 2013 - I think that the question posed is a valid one, and in my opinion the answer is YES. As a matter of fact, I believe that Maersk, increased the GRI from $600 to $950 per TEU, following others that have announced an higher GRI ($1000/TEU) from the get go.
Another, and in my opinion a more important and interesting, question is: Will this GRI hold and for how long?
Announcing a GRI is not good enough if it is not augmented by additional steps that will justify it. As Maersk, or for that matter any of the Ocean Carriers, do not control the demand for their service, and at the same time are not doing much (or enough) to control the supply of carrying capacity, one should, and Maersk can do it, support their own decisions, by sticking to it, no matter what. It will not take very long for all to follow suit. This is one way to make the GRI hold, and for Maersk to gain points as the leaders of the Maritime / Shipping industry.
Chaim Shacham - October 9, 2013 - I think that the question posed is a valid one, and in my opinion the answer is YES. As a matter of fact, I believe that Maersk, increased the GRI from $600 to $950 per TEU, following others that have announced an higher GRI ($1000/TEU) from the get go.
Another, and in my opinion a more important and interesting, question is: Will this GRI hold and for how long?
Announcing a GRI is not good enough if it is not augmented by additional steps that will justify it. As Maersk, or for that matter any of the Ocean Carriers, do not control the demand for their service, and at the same time are not doing much (or enough) to control the supply of carrying capacity, one should, and Maersk can do it, support their own decisions, by sticking to it, no matter what. It will not take very long for all to follow suit. This is one way to make the GRI hold, and for Maersk to gain points as the leaders of the Maritime / Shipping industry.
Chaim Shacham - November 22, 2013 - Unfortunately, it seems that the Ocean Carriers( in particular the smaller ones) have very limited options in response to the P3.
Option #1 is already mentioned by Gavin in his article - "Big up or ship out". Carriers can, and as a matter of fact, are building new ships, much bigger than what they are operating nowadays. This option is a very costly one, both in terms of the actual cost to build these mega vessels, as well as finding the right sources to finance these new buildings. At the same time, in order to try and maintain the very gentle equilibrium between supply and demand ( of carrying capacity), the carriers will have to get rid of some of their existing tonnage, which they will be very reluctant to do.
Option #2 is to join and become full fledged members of existing alliances. These option is not a stand alone one, because they will have to contribute large vessels to the trade lanes where these ships are operated. We already saw this option being exercised with Evergreen joining the CKYH alliance.
Option #3 is for some carriers to concentrate on special niches and specific trade areas where they have some advantages with their smaller vessels that can call some of the ports directly without the need of transshipment.
Option #4 is for the smaller carriers to find ways and become more efficient with their vessels in order to reduce the slot cost on their smaller vessels to the level of same on the huge Triple E vessels.
Option #1 is already mentioned by Gavin in his article - "Big up or ship out". Carriers can, and as a matter of fact, are building new ships, much bigger than what they are operating nowadays. This option is a very costly one, both in terms of the actual cost to build these mega vessels, as well as finding the right sources to finance these new buildings. At the same time, in order to try and maintain the very gentle equilibrium between supply and demand ( of carrying capacity), the carriers will have to get rid of some of their existing tonnage, which they will be very reluctant to do.
Option #2 is to join and become full fledged members of existing alliances. These option is not a stand alone one, because they will have to contribute large vessels to the trade lanes where these ships are operated. We already saw this option being exercised with Evergreen joining the CKYH alliance.
Option #3 is for some carriers to concentrate on special niches and specific trade areas where they have some advantages with their smaller vessels that can call some of the ports directly without the need of transshipment.
Option #4 is for the smaller carriers to find ways and become more efficient with their vessels in order to reduce the slot cost on their smaller vessels to the level of same on the huge Triple E vessels.
Ship Loses over 500 Containers in Heavy Seas - February 24-25, 2014
Chaim Shacham - February 23, 2014 - Regretfully, the shipping analysts are correct. But, It is not only that the containers are not accurately weighted. Unfortunately, some of the containers that are being loaded on the ships, are not weighted at all, and the ocean carriers have to rely on the shippers' declarations of weight, which as we all know are at best inaccurate, and sometimes deceiving and misleading.
When the wrong weights are being used to calculate the ship's stability, the stresses that the ship will endure at sea and the container stack weights both on and under deck, nothing good can come out of it. As a matter of fact, ships can break (and it happened already), ships can loose their stability and topple, the containers lashing may break when under rolling stress, and without saying that this was the reason in the case of the Svendborg Maersk containers may be lost over board.
Steve Cox -Team Leader - The report I read stated 85% of containers lost where empties, while I am sure that some out there may overload Ctrs, strict road weight limits in many countries are stringently enforced with severe penalties for those who choose and of course are caught abusing the system, the legal ramifications for any repeat offenders would ultimately result in loss of licences etc. Furthermore most major ports have weight bridges at their entrance when every truck entering is checked, modern port lifting equipment has the ability to weigh what it picks up, what am I missing ?
Chaim Shacham - February 24, 2014 - I am very familiar with the strict road weight limits issue and the stringent enforcement of same. I am sure that most of the containers that are on the roads are within the legal limits. unfortunately, shippers tend to stuff the containers to the limit of the permissible road weight, but declare to the ocean carriers lighter weights to pay lower freight rates.
It is also true that most major ports are weighing the containers as they enter the marine terminals, but this information stays with the terminal operator and does not find its way into the stability calculation of the vessel, where the weights that are considered are those received from the shippers.
Also, we should not forget that the only containers that are being weighted are the ones arriving by truck. Containers arriving by rail are not being weighted when entering the terminal, and there are quite many of these.
It is also true that the lifting equipment (cranes) has the ability to weigh the container when it is picked up, but this is only to protect the equipment and ensuring that it does not lift more than what its Safe Working Load allows.
All in all, the issue of wrong container weights is a problem that requires a solution to protect all pertinent parties and avoid mishaps like loosing containers over board.
Peter Banham - Experienced International Port Specialist - Dear Chaim, I support your comments 100%, I was a ships planner in my early life and I know the problems the last port has in rearranging and re-stowing the ship to ensure all containers (avoiding split B/L of course) are loaded is like. I wish all the ports I worked in in the past weighed their containers at the gate in! Sadly and seriously none have and I have worked in many! I understand the crane has dynamic weighing, but as you said its only for the safe working of the cranes. Not until this is mandatory will this practice stop, however ports do have the capability to do this (weighing boxes on arrival) but for some obscure reason its not done. I just wish some of those careless shippers could really see the impact their devious ways has on a vessel then may be, only may be, they would be more honest. Sadly its now up to the likes of IMO to do something, sooner rather than later.
Chaim Shacham - February 23, 2014 - Regretfully, the shipping analysts are correct. But, It is not only that the containers are not accurately weighted. Unfortunately, some of the containers that are being loaded on the ships, are not weighted at all, and the ocean carriers have to rely on the shippers' declarations of weight, which as we all know are at best inaccurate, and sometimes deceiving and misleading.
When the wrong weights are being used to calculate the ship's stability, the stresses that the ship will endure at sea and the container stack weights both on and under deck, nothing good can come out of it. As a matter of fact, ships can break (and it happened already), ships can loose their stability and topple, the containers lashing may break when under rolling stress, and without saying that this was the reason in the case of the Svendborg Maersk containers may be lost over board.
Steve Cox -Team Leader - The report I read stated 85% of containers lost where empties, while I am sure that some out there may overload Ctrs, strict road weight limits in many countries are stringently enforced with severe penalties for those who choose and of course are caught abusing the system, the legal ramifications for any repeat offenders would ultimately result in loss of licences etc. Furthermore most major ports have weight bridges at their entrance when every truck entering is checked, modern port lifting equipment has the ability to weigh what it picks up, what am I missing ?
Chaim Shacham - February 24, 2014 - I am very familiar with the strict road weight limits issue and the stringent enforcement of same. I am sure that most of the containers that are on the roads are within the legal limits. unfortunately, shippers tend to stuff the containers to the limit of the permissible road weight, but declare to the ocean carriers lighter weights to pay lower freight rates.
It is also true that most major ports are weighing the containers as they enter the marine terminals, but this information stays with the terminal operator and does not find its way into the stability calculation of the vessel, where the weights that are considered are those received from the shippers.
Also, we should not forget that the only containers that are being weighted are the ones arriving by truck. Containers arriving by rail are not being weighted when entering the terminal, and there are quite many of these.
It is also true that the lifting equipment (cranes) has the ability to weigh the container when it is picked up, but this is only to protect the equipment and ensuring that it does not lift more than what its Safe Working Load allows.
All in all, the issue of wrong container weights is a problem that requires a solution to protect all pertinent parties and avoid mishaps like loosing containers over board.
Peter Banham - Experienced International Port Specialist - Dear Chaim, I support your comments 100%, I was a ships planner in my early life and I know the problems the last port has in rearranging and re-stowing the ship to ensure all containers (avoiding split B/L of course) are loaded is like. I wish all the ports I worked in in the past weighed their containers at the gate in! Sadly and seriously none have and I have worked in many! I understand the crane has dynamic weighing, but as you said its only for the safe working of the cranes. Not until this is mandatory will this practice stop, however ports do have the capability to do this (weighing boxes on arrival) but for some obscure reason its not done. I just wish some of those careless shippers could really see the impact their devious ways has on a vessel then may be, only may be, they would be more honest. Sadly its now up to the likes of IMO to do something, sooner rather than later.
The Panama Canal is already open
Chaim Shacham - April 14, 2014 - The only reason that the Panama Canal lost some of cargo moving between Asia and the US East and Gulf Coasts, in favor of the Suez Canal, is because the Ocean Carriers are taking advantage of what is known as Economy of Scale. Nowadays the transit of Panama Canal is limited, in the case of Container Ships, to vessels of nominal capacity of about 5000 TEUs. The cost of slot on the bigger vessels, of up to 9-10,000 TEUs (the largest vessels that ports on the US East Coast can accommodate) is so much cheaper (about 40%) that it makes a lot of economical sense to move containers on the bigger ships through the Suez Canal even when the loading is done in Asian ports which are geographically closer to the USEC via the Panama Canal. I believe that when the Panama Canal will open the new sets of locks to allow ships of up to (about) 12.500 TEUs, the decision by the Ocean Carriers which Canal to use will be dictated by the distance between the Loading and Discharge ports, and because most of the Asian ports starting with Hong Kong and moving North and East are closer to the USEC ports via the Panama Canal, some of the cargo lost will be regained.
Weighing containers will become law, but where in the supply chain will it happen?
Chaim Shacham - May 22, 2014 - I applaud the IMO Safety Committee for finally doing the right thing by approving the amendments to the SOLAS that will introduce a mandatory requirement to weigh the shipping containers prior to loading onboard an export vessel.
I also agree with Capt. Brough wondering at which point in the transport chain the mandatory weighing would (should) take place.
The perfect solution would be to weigh the containers at the shippers' premises, prior leaving on their way to the port, and by doing it there the problem that it would be "too late at the container crane" as the law would have already be broken on the road or rail journey to the port, would be prevented and avoided. Unfortunately, we all understand that this solution is an utopia, and in my opinion will not materialize. Moreover, If the blame for incorrectly declared weights are with the shippers, can we trust them as it pertains to the accuracy of the scales in their yards?
So, we are back to present process whereby the containers are weighted as they enter the Marine terminals gates, except now, when the actual weight of the container does not match the shipper's declaration, it will be turned around and sent back to its origin for re-stuffing to the proper weight, at the cost of the offending party. Knowing the industry and its people, I can assure that these kind of "Mistakes" will disappear real quick.
The same process should be implemented also on containers arriving at the Marine Terminals by rail, as well as containers that are stuffed on the terminal.
Chaim Shacham - May 22, 2014 - I applaud the IMO Safety Committee for finally doing the right thing by approving the amendments to the SOLAS that will introduce a mandatory requirement to weigh the shipping containers prior to loading onboard an export vessel.
I also agree with Capt. Brough wondering at which point in the transport chain the mandatory weighing would (should) take place.
The perfect solution would be to weigh the containers at the shippers' premises, prior leaving on their way to the port, and by doing it there the problem that it would be "too late at the container crane" as the law would have already be broken on the road or rail journey to the port, would be prevented and avoided. Unfortunately, we all understand that this solution is an utopia, and in my opinion will not materialize. Moreover, If the blame for incorrectly declared weights are with the shippers, can we trust them as it pertains to the accuracy of the scales in their yards?
So, we are back to present process whereby the containers are weighted as they enter the Marine terminals gates, except now, when the actual weight of the container does not match the shipper's declaration, it will be turned around and sent back to its origin for re-stuffing to the proper weight, at the cost of the offending party. Knowing the industry and its people, I can assure that these kind of "Mistakes" will disappear real quick.
The same process should be implemented also on containers arriving at the Marine Terminals by rail, as well as containers that are stuffed on the terminal.
Maritime industry analyst warns against rushing to build ever larger ships.
Chaim Shacham - June 5, 2014 - I am very sincere when I say that I have a lot of respect to the knowledge, experience and the expertise of Mr. Ben Hackett, that was gained over a long period of time in the Shipping and maritime industry. I have no doubt in my mind that he knows much more than a thing or two about maritime supply chains.
Because of all this respect and admiration to him, I am somewhat disappointed with what he has to say, as it appears in the above article.
As a matter of fact, if the article truly reflects what Mr. Ben Hackett has to say about the subject matter, than we did not hear anything new, anything that was not already said by so many others, just as distinguished as Mr. Ben Hackett.
Anybody that is involved with, and an active contributing member of the Maritime Industry knows exactly that the main problem as it pertains to the Ocean Container Carriers is EXCESS CAPACITY. The supply of carrying capacity is bigger than the demand for it, a fact that keeps the freight rates depressed to a level that most of the carriers are unable to cross the zero profit margin Northward.
The same anybody knows very well that the solution to the problem is on the Supply side, and in explicit words: reduce the supply. This can be done by idling (lay up) or scrapping ships. This was done very successfully in 2010, but as soon as the carriers started to be profitable, they stopped (not completely) both, as the needed to capacity to satisfy the demand. Once ships were pulled back in service, the freight rates started to decline again.
I agree with Mr. Hackett that "The main benefit of the Mega vessels is the lower slot cost". If the carriers can not maintain a sustainable level of freight rates by controlling the supply of capacity, the only thing left for them, is to reduce their costs. Taking advantage of the lower slot cost that the Mega Ships are offering is the right thing to do, and we can see how successful some of the carriers - without mentioning names - that are already operating these kind of vessels are. One can not argue with success.
From a person the caliber of Mr. Hackett, we should expect more than just telling us things we already know. From him we should hear the HOW to do it.
Chaim Shacham - June 5, 2014 - I am very sincere when I say that I have a lot of respect to the knowledge, experience and the expertise of Mr. Ben Hackett, that was gained over a long period of time in the Shipping and maritime industry. I have no doubt in my mind that he knows much more than a thing or two about maritime supply chains.
Because of all this respect and admiration to him, I am somewhat disappointed with what he has to say, as it appears in the above article.
As a matter of fact, if the article truly reflects what Mr. Ben Hackett has to say about the subject matter, than we did not hear anything new, anything that was not already said by so many others, just as distinguished as Mr. Ben Hackett.
Anybody that is involved with, and an active contributing member of the Maritime Industry knows exactly that the main problem as it pertains to the Ocean Container Carriers is EXCESS CAPACITY. The supply of carrying capacity is bigger than the demand for it, a fact that keeps the freight rates depressed to a level that most of the carriers are unable to cross the zero profit margin Northward.
The same anybody knows very well that the solution to the problem is on the Supply side, and in explicit words: reduce the supply. This can be done by idling (lay up) or scrapping ships. This was done very successfully in 2010, but as soon as the carriers started to be profitable, they stopped (not completely) both, as the needed to capacity to satisfy the demand. Once ships were pulled back in service, the freight rates started to decline again.
I agree with Mr. Hackett that "The main benefit of the Mega vessels is the lower slot cost". If the carriers can not maintain a sustainable level of freight rates by controlling the supply of capacity, the only thing left for them, is to reduce their costs. Taking advantage of the lower slot cost that the Mega Ships are offering is the right thing to do, and we can see how successful some of the carriers - without mentioning names - that are already operating these kind of vessels are. One can not argue with success.
From a person the caliber of Mr. Hackett, we should expect more than just telling us things we already know. From him we should hear the HOW to do it.
A P3 revival? Never say never, maritime expert says
JOC- June 23, 2014, NAPLES, Fla. — The final chapter on the P3 Network, the proposed mega-alliance among the world’s three largest ocean carriers that Chinese regulators rejected last week, may not have been written, a former container shipping executive said today.
“Maybe one day, the P3 will become the P4,” Capt. Chaim Shacham, a maritime consultant who recently left Zim Integrated Shipping Services after a 45-year career that included roles as deck cadet, master mariner and international director of operations, told SMC3’s Connections 2014 Conference in Naples, Florida.
He noted, for example, that China almost certainly would approve the alliance if China Shipping Container Lines were asked to participate along with Maersk Line, CMA CGM and Mediterranean Shipping Co. to form a P4.
China rejected the P3 on grounds that the three shipping giants would control too much of the market in the Asia-Europe trade. The U.S. Federal Maritime Commission already had approved the partnership, and European regulators declined to intervene — though antitrust authorities said they would watch the competitive impact closely.
Maersk, CMA CGM and MSC responded to the June 17 Chinese rejection by saying they would no longer pursue the partnership, and there has been no indication of any change of heart.
Asked if including China Shipping in an enlarged alliance would risk running afoul of U.S. or EU regulators, Shasham said, “I don’t see why. The CKYHE (alliance among China Ocean Shipping Co., “K” Line, Yang Ming, Hanjin Shipping and Evergreen) already includes a Chinese carrier, so how could you allow one but not the other?”
The P3 would have controlled 42 percent of Asia-Europe capacity, 24 percent of trans-Pacific capacity and 40 to 42 percent on the trans-Atlantic, according to the FMC. Initially, the network would have comprised 252 vessels totaling 2.6 million 20-foot-equivalent units on east-west routes.
The mega-alliances, he said, are the ocean carriers’ solution to filling massive new vessels capable of carrying more than 18,000 TEUs that have been part of a rapid buildup in capacity since 2005. The global recession and a tepid recovery in cargo demand have contributed to billions of dollars in collective losses among carriers in four of the past five years.
By building economies of scale, carriers can slash their round-trip slot costs by millions of dollars, Shacham said. “The bigger the ship, the lower the slot cost,” he said. For example, he said the average slot cost of $1,250 per TEU drops 40 percent when going from a 5,000-TEU ship to one of 8,000 TEUs and by 60 percent when going to a 14,000-TEU ship. That equates to savings of $1.2 million per round-trip voyage in the Asia-Europe trade, Shacham said.
“But those savings only occur if the ship sails full,” he said, thus the pursuit to form vessel-sharing alliances such as the P3.
JOC- June 23, 2014, NAPLES, Fla. — The final chapter on the P3 Network, the proposed mega-alliance among the world’s three largest ocean carriers that Chinese regulators rejected last week, may not have been written, a former container shipping executive said today.
“Maybe one day, the P3 will become the P4,” Capt. Chaim Shacham, a maritime consultant who recently left Zim Integrated Shipping Services after a 45-year career that included roles as deck cadet, master mariner and international director of operations, told SMC3’s Connections 2014 Conference in Naples, Florida.
He noted, for example, that China almost certainly would approve the alliance if China Shipping Container Lines were asked to participate along with Maersk Line, CMA CGM and Mediterranean Shipping Co. to form a P4.
China rejected the P3 on grounds that the three shipping giants would control too much of the market in the Asia-Europe trade. The U.S. Federal Maritime Commission already had approved the partnership, and European regulators declined to intervene — though antitrust authorities said they would watch the competitive impact closely.
Maersk, CMA CGM and MSC responded to the June 17 Chinese rejection by saying they would no longer pursue the partnership, and there has been no indication of any change of heart.
Asked if including China Shipping in an enlarged alliance would risk running afoul of U.S. or EU regulators, Shasham said, “I don’t see why. The CKYHE (alliance among China Ocean Shipping Co., “K” Line, Yang Ming, Hanjin Shipping and Evergreen) already includes a Chinese carrier, so how could you allow one but not the other?”
The P3 would have controlled 42 percent of Asia-Europe capacity, 24 percent of trans-Pacific capacity and 40 to 42 percent on the trans-Atlantic, according to the FMC. Initially, the network would have comprised 252 vessels totaling 2.6 million 20-foot-equivalent units on east-west routes.
The mega-alliances, he said, are the ocean carriers’ solution to filling massive new vessels capable of carrying more than 18,000 TEUs that have been part of a rapid buildup in capacity since 2005. The global recession and a tepid recovery in cargo demand have contributed to billions of dollars in collective losses among carriers in four of the past five years.
By building economies of scale, carriers can slash their round-trip slot costs by millions of dollars, Shacham said. “The bigger the ship, the lower the slot cost,” he said. For example, he said the average slot cost of $1,250 per TEU drops 40 percent when going from a 5,000-TEU ship to one of 8,000 TEUs and by 60 percent when going to a 14,000-TEU ship. That equates to savings of $1.2 million per round-trip voyage in the Asia-Europe trade, Shacham said.
“But those savings only occur if the ship sails full,” he said, thus the pursuit to form vessel-sharing alliances such as the P3.
59th Annual Connections 2014 Conference Concludes in Naples FL. – July 1, 2014 – The 59th Annual Connections Conference, held at the Ritz-Carlton in Naples, FL, June 22-25, drew a diverse group of senior level transportation professionals from across the U.S., Canada, Mexico and the United Kingdom. Offering more than 20 hours of targeted content and over 15 hours of dedicated networking opportunities, Connections 2014 is recognized as a leading U.S. supply chain event.
Connections 2014 included individual presentations by six industry thought leaders. James Welch, CEO at YRC Worldwide, addressed the expectations and major factors influencing the trucking industry including the outlook on pricing, capacity, growth and profit. Rick DiMaio, VP Distribution at Office Depot provided a first-hand look at laying the groundwork for being truly omni-channel, while Brian McKiernan, SR VP Development at CenterPoint Properties discussed a new formula of flexible design to meet warehousing's long-term needs. Additional thought leaders included industry consultant and former Zim executive Captain Chaim Shacham, SJ Consulting Group president Satish Jindel and Lynn Pitts, director of economic development for Florida Power & Light.
Connections 2014 included individual presentations by six industry thought leaders. James Welch, CEO at YRC Worldwide, addressed the expectations and major factors influencing the trucking industry including the outlook on pricing, capacity, growth and profit. Rick DiMaio, VP Distribution at Office Depot provided a first-hand look at laying the groundwork for being truly omni-channel, while Brian McKiernan, SR VP Development at CenterPoint Properties discussed a new formula of flexible design to meet warehousing's long-term needs. Additional thought leaders included industry consultant and former Zim executive Captain Chaim Shacham, SJ Consulting Group president Satish Jindel and Lynn Pitts, director of economic development for Florida Power & Light.
Prospect of Nicaragua canal stumps industry observers - JOC - July 28, 2014
“If the Nicaragua canal will ever be built, the final cost will be much higher than $40 billion,” said Captain Chaim Shacham, a former senior executive with Zim Integrated Shipping Services, who is now an independent consultant. “This is not to say that it will not be built, but if it will be built, it will be a waste of a lot of money, and it will not bring any positive ROI for many years, if at all.”
Nicaraguan President Daniel Ortega awarded the contract for the canal on a no-bid basis to HKND Group. “To the best of my knowledge, HKND Group and its chairman, Wang Jing, have nothing to do with engineering and/or construction,” Sacham said. “However, under the exclusive contract, Wang can skip building the canal (and making any payments to Nicaragua) and instead simply operate lucrative tax-free side projects. This leads me to say that if this canal will ever be built, it will not be by HKND Group but by others, and it will take much longer than the five years that they are saying it will take.”
HKND’s plan is to build a canal that will be able to accommodate the largest ships that are likely to be built up through the year 2030. Although the proposal does not specify the precise size of the ships its locks would handle, the HKND website says it will “be able to accommodate super-post-Panamax ships up to about 23,000 20-foot-equivalent units, and will offer the shortest shipping route between Asia and many U.S. East Coast ports.”
“Who needs it?” Sacham said. “When the new locks are finished, the Panama Canal will be able to handle ships of up to 12,500 TEUs, but East Coast ports won’t be ready to handle ships that big for five years.”
“If the Nicaragua canal will ever be built, the final cost will be much higher than $40 billion,” said Captain Chaim Shacham, a former senior executive with Zim Integrated Shipping Services, who is now an independent consultant. “This is not to say that it will not be built, but if it will be built, it will be a waste of a lot of money, and it will not bring any positive ROI for many years, if at all.”
Nicaraguan President Daniel Ortega awarded the contract for the canal on a no-bid basis to HKND Group. “To the best of my knowledge, HKND Group and its chairman, Wang Jing, have nothing to do with engineering and/or construction,” Sacham said. “However, under the exclusive contract, Wang can skip building the canal (and making any payments to Nicaragua) and instead simply operate lucrative tax-free side projects. This leads me to say that if this canal will ever be built, it will not be by HKND Group but by others, and it will take much longer than the five years that they are saying it will take.”
HKND’s plan is to build a canal that will be able to accommodate the largest ships that are likely to be built up through the year 2030. Although the proposal does not specify the precise size of the ships its locks would handle, the HKND website says it will “be able to accommodate super-post-Panamax ships up to about 23,000 20-foot-equivalent units, and will offer the shortest shipping route between Asia and many U.S. East Coast ports.”
“Who needs it?” Sacham said. “When the new locks are finished, the Panama Canal will be able to handle ships of up to 12,500 TEUs, but East Coast ports won’t be ready to handle ships that big for five years.”
Big Ships could come to US ports under Maersk, MSC alliance - JOC - August 29, 2014
"To the best of my knowledge, nor Maersk neither MSC are presently operating ships with capacity of 19,200 TEU. However I read that ships of that nominal carrying capacity have been ordered (or will be ordered) by a certain ships owner to be bareboat chartered to MSC, which means that "eventually" may take some time to happen. The more interesting question is which ports at the U.S. will be ready to handle ships of this size. These vessels will require not only deeper ports but also the appropriate terminal equipment as well as infrastructure. The bigger the ships, the lower the efficiency. We all know that the U.S. ports where ships of 14,000 TEU are calling, are struggling to operate these vessels and most times it comes on account of efficiency. What will happen if even bigger ships will arrive at these ports?"
"To the best of my knowledge, nor Maersk neither MSC are presently operating ships with capacity of 19,200 TEU. However I read that ships of that nominal carrying capacity have been ordered (or will be ordered) by a certain ships owner to be bareboat chartered to MSC, which means that "eventually" may take some time to happen. The more interesting question is which ports at the U.S. will be ready to handle ships of this size. These vessels will require not only deeper ports but also the appropriate terminal equipment as well as infrastructure. The bigger the ships, the lower the efficiency. We all know that the U.S. ports where ships of 14,000 TEU are calling, are struggling to operate these vessels and most times it comes on account of efficiency. What will happen if even bigger ships will arrive at these ports?"
Are Nicaragua canal plans driven by geopolitics? - JOC - October 21, 2014
Chaim Shacham - In reference to "While $40 billion might suffice to build a sea-level canal, it won’t go very far if the HKND Group plans to build locks, as it states on its website it will do. The HKND Group offered no details of where or what size the lockswill be", if this controversial canal will ever be built (and I am not saying it will not), and if it will follow the "approved route" through the lake Nicaragua which is 32.7 meters (107 ft) above sea level, the Sea Level Canal is an impossibility. While I am not a canals builder, I don't see how it can be done without locks.
Chaim Shacham - In reference to "While $40 billion might suffice to build a sea-level canal, it won’t go very far if the HKND Group plans to build locks, as it states on its website it will do. The HKND Group offered no details of where or what size the lockswill be", if this controversial canal will ever be built (and I am not saying it will not), and if it will follow the "approved route" through the lake Nicaragua which is 32.7 meters (107 ft) above sea level, the Sea Level Canal is an impossibility. While I am not a canals builder, I don't see how it can be done without locks.
New service brings larger ships to Charleston - JOC - October 21, 2014
Chaim Shacham - I agree wholeheartedly with Jim Newsome, SCPA president and CEO, emphasizing the "importance of deepening the Charleston harbor to 52 feet in order to provide unrestricted access to our container terminals" While vessels of 5500 TEU are indeed considered, at present time, as Post Panamax, they are not that much larger than the 3800 - 4600 TEU ships previously plying the service, and in reality don't require that much more depth than what's available for them today. The Port of Charleston already handles bigger ships (>5500 TEU) very successfully and efficiently. It is the much bigger ships of up to 12,500 TEU that will start crossing the Panama Canal, once the expansion of the canal will be completed in the beginning of 2016, and it is the even bigger ships (>12,500 TEU) that will come to Charleston by way of the Suez Canal that necessitates the deepening.
Chaim Shacham - I agree wholeheartedly with Jim Newsome, SCPA president and CEO, emphasizing the "importance of deepening the Charleston harbor to 52 feet in order to provide unrestricted access to our container terminals" While vessels of 5500 TEU are indeed considered, at present time, as Post Panamax, they are not that much larger than the 3800 - 4600 TEU ships previously plying the service, and in reality don't require that much more depth than what's available for them today. The Port of Charleston already handles bigger ships (>5500 TEU) very successfully and efficiently. It is the much bigger ships of up to 12,500 TEU that will start crossing the Panama Canal, once the expansion of the canal will be completed in the beginning of 2016, and it is the even bigger ships (>12,500 TEU) that will come to Charleston by way of the Suez Canal that necessitates the deepening.
Big Data - Is this the answer to Ship Efficiency - Container Shipping – powered by Containerisation International and - October 22, 2014
Chaim Shacham - Big Data, as it pertains to ships and shipping, is without any doubt a very important factor in Ship Efficiency, but in my humble opinion, it is not the answer, at least not the full and complete answer to Ship Efficiency.
Big Data is defined by those who claim to know what Big Data is, as "all manner of data relating to weather routing, ship performance, speed, trim and stability, ocean currents and just about everything we can measure, digitize, and analyze". If this is what is referred to as Big Data, I am sure it will come as no surprise to members of the Maritime / Shipping / Transportation by sea Industry, that this data has been collected for many years by different bodies and agencies, and moreover was willingly shared by those who collected, measured, digitized and analyzed it, with all ship owners, operators and charterers, sometimes even because they were requested to do it by low.
So, if I am right, and the Big Data was available, how come Ship Efficiency was not improved, or at least not substantially enough to be so considered?
I am a great believer that the it is more the "Small Data" that is affecting Ship Efficiency, and will continue to be the dominant factor.
When the Big Data is available to all the Masters and the crews on board each and every ship the same, it is the ship's own management who should be tasked with making the right decision regarding the right route, and reacting to changing conditions.
At the end of the day (the voyage), it is the Masters' decisions that will result in how high or how low is the Ship Efficiency, measured by the impact it left on the environment.
Chaim Shacham - Big Data, as it pertains to ships and shipping, is without any doubt a very important factor in Ship Efficiency, but in my humble opinion, it is not the answer, at least not the full and complete answer to Ship Efficiency.
Big Data is defined by those who claim to know what Big Data is, as "all manner of data relating to weather routing, ship performance, speed, trim and stability, ocean currents and just about everything we can measure, digitize, and analyze". If this is what is referred to as Big Data, I am sure it will come as no surprise to members of the Maritime / Shipping / Transportation by sea Industry, that this data has been collected for many years by different bodies and agencies, and moreover was willingly shared by those who collected, measured, digitized and analyzed it, with all ship owners, operators and charterers, sometimes even because they were requested to do it by low.
So, if I am right, and the Big Data was available, how come Ship Efficiency was not improved, or at least not substantially enough to be so considered?
I am a great believer that the it is more the "Small Data" that is affecting Ship Efficiency, and will continue to be the dominant factor.
When the Big Data is available to all the Masters and the crews on board each and every ship the same, it is the ship's own management who should be tasked with making the right decision regarding the right route, and reacting to changing conditions.
At the end of the day (the voyage), it is the Masters' decisions that will result in how high or how low is the Ship Efficiency, measured by the impact it left on the environment.
Suez Surpasses Panama in U.S East Coast calls - LinkedIn's Shipping Network Discussion Group - November 12, 2014
Chaim Shacham - The fact that Suez surpasses Panama in US East Coast calls should not surprise anybody. As a matter of fact the surprise is that it took so long for this to happen.
The lower slot cost on the ships that can not transit the Panama Canal due to their size, and the operational savings to the ocean carriers are better than the extra cost of time and fuel to sail a ship from Asia to the USEC via the Suez compared with the Panama route.
All this is, in my opinion, going to change when the expanded Panama Canal will allow the transit of bigger ships (12,500 TEUs) through its locks. The main reason being that the route from Asia (Hong Kong and north) to the ports on the USEC, is shorter via the Panama, compared to via the Suez.
It is believed that, at the time the expanded Panama Canal will be in operation, the Trans Pacific work "horses" will be vessels of about 10,000 TEUs. The ocean carriers, having two options, will choose the cheaper one, which due to the shorter distance, will be the Panama.
While the slot cost on a 14,000 TEUs vessel is lower than the one on a 10,0000 TEUs, one has to remember that the USEC are just not ready (and probably will not be) to efficiently handle ships bigger than 10-12,000 TEUs, which means that even if the bigger ships will come to the USEC via the Suez, all the savings due to Lowe slot cost will evaporate due to inefficiency of the ports and the infrastructure.
I would love to hear comments and other opinions from my esteemed colleagues.
Chaim Shacham - The fact that Suez surpasses Panama in US East Coast calls should not surprise anybody. As a matter of fact the surprise is that it took so long for this to happen.
The lower slot cost on the ships that can not transit the Panama Canal due to their size, and the operational savings to the ocean carriers are better than the extra cost of time and fuel to sail a ship from Asia to the USEC via the Suez compared with the Panama route.
All this is, in my opinion, going to change when the expanded Panama Canal will allow the transit of bigger ships (12,500 TEUs) through its locks. The main reason being that the route from Asia (Hong Kong and north) to the ports on the USEC, is shorter via the Panama, compared to via the Suez.
It is believed that, at the time the expanded Panama Canal will be in operation, the Trans Pacific work "horses" will be vessels of about 10,000 TEUs. The ocean carriers, having two options, will choose the cheaper one, which due to the shorter distance, will be the Panama.
While the slot cost on a 14,000 TEUs vessel is lower than the one on a 10,0000 TEUs, one has to remember that the USEC are just not ready (and probably will not be) to efficiently handle ships bigger than 10-12,000 TEUs, which means that even if the bigger ships will come to the USEC via the Suez, all the savings due to Lowe slot cost will evaporate due to inefficiency of the ports and the infrastructure.
I would love to hear comments and other opinions from my esteemed colleagues.
