Editor’s Note:TSA (Transpacific Stabilization Agreement) was established in 1989 and includes in its membership the ocean carriers Hapag-Lloyd, Hyundai, K Line, Maersk, MSC, NYK, OOCL, Yang Ming and Zim. TSA’s activities extend to the largest ocean container trade lane in the world, with some 4.3 million teus annually. Countries included in TSA’s coverage are the US, Japan, Korea, Taiwan, Hong Kong, China, Singapore, Malaysia, Thailand, Indonesia, the Philippines, Vietnam, Cambodia, Laos, Myanmar (Burma) and the Russian Far East.Brian Conrad is the Executive Administrator of both the Transpacific Stabilization Agreement (TSA) and the Westbound Transpacific Stabilization Agreement (WTSA). Conrad is also President of Transpacific Carrier Services, Inc., a non-profit provider of administrative services to TSA and WTSA, and serves as Executive Administrator of two affiliated transpacific agreements in the Canada-Asia trade, the Canada Transpacific Stabilization Agreement (CTSA) and Canada Westbound Transpacific Stabilization Agreement (CWTSA). He has been with TSA and WTSA since 1997, when he joined those groups as Administrator/Secretary. He became Deputy Executive Director in 1999 and served in that capacity until 2007 when both groups underwent organizational restructuring. Prior to 1997 Conrad was based in Hong Kong and served as Managing Director for the Asia North America Eastbound Rate Agreement (ANERA), a carrier group that set rates and negotiated annual Asia-U.S. service contracts on behalf of members. AJOT: Supply & Demand: What was the principal cause of disconnect between transpacific ocean carrier capacity (both ships and equipment) and shipper demand in 2009/10? Container shortages were a big feature of complaints of both importers and exporters in 2010. Can this be remedied? Similarly availability of chassis and boxes was also a frequent complaint. Ocean carriers have already been working on the grey box concept. Would they take it a step further and just get out of the chassis business altogether?Conrad: “This is really a question for the carriers individually, but our observations on trade and market trends, as they have been analyzed extensively by the industry, consultants, and the press over the past year, are as follows: A. After five years of solid, mostly double-digit annual cargo growth in the trade – mainly due to China growth – transpacific cargo demand began to fall off in late 2008 and then abruptly dropped by more than 20% in 2009. In order to adapt to the new volume levels and cut costs, carriers took a similar approach as other industries and reduced their supply in the trade in 2009. B. The “disconnect” in early 2010 was caused by a convergence of factors. First, the spike in volumes in early 2010 was not predicted by shippers in their forecasts for their carriers, so the carriers did not plan for it in their deployment plans for that period. Thus, when cargo initially picked up again in 2010, there was no certainty that volumes would hold beyond a brief restocking period. Absent indications to that effect, it would have been a poor business decision for an individual carrier to extensively reintroduce capacity prematurely. When the spike sustained longer than expected, carriers were able to reasonably increase their capacity offerings in the trade. Obviously in such an environment, container orders plummeted as well – so much so that a number of Asian manufacturers closed their doors, shutting off the supply. Workers went off to other jobs or returned home to the countryside. When carriers finally felt comfortable tendering new orders, companies had to ramp back up their operations, often training entirely new workforces from scratch. Still, lines have been individually bringing back service, such that there is now over 20% more vessel capacity in the trade than at the beginning of 2010. In addition, new operators have entered the market in response to strengthened volumes and improved rates. Contain