As new ocean carrier mega-alliances launch this month, shippers may expect service improvements and other benefits, according to container line and beneficial cargo owner executives speaking at a conference hosted by the Jacksonville Port Authority.
The latest alliances were among topics about which optimism was expressed March 21 at the JAXPORT Logistics & Intermodal Conference in St. Augustine, Florida.
“We’re going to make shipping great again,” said Fabio Santucci, president of Mediterranean Shipping Co. (USA) Inc. Richard Craig, president and chief executive officer of Mitsui O.S.K. Line unit MOL (America) Inc., commented, “I’m confident we’re going to have a smooth transition.”
And Mike Wilson, senior vice president for business operations at Hamburg Süd North America Inc., said he believes new carrier alignments should facilitate enhanced efficiencies, with relationships and service product quality continuing to be the keys as container lines increasingly recognize the importance of “the virtual train.”
Beginning operations in April are the Ocean Alliance, consisting of CMA CGM, China Cosco Shipping, Evergreen Line and Orient Overseas Container Line, and the Transportation High Efficiency Alliance, or THE Alliance for short, of Hapag-Lloyd, “K” Line, Mitsui O.S.K. Line, NYK Line and Yang Ming.
Meanwhile, the 2M Alliance of Maersk Line and Mediterranean Shipping Co. adds Hyundai Merchant Marine and Hamburg Süd volumes via slot charter agreements, as Maersk advances its plan for acquiring Hamburg Süd.
Beneficial cargo owners on the same panel joined the carrier executives in taking a relatively favorable stance.
Carter Noland, supply chain director at major pulp producer GP Cellulose LLC, said he expects transit times to improve under the new carrier structure, adding, “and we certainly should take advantage of that.” International Forest Products LLC’s director of global transportation, Charlie Cunnion, said he does not anticipate negatives resulting from the new alliances while he expects low ocean freight rates to continue, commenting, “I think it’s going to be a shippers’ market for some time now.”
Jim Prior, divisional vice president for transportation at luxury fashion accessory leader Coach Inc., offered a three-word summation of 2016 – “crisis, consolidation, transformational” – indicating that the new carrier alliances have potential for lifting the industry’s condition from a year in which container lines suffered multibillion-dollar losses.
Elaborating from a carrier point of view, MSC’s Santucci said that, whereas he expects equipment shortages to continue to pose challenges in 2017, he believes capacity imbalance issues will clear up within two to three years.
Santucci dismissed a suggestion that ocean carriers are colluding on rates, saying, “If there was any collusion, the rates wouldn’t be where they are.”
Indeed, MOL’s Craig said, “We compete fiercely with our alliance partners.”
While he said the new alliances and their mega-containerships should bring about economies of scale on the water, Santucci said supply chain efficiencies won’t be realized without marine terminals instituting measures such as night opening of gates and trucker appointment systems.
Craig cited MOL’s extensive investments in automation at terminals in Oakland and Southern California, remarking, “We’re not just going to dump a big pile of cargo in there and overwhelm them.”
Not surprisingly, another JAXPORT conference panel discussion – on the outlook for Caribbean trade – focused on commerce with Puerto Rico, for which the Port of Jacksonville has provided the dominant mainland link for decades.
Wal-Mart Stores Inc.’s director of global logistics, Anthony McAuley, said actively extending his company’s “Buy America” strategy to the island commonwealth should help stimulate Puerto Rican manufacturing and two-way shipping, with more raw materials heading to Puerto Rico and greater quantities of manufactured goods coming north in what traditionally has been a trade highly skewed toward southbound moves. At the same time, he said, logistics costs will be reduced for consumer goods made on the island and bought at Puerto Rican Wal-Mart stores.
“Being able to stamp ‘Made in America’ on your product, that’s going to be worth something for at least the next four years,” McAuley said, alluding to Trump administration policies hostile to imports.
Thomas B. Crowley Jr., chairman and chief executive officer, Crowley Maritime Corp., said he views manufacturing in Puerto Rico as “a huge unsung opportunity” to help fill containers that historically return northbound largely empty.
Crowley noted the extensive investments in liquefied natural gas, in new LNG-powered vessels and LNG delivery systems, being made by his company and another carrier in the Puerto Rico lane – TOTE Maritime – saying the clean-burning fuel is “the future of shipping, we believe.”
That sentiment was echoed by TOTE’s president and chief executive officer, Anthony Chiarello, who said, “We believe LNG will become the leading marine fuel.”
Mitch Luciano, president and chief executive officer, Trailer Bridge Inc., the third carrier in the Jacksonville-San Juan lane, said his company, which provides triple-deck barge service, is in its best financial condition in its quarter century of operation and said he has “a very positive outlook” on Puerto Rico trade. He added, however, that he does not see an economic rebound on the island until 2019 or 2020.
Sergio Sandrin, president of Aqua Gulf Transport, the leading third-party logistics provider in the Puerto Rican trade, said that while that business “is still our rice and beans,” he sees the Dominican Republic as a fantastic growth market. He said he would love to see direct Dominican service from Jacksonville, adding that his 3PL presently serves that market via ships from Savannah and Miami.
Craig Mygatt, chief executive officer of Maersk Group unit SeaLand, which does not yet call at Jacksonville, said he believes the most exciting country in the Caribbean region is Mexico, while Cuba also is generating great global attention, even though the United States is lagging behind other nations in serving it.
Referring to U.S. interests not stepping in to serve a potentially post-embargo Cuba, Mygatt commented, “We’ve either got to get our act together or it’s going to get backfilled from the international community.”
Crowley, whose U.S. company has been serving Cuba with non-embargoed “humanitarian” goods since 2001, well prior to U.S. sanction easing by the Obama administration, interjected, “Every other country is there in Cuba. I think we’re missing an opportunity, and every day we wait, we’re losing out.”
In yet another discussion, executives of a pair of big U.S. retailers pointed out how technology is being deployed to enhance supply chain efficiencies.
Rick Schart, senior vice president for supply chain and e-commerce at Jacksonville-based discount department store operator Stein Mart Inc., said managing logistics costs is a key to better corporate margins, observing, “The retail supply chain needs to be a core competency of the business.”
Schart said his company heavily relies upon data – not just from sales but also what people look at when browsing Stein Mart’s website – in making decisions. Taking advantage of technology is particularly important, he said, in an environment in which a product may be sold even before it comes into the company’s possession.
Schart added that he sees “huge potential” in deployment of warehouse robotics.
Wayne Varnadore, senior vice president and chief logistics officer of Bradenton, Florida-based retail chain Beall’s Inc., said his company is increasingly counting on cloud-based solutions in a distribution model that has entailed removing half the inventory from its 525 stores.
“Visibility is a big deal for us,” Varnadore said, “especially on the inbound side.”