The space situation ex Asia to North America is extremely difficult and is expected to get worse - increasingly similar to conditions back in 1998 (when there was a huge surge of bookings combined with capacity cuts on Transpacific resulting in 3 week backlog and a $ 1500 increase per 40ft within 2 weeks) The pertinent facts are as follows: a) Winter Schedules means some carriers like Grand Alliance (inclusive Hapag) have over 50% capacity reduction b) Huge surge of bookings for carriers due - 1) Rush to avoid Jan 15 GRI/ERC; 2) Chinese New Year; 3) Overall inventory replenishment With all shippers including large ones all caught in the space crunch and majority having exceeded the MQC''s, all major shippers have accepted the full GRI/ERC of $400 per 40ft (and $500 MLB for Canada) (In fact, one of the top 3 importers in North America approached us for space into Canada at current market rates with GRI/ERC plus a premium as well, but we have declined to take on their business as they are not a regular customer.) We have had several such requests in the past week. Carriers'' are under huge constant pressure from their financial management*** since revenue from TPEB stands out as significantly lower than other trades. (e.g. *** Continuing losses TP service compare unfavorably with Asia/Europe Increases since July 2009 totaling US$ 1700 per TEU or $ 3400 per FEU including PSS for current Asia/Europe rate of US$ 4300 per FEU The carriers'' financial management have yield management programs that seek out the highest revenue containers at this time) d) "Space Madness" What will further exacerbate the situation is the first confirmation of CNY cancellation of sailing for week 8 by Maersk and the combining of two loops into one for that week. Maersk is also implementing effective Feb 1, 2010, a Toronto Repositioning Surcharge of $500 per container for all Asia/Toronto destined containers due imbalance - this will drive Toronto containers to other carriers. (Other carriers have not yet announced finalized CNY cancellation of sailings but some may follow suit) We expect ''Space Madness'' through to the end February and possibly end of first quarter 2010 with some carriers asking for "Premium" rates i.e. rates much higher than announced GRI/ERC to make space available. As previously advised, please work with Schenker to ''ride out'' the current ''Space Madness'' as our mutual focus should be keeping your supply chain moving - even if it means the acceptance of the GRI/ERC for now. Please timely confirm to us, in writing, your acceptance of the GRI/ERC as we do not wish to move your shipments without confirmation to avoid mutual misunderstanding in the future. Please kindly note that the reality is that there is not enough space to move all shipments and increasingly it is becoming "First Come First Serve" - even if the GRI/ERC is accepted, therefore booking well in advance of normality is expected with some carriers forecasting 2 week carry over on bookings. If you have many bookings, we also suggest you prioritize them so that we ensure the right containers get on board the vessel at the right time. Please ''forgive'' us for any inconvenience - these shipping conditions are the worst we have seen in the past 12 years and the second worst in the last 30 years - and they are market conditions. We are also talking to carriers and have some solutions with them to get time sensitive cargo moving, however these carriers for the most part have rate levels higher than current levels you enjoy and are limited options due to the current congestion on all vessels, therefore should you wish to explore this situation
