# Maersk axes TP5 service on unprofitable transpacific trade



## RHP (Nov 1, 2007)

Wednesday 10 December 2014, 14:27

Maersk: questioning the long-term health of the transpacific trade. The trade lane has lost money in nine of the last 10 years, says carrier
MAERSK Line is to close one of its west coast transpacific services, saying that the trade has been unprofitable in nine of the last 10 years.
The Danish shipping lines says it decided to axe the TP5 service due to the challenging operating environment on the transpacific trade lane over the last decade.

The TP5 service is the Danish carrier’s only service dedicated to the Asia-west coast US trade lane. TP6 and TP9 services are both pendulum services covering other trade lanes and the Bay Bridge, Taiwan Express, TP2 and TP8 service are slot charters on other carriers’ services.
It will also stop offering the Taiwan Express service, an Evergreen service on which it takes slots.

Maersk Line said the difficulty facing operators on the trade has led some to question the long-term health of the transpacific. “As a result, we have taken a detailed look at the economics of the trade with a focus on ensuring we secure our position,” it said. However, the carrier is quick to head off customers' concerns regarding its commitment to trade. “In fact, we see it very much the opposite,” it said. “As we look toward the future, we want to continue playing a critical role in the supply chain of our customers on the trade.”

Nevertheless, it said long-standing downward pressure on profitability in the transpacific represents a serious risk to service levels.
“We will not take the lead but rely on the Transpacific Stabilization Agreement to address the profitability challenge to the benefit of all stakeholders.
“To ensure we provide the necessary coverage for our customers, all key corridors will continue to be serviced by alternate options.”
The TP5 service will close on January 15 and Taiwan Express will end on January 1.

However, Maersk Line is expected to take space on APL’s CC3 service from mid-January which will cover Japan to Los Angeles and Long Beach.
The TP5’s north China and South Korea calls will be covered by services offered by the 2M Alliance.

Further slot-exchange services may be announced for the trade lane, but as it stands, Maersk Line will offer a reduced number of services from Asia to the US west coast on launching the alliance with Mediterranean Shipping Co. The Danish carrier now offers seven services to the US west coast; TP5 which is dedicated to the trade lane, TP6 and TP9, which are pendulum services and Bay Bridge, Taiwan Express, TP2 and TP8, which are slots on other carriers’ services.

Under the new east-west network of the 2M Alliance, Maersk Line will offer four services; the TP2, TP6, TP8 and TP9.
It will also offer APL’s CC3 service. TP5 deploys six vessels of an average size of 4,200 teu. Its removal will reduce capacity on the Asia-North American west coast by 1.5%.

It is not the only service to have been cancelled in recent weeks. In October the G6 Alliance temporarily removed its CC2 service from the trade.
Combined, these two service withdrawals represent a capacity reduction of 3.1%. Freight rates on the transpacific west coast trade lane have been coming under pressure this year. According to Shanghai Containerised Freight Index figures, the average year-to-date freight rate to the west coast stands at $1,977 per feu this year. Last year, the average rate stood at $2,105 per feu; in 2010 it was $2,339 per feu.

According to Containerisation International’s vessel-utilisation analysis, ships are underutilised on the trade lane, with rates of 77% recorded for the first quarter, 78% for the second quarter, 87% for the peak third quarter and 82% for the last quarter. Carriers are hoping to improve the situation and the Transpacific Stabilization Agreement has recommended its member lines implement a whopping $1,000 per feu price increase in mid-December. TSA executive administrator Brian Conrad says rates are as low as they have been since 2011.

Container Trades Statistics data shows that volumes from Asia to North Americaincreased 9% on-year in September to reach 1.4m teu.
The 11.7m teu transported between January and September is 2.2% ahead of the first nine months of 2013.
The National Retail Federation said that growth in September reflected shippers rushing to bring in merchandise because of concerns of a west coast port shutdown as negotiations over a new contract between dockers and terminals drag on.


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