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JOCâs Analysis of Land vs. Sea: Roller Coaster on the Water

Published: 20 May 2015 01:05:40 PST

According to The Journal of Commerce (JOC), freight pricing on land transport is steady and even rising, but the spot market in ocean shipping is raising the stakes for the peak season.

The extensive analysis provided a comprehensive outlook on the competitive dynamics in the ocean transportation environment. New figures from various international sources illustrate the vast differences between ocean operations and land transportation such as trucking and rail. A key take-away message—as an international industry with almost no barriers to entry, ocean operations can lure foreign investors seeking a quick profit to move quickly into a trade when freight rates are favorable, the article said.

Case in point: When Union Pacific Railroad’s intermodal volume slipped 1 percent in the second quarter, including a 2 percent drop in international containers, barely a ripple of concern or financial pain fluttered through North America’s largest railroad. That’s because revenue per unit jumped 14 percent over 2010’s second quarter, a demonstration of pricing power in the U.S. shipping market that spread through the railroad industry.

Over that same quarter, Singapore-based container shipping line APL rode improving global trade demand to its strongest volume ever—58,000 weekly 40-foot equivalent units—a 7 percent improvement over the year before.

The divergent results are a stark example of how the major transportation channels serving supply chains are coping with weakened demand as they compete for a greater share of shipping spending in the coming peak season.

Container Rates vs Capacity and Rail Freight vs Traffic

Although experts have high confidence heading into the peak holiday season, the article’s authors say to maintain a focus on how carriers manage capacity after the peak, as that will be crucial to their financial performance for this year and next.

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