High and Dry.

Mergers and alliances in the shipping industry leave importers and exporters sitting on the dock of the bay, just wasting time...

JERRY CASTILLO IS FACING A NEW PROBLEM THESE DAYS--finding ships to carry computer parts and other cargo to South America. "Before, we never had a problem getting someone to take our cargo," says the forwarder at Abba Shipping, a Miami freight-moving company that specializes in Latin American shipments. "Now, it's tough just to get some of the lines to even answer the phone."

A Miami forwarder having trouble finding service to South America? That's right, a consolidation tsunami is rewriting shipping schedules and ports of calls throughout the region.

Miami, for example, no longer reigns as the biggest gateway for containers heading to South America. Since last year, Charleston, South Carolina, has claimed that title, posting a 75% increase in southbound shipments. "This was not new cargo," Charleston spokesman Byron Miller is quick to point out. Rather, Charleston snatched most of that cargo from other ports, including Jacksonville and Miami, thanks to shipping lines' reduced presence in those traditional Florida powerhouses.

The riptide is steering old shipping routes, gateways and service the way of cargo sailing ships. Up to a few years ago, when fleets of ships sporting

different company logos plied the trades, importers and exporters had their pick of lines, service, ports and even nationality of the crew. Now, shipping lines--which carry about 95% of all international cargo--are copping a take-it-or-leave-it attitude that's taking many shippers aback. And the service, importers and exporters say, ain't what it used to be.

"Even with the top carriers, it's been different," says Geoff Giovanetti, the executive director of the Wine and Spirits Shipping Association in Virginia, one of the biggest freight-importing associations in the United States. He reports problems getting shipping lines to take cargo throughout Latin America unless he pays higher rates and drives a hard bargain. "It's really quite surprising," he says.

Bloody mess. Doug Webster, a spokesman for shipping line Hamburg-Sud, says the shipping lines are reacting to fierce rate cuts in recent years. "It's been a bloodbath," Webster says. "The lines have to take a look at the flow of cargo volume and rationalize."

And indeed they have. "Nowhere in the world today will you find ocean carriers 'going it alone' on any significant trade route," Geoff Greenwood, the western area vice president for Columbus Line USA, one of the Hamburg-Sud shipping lines, said at a recent logistics conference in Los Angeles. "Instead, acquisitions, mergers, joint service and alliance partnerships have been used to spread the risk and lower unit costs."

In recent years, Denmark's Maersk Line has taken over Sea-Land to become Maersk-Sealand. Germany's Hamburg-Sud took over U.S.-based Crowley's East Coast South American Service, while Crowley kept its ships in the Caribbean and Central America. Hamburg also took over Alianca, a Brazilian line.

The new deals are creating a whole new host of problems. "A new set of players must learn to work together," said Greenwood. "Decision-making takes longer and is more complex because more parties and philosophies of practice are involved."

In the short term, that means importers and exporters are ship out of luck. Castillo and other forwarders are particularly concerned about the southern routes. It's simply becoming harder and more expensive to get cargo where it needs to be, when it needs to be there.

That's quite a change from the 1990s, when shipping lines were plentiful. They took heavy equipment, electrical appliances and other finished goods to South America and loaded up with mostly agricultural and other food products for the backhaul. The Caribbean and Central America received specialty foods for tourists, finished goods and semi-finished clothing that would later he reshipped as a finished product.

Joining the traditional regional leader, the Crowley group of companies on the high seas were new carriers like Maersk. By the middle of the decade, when Brazil eased its import restrictions, the floodgates opened. Boxed U.S. exports increased by more than 70% between 1995 and 1997, making Brazil the second-leading destination after Europe for the cargo in the Atlantic. "I don't remember a better period for Brazil and U.S. diplomatic political relations," says Rubens Barbosa, the Brazilian ambassador to the United States. The United States, he says, has better trade with Brazil than it does with Russia, India or China

Membership in the Inter-American Freight Conference of carriers for the East Coast Latin American trade doubled to 16 in little more than a year in the mid-1990s. More ships plus more space meant an easier life for Castillo, Giovanetti and other shippers. "We never had any trouble before," Castillo says. "We always found ships whenever we needed them."

Sinking ships. The equation, though, did not work so well for the carriers. For them, more ship space usually meant lower freight rates. And when the cargo dried up--as it did over the past couple of years--that meant empty ships and even leaner revenues. Many carriers found it impossible to stay afloat.

Shipping's an expensive business--it can cost up to US$50,000 a day to run a cargo ship, full or empty, docked or not. And most shipping lines are beating a course against a tide of heavy losses and killer competition.

Some, especially national lines, pulled out of international trade lanes, sticking with domestic coastal cargo. Others dropped out of the shipping business altogether. But many of the major lines merged and consolidated. Hamburg-Sud's service is now refocusing its port calls and other priorities. Crowley, the former regional leader in Latin American services, no longer offers a host of combinations.

Even as the newly merged or allied shipping lines use the lever age of larger group volumes to drive down port costs, they demand that those partners provide strong data links to smoothly exchange information with carriers, third-party suppliers and customers. Mergers and alliances also demand coordination of equipment inventories and management systems. Repositioning empty boxes is a huge challenge for North-South carriers on routes where container imbalances are a constant reality.

Chile's Compania Sudamericana de Vapores purchased Brazilian company Grupo Libra's shipping line. The deal effectively removed yet another carrier from the shipping route. It has also reduced shipments to the northeast U.S. port of Philadelphia, which had started to become a key gateway for Chilean and Brazilian imports. "We had invested in a terminal and we were counting on some of that cargo," says Robert Palaima, the head of Delaware River Stevedores, the operator of the Tioga Street Terminal in Philadelphia.

Lots of ports and terminal operators have invested heavily counting on carriers and cargo from the Latin American trade, but the changing tides have left them like the forwarders, importers and exporters--scrounging for ships. "I can still find space:' says freight forwarder Castillo. "But it may not be when I need it. And nowadays, I can't count on getting the cargo there when it has to