<div class="phx-topic abstract-wrapper">Despite record import volumes in August, marine terminals at the ports of Los Angeles and Long Beach are experiencing minimal congestion, with elevated rail container dwell times the only problem area.</div>

Despite record import volumes in August, marine terminals at the ports of Los Angeles and Long Beach are experiencing minimal congestion, with elevated rail container dwell times the only problem area.

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<div class="phx-topic">Industry stakeholders are pointing to minimal supply chain disruption at the ports of Los Angeles and Long Beach this peak season despite record import volumes, thanks to warehouses throughout Southern California being able to keep churning freight through their facilities. During the height of COVID-related supply chain chaos in 2021–22, warehouses were unable to gear up for import surges and became a major bottleneck in the regional supply chain. That triggered chassis shortages, congested marine terminals and vessel bunching outside the ports. But a steady flow of imports this spring and summer has helped warehouse operators to maintain staffing and equipment at peak performance levels, said Scott Weiss, vice president of technical sales-warehouse and distribution services for North America at A.P. Moller Maersk. “There used to be much more seasonality to imports. Now it’s more spread out,” Weiss told the Journal of Commerce. “Warehouses like when it’s spread out.” “The reason why we are fluid [today] is because the warehouses are keeping up,” Sal Ferrigno, vice president of SSA Marine, which operates three container terminals in Long Beach, told the Journal of Commerce. Unlike during the pandemic when warehouses could not find enough workers, those facilities appear to be fully staffed today, Ferrigno said. The Los Angeles-Long Beach port complex, which accounts for almost 50% of US imports from Asia, handled an all-time high of 849,806 TEUs of Asian imports in August, up 23.7% year over year and about 16% higher than both August 2021 and 2022, according to PIERS, a Journal of Commerce sister product within S&amp;P Global. <h3>Near-dock surge yards a safety valve </h3>Marine terminal operators say there are several additional developments since the pandemic that are fostering improved supply chain fluidity, notably the access to more near-dock “surge” yards that provide temporary storage for inbound containers until they are needed at the warehouses or put on trains headed eastbound. This frees up space at the terminals to handle a continuous discharge of import containers and prevents a backlog of ships in the harbor. “We’re definitely seeing more container dray-offs today,” said Sepehr Matinifar, vice president of logistics services at the Wonderful Company, a developer of industrial and storage space in Southern California. Major retailers such as Amazon and Walmart are heavy users of the near-dock storage yards, he said. Mario Cordero, executive director of the Port of Long Beach, cited the port’s Pier S overflow yard that is helping to keep dwell times for containers that are trucked from the terminals below three days. According to the Pacific Merchant Shipping Association (PMSA), which tracks container dwell times, the average dwell time in the port complex in August for containers leaving by truck was 2.95 days. That’s up from 2.81 days in July but was the 10th consecutive month of sub-three-day dwells since October 2023, according to PMSA. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="155dedc1-99f2-4adf-a449-1c9ab2510f95"></dynamic-object></div>When marine terminals are fluid, vessels move immediately to berth and depart on schedule after they have been worked. That prevents the backlogs that developed during COVID-19, which reached <a href="https://www.joc.com/article/trans-pac-vessel-reliability-ticked-higher-in-march-on-us-west-east-coasts-5243041">a record 109 container ships in January 2022</a>, according to the Marine Exchange of Southern California. The Marine Exchange reported that a record 67 container ships are scheduled to arrive in the LA-LB port complex this week. “Vessels and cargo arriving, departing and shifting around the ports of LA and LB continue to move normally with no labor delays and ample labor,” said Kip Louttit, executive director of the Marine Exchange. The post-COVID environment was also marked by excessive off-terminal chassis dwell times as chassis-container units sat idle in warehouse yards or on the streets waiting for space to open at the warehouses. Chassis street dwells during and immediately after COVID <a href="https://www.joc.com/article/la-port-expects-imports-to-surge-further-in-q2-5205950">spiked to more than 10 days</a>, according to the Pool of Pools, which is managed by the three largest intermodal equipment providers (IEPs) in Southern California. According to the Pool of Pools, the average street dwell time for 40-foot chassis as of Thursday was 5.9 days. That is below the seven-day-plus dwell times that can contribute to port congestion and reduce chassis availability in the LA-LB harbor area. Another reason why there is no significant chassis shortage today is that a number of drayage operators serving the ports now own or lease chassis, which reduces their dependence on shared containers in the Pool of Pools and promotes a more efficient use of chassis, according to Matt Schrap, CEO of the Harbor Trucking Association. <h3>Rail container dwell times still excessive </h3>The only sector of the Southern California supply chain that continues to register below-par performance is intermodal rail. The average dwell time of rail containers on the Los Angeles-Long Beach marine terminals in August was 8.2 days, up from 5.66 days in July and the highest since November 2022. “There are some rail container backlogs now,” said Alan McCorkle, president of Yusen Terminals in Los Angeles. “We’ve had to activate one of our two near-dock areas to handle the rail container backlog.” Rail industry analyst Lawrence Gross, president and founder of Gross Transportation, said record volumes play a major role in the surge of long-dwelling rail containers at the ports. He said that according to the Association of American Railroads, last week was the busiest for North American intermodal rail since June 2021, and inland point intermodal (IPI) traffic is projected to remain strong at least through October. “If the volumes stay this strong for that long, then I think there will unavoidably be some problems. Congestion, but not a meltdown,” said Gross, also a Journal of Commerce analyst. BNSF Railway had its busiest week for IPI moves in the week before Labor Day, and new record volumes are forecast for the coming two weeks, said Jon Gabriel, BNSF’s vice president for innovation, service design and network strategy. Contact Bill Mongelluzzo at <a href="mailto:bill.mongelluzzo@spglobal.com">bill.mongelluzzo@spglobal.com</a>.</div>

Industry stakeholders are pointing to minimal supply chain disruption at the ports of Los Angeles and Long Beach this peak season despite record import volumes, thanks to warehouses throughout Southern California being able to keep churning freight through their facilities. During the height of COVID-related supply chain chaos in 2021–22, warehouses were unable to gear up for import surges and became a major bottleneck in the regional supply chain. That triggered chassis shortages, congested marine terminals and vessel bunching outside the ports. But a steady flow of imports this spring and summer has helped warehouse operators to maintain staffing and equipment at peak performance levels, said Scott Weiss, vice president of technical sales-warehouse and distribution services for North America at A.P. Moller Maersk. “There used to be much more seasonality to imports. Now it’s more spread out,” Weiss told the Journal of Commerce. “Warehouses like when it’s spread out.” “The reason why we are fluid [today] is because the warehouses are keeping up,” Sal Ferrigno, vice president of SSA Marine, which operates three container terminals in Long Beach, told the Journal of Commerce. Unlike during the pandemic when warehouses could not find enough workers, those facilities appear to be fully staffed today, Ferrigno said. The Los Angeles-Long Beach port complex, which accounts for almost 50% of US imports from Asia, handled an all-time high of 849,806 TEUs of Asian imports in August, up 23.7% year over year and about 16% higher than both August 2021 and 2022, according to PIERS, a Journal of Commerce sister product within S&P Global. Near-dock surge yards a safety valve Marine terminal operators say there are several additional developments since the pandemic that are fostering improved supply chain fluidity, notably the access to more near-dock “surge” yards that provide temporary storage for inbound containers until they are needed at the warehouses or put on trains headed eastbound. This frees up space at the terminals to handle a continuous discharge of import containers and prevents a backlog of ships in the harbor. “We’re definitely seeing more container dray-offs today,” said Sepehr Matinifar, vice president of logistics services at the Wonderful Company, a developer of industrial and storage space in Southern California. Major retailers such as Amazon and Walmart are heavy users of the near-dock storage yards, he said. Mario Cordero, executive director of the Port of Long Beach, cited the port’s Pier S overflow yard that is helping to keep dwell times for containers that are trucked from the terminals below three days. According to the Pacific Merchant Shipping Association (PMSA), which tracks container dwell times, the average dwell time in the port complex in August for containers leaving by truck was 2.95 days. That’s up from 2.81 days in July but was the 10th consecutive month of sub-three-day dwells since October 2023, according to PMSA. When marine terminals are fluid, vessels move immediately to berth and depart on schedule after they have been worked. That prevents the backlogs that developed during COVID-19, which reached a record 109 container ships in January 2022 , according to the Marine Exchange of Southern California. The Marine Exchange reported that a record 67 container ships are scheduled to arrive in the LA-LB port complex this week. “Vessels and cargo arriving, departing and shifting around the ports of LA and LB continue to move normally with no labor delays and ample labor,” said Kip Louttit, executive director of the Marine Exchange. The post-COVID environment was also marked by excessive off-terminal chassis dwell times as chassis-container units sat idle in warehouse yards or on the streets waiting for space to open at the warehouses. Chassis street dwells during and immediately after COVID spiked to more than 10 days , according to the Pool of Pools, which is managed by the three largest intermodal equipment providers (IEPs) in Southern California. According to the Pool of Pools, the average street dwell time for 40-foot chassis as of Thursday was 5.9 days. That is below the seven-day-plus dwell times that can contribute to port congestion and reduce chassis availability in the LA-LB harbor area. Another reason why there is no significant chassis shortage today is that a number of drayage operators serving the ports now own or lease chassis, which reduces their dependence on shared containers in the Pool of Pools and promotes a more efficient use of chassis, according to Matt Schrap, CEO of the Harbor Trucking Association. Rail container dwell times still excessive The only sector of the Southern California supply chain that continues to register below-par performance is intermodal rail. The average dwell time of rail containers on the Los Angeles-Long Beach marine terminals in August was 8.2 days, up from 5.66 days in July and the highest since November 2022. “There are some rail container backlogs now,” said Alan McCorkle, president of Yusen Terminals in Los Angeles. “We’ve had to activate one of our two near-dock areas to handle the rail container backlog.” Rail industry analyst Lawrence Gross, president and founder of Gross Transportation, said record volumes play a major role in the surge of long-dwelling rail containers at the ports. He said that according to the Association of American Railroads, last week was the busiest for North American intermodal rail since June 2021, and inland point intermodal (IPI) traffic is projected to remain strong at least through October. “If the volumes stay this strong for that long, then I think there will unavoidably be some problems. Congestion, but not a meltdown,” said Gross, also a Journal of Commerce analyst. BNSF Railway had its busiest week for IPI moves in the week before Labor Day, and new record volumes are forecast for the coming two weeks, said Jon Gabriel, BNSF’s vice president for innovation, service design and network strategy. Contact Bill Mongelluzzo at bill.mongelluzzo@spglobal.com .

Maritime

Container Shipping News

Port News

North American ports

Marine terminals

Supply chain

Southern California supply chain fluid despite surging import volumes

<div class="phx-topic abstract-wrapper">While there are still regulatory hurdles to clear, a spokesperson for DSV told the Journal of Commerce the combined company “will continue under the DSV brand” going forward.</div>

While there are still regulatory hurdles to clear, a spokesperson for DSV told the Journal of Commerce the combined company “will continue under the DSV brand” going forward.

<div class="phx-topic">The DB Schenker brand that two years ago celebrated its 150th anniversary will be absorbed by DSV, which last week acquired the Essen, Germany-based company for €14.3 billion ($15.9 billion). While there are <a href="https://www.joc.com/article/union-government-hurdles-ahead-in-dsvs-16-billion-takeover-of-db-schenker-5727281">still regulatory hurdles to clear</a> — and reports of rival bidder CVC Capital Partners urging DB Schenker to reconsider its intention to sell to the Denmark-based forwarder — a spokesperson for DSV told the Journal of Commerce that “going forward, the combined company will continue under the DSV brand.” That’s a path followed by the three major acquisitions DSV has made over the past decade — <a href="https://www.joc.com/article/dsv-buys-uti-for-135-billion-5205537">acquiring UTi in 2015</a> for $1.35 billion, <a href="https://www.joc.com/article/newly-combined-dsv-panalpina-targets-trans-pacific-trade-5226703">Panalpina in 2019</a> for $4.6 billion and <a href="https://www.joc.com/article/size-equals-value-in-fragmented-market-dsvs-andersen-5248808">Agility’s Global Integrated Logistics (GIL) in 2021</a> for $4.2 billion. Schenker &amp; Co. was founded in 1872 by Gottfried Schenker in Vienna and has developed into a global forwarder with approximately 75,000 employees. A combined DSV-DB Schenker entity will have close to 150,000 employees around the world with a 50/50 split. The size of the workforce featured prominently during takeover negotiations, with the final two bidders both pledging to limit redundancies. DSV included social commitments to DB Schenker jobs in the acquisition agreement as well as a pledge to invest €1 billion in Germany over the next three to five years, “which will contribute to ensuring long-term growth and job creation.” DSV noted in its acquisition statement last week that Germany “will be a key market for DSV with a substantial impact on the future organization.” The forwarder said “various central functions” of DB Schenker would remain in Germany, including the Schenker head office in Essen. Michael Clover, head of commercial development at consultancy Transport Intelligence (Ti), said DSV’s commitment to Germany in the final bidding stages appears to have been made to get the deal over the line with the federal government, while the jobs guarantee was aimed at placating German unions. “The German logistics industry is obviously enormous, but with German manufacturing down at the moment logistics growth is struggling in the country,” Clover told the Journal of Commerce. “Ti forecasts show that German freight forwarding will grow at a compound annual growth rate [CAGR] of 3.2% from 2023 to 2028, contract logistics at a CAGR of 1% and road freight at a 1.5%,” he added. “So, you could argue that the commitment to Germany for the next two years was all about securing the deal rather than about the growth opportunities in Germany.” Germany’s United Services Union, known as ver.di, had a wait-and-see attitude when contacted by the Journal of Commerce after the deal was signed last week. “For us, it is essential that as many jobs as possible are retained at the end of the sales process,” a union spokesperson said. <h3>World’s largest forwarder </h3>In global revenue terms, a combined DSV-DB Schenker will be the world’s largest forwarder with revenue of $39.3 billion based on 2023 results, according to DSV. Figures by market research firm Armstrong &amp; Associates put DHL Global Forwarding in second place globally at $33.8 billion and Kuehne + Nagel third with $31.6 billion. In terms of global ocean volume, Kuehne + Nagel remains at the top with 4.34 million TEUs against DSV-DB Schenker’s 4.30 million TEUs, with DHL Global Forwarding third at 3 million TEUs. DSV-DB Schenker is clearly ahead in air freight volume, handling a combined 2.45 million tons in 2023 against Kuehne + Nagel’s 1.9 million tons and DHL Global Forwarding’s 1.67 million tons. While the three Europe-based companies dominate the global forwarding market, it is a different picture on the trans-Pacific. Through the first eight months of this year, Kuehne + Nagel held the largest ocean market share of the three European forwarders, at 3.01% and 180,049 TEUs, but that was only good enough for fourth place, according to data from PIERS, a sister company of the Journal of Commerce within S&amp;P Global. California-based Kerry Apex led with a 5.21% share of the trans-Pacific market and volume of 312,195 TEUs. After the first eight months of 2024, DSV was at 21st place on the trans-Pacific with 53,193 TEUs and 0.89% of the market. The latest available data for DB Schenker is for January to August 2023, when it handled just 6,167 TEUs. “The combined entity will be a large player on the trans-Pacific, and this will be a benefit of the deal to help get DSV more exposure to this key trade lane, but not the driving rationale,” Clover noted. Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com">greg.knowler@spglobal.com</a>. </div>

The DB Schenker brand that two years ago celebrated its 150th anniversary will be absorbed by DSV, which last week acquired the Essen, Germany-based company for €14.3 billion ($15.9 billion). While there are still regulatory hurdles to clear — and reports of rival bidder CVC Capital Partners urging DB Schenker to reconsider its intention to sell to the Denmark-based forwarder — a spokesperson for DSV told the Journal of Commerce that “going forward, the combined company will continue under the DSV brand.” That’s a path followed by the three major acquisitions DSV has made over the past decade — acquiring UTi in 2015 for $1.35 billion, Panalpina in 2019 for $4.6 billion and Agility’s Global Integrated Logistics (GIL) in 2021 for $4.2 billion. Schenker & Co. was founded in 1872 by Gottfried Schenker in Vienna and has developed into a global forwarder with approximately 75,000 employees. A combined DSV-DB Schenker entity will have close to 150,000 employees around the world with a 50/50 split. The size of the workforce featured prominently during takeover negotiations, with the final two bidders both pledging to limit redundancies. DSV included social commitments to DB Schenker jobs in the acquisition agreement as well as a pledge to invest €1 billion in Germany over the next three to five years, “which will contribute to ensuring long-term growth and job creation.” DSV noted in its acquisition statement last week that Germany “will be a key market for DSV with a substantial impact on the future organization.” The forwarder said “various central functions” of DB Schenker would remain in Germany, including the Schenker head office in Essen. Michael Clover, head of commercial development at consultancy Transport Intelligence (Ti), said DSV’s commitment to Germany in the final bidding stages appears to have been made to get the deal over the line with the federal government, while the jobs guarantee was aimed at placating German unions. “The German logistics industry is obviously enormous, but with German manufacturing down at the moment logistics growth is struggling in the country,” Clover told the Journal of Commerce. “Ti forecasts show that German freight forwarding will grow at a compound annual growth rate [CAGR] of 3.2% from 2023 to 2028, contract logistics at a CAGR of 1% and road freight at a 1.5%,” he added. “So, you could argue that the commitment to Germany for the next two years was all about securing the deal rather than about the growth opportunities in Germany.” Germany’s United Services Union, known as ver.di, had a wait-and-see attitude when contacted by the Journal of Commerce after the deal was signed last week. “For us, it is essential that as many jobs as possible are retained at the end of the sales process,” a union spokesperson said. World’s largest forwarder In global revenue terms, a combined DSV-DB Schenker will be the world’s largest forwarder with revenue of $39.3 billion based on 2023 results, according to DSV. Figures by market research firm Armstrong & Associates put DHL Global Forwarding in second place globally at $33.8 billion and Kuehne + Nagel third with $31.6 billion. In terms of global ocean volume, Kuehne + Nagel remains at the top with 4.34 million TEUs against DSV-DB Schenker’s 4.30 million TEUs, with DHL Global Forwarding third at 3 million TEUs. DSV-DB Schenker is clearly ahead in air freight volume, handling a combined 2.45 million tons in 2023 against Kuehne + Nagel’s 1.9 million tons and DHL Global Forwarding’s 1.67 million tons. While the three Europe-based companies dominate the global forwarding market, it is a different picture on the trans-Pacific. Through the first eight months of this year, Kuehne + Nagel held the largest ocean market share of the three European forwarders, at 3.01% and 180,049 TEUs, but that was only good enough for fourth place, according to data from PIERS, a sister company of the Journal of Commerce within S&P Global. California-based Kerry Apex led with a 5.21% share of the trans-Pacific market and volume of 312,195 TEUs. After the first eight months of 2024, DSV was at 21st place on the trans-Pacific with 53,193 TEUs and 0.89% of the market. The latest available data for DB Schenker is for January to August 2023, when it handled just 6,167 TEUs. “The combined entity will be a large player on the trans-Pacific, and this will be a benefit of the deal to help get DSV more exposure to this key trade lane, but not the driving rationale,” Clover noted. Contact Greg Knowler at greg.knowler@spglobal.com .

Air Cargo Forwarder News

Forwarding

Trans-Pacific

DSV takeover signals end to 150 years of DB Schenker brand

<div class="phx-topic abstract-wrapper">The forwarder did not provide financial details, but CEO James Gagne told the Journal of Commerce the transaction puts SEKO on solid financial footing.</div>

The forwarder did not provide financial details, but CEO James Gagne told the Journal of Commerce the transaction puts SEKO on solid financial footing.

<div class="phx-topic">SEKO Logistics on Thursday confirmed it has reached a definitive agreement with its existing financial partners in a move to reinforce its financial position. The forwarder did not provide financial details or disclose which existing backers are involved, but CEO James Gagne told the Journal of Commerce the transaction puts SEKO on solid financial footing. “This recapitalization transaction strengthens our balance sheet and gives us capital to enhance our service offerings, further invest in our team, our network, and technology, and expand our global footprint,” he said. In a separate statement, Gagne noted that the ongoing freight recession has “impacted the entire market.” “…[B]y proactively addressing our balance sheet, we will be at the forefront of the industry and better equipped to navigate these challenges...,” he said. Private equity firm Ridgemont Equity Partners acquired a majority stake in SEKO in early 2021. North Carolina-based Ridgemont, a middle-market buyout and growth equity investor, took over as SEKO’s lead investor from Greenbriar Equity, a New York-based firm that retained a stake in the forwarder. The exact size of the ownership stakes in SEKO held by Ridgemont and Greenbriar were not disclosed at the time. The transaction announced Thursday, expected to close in the coming weeks, comes amid a flurry of acquisitions in the forwarding space, most notably <a href="https://www.joc.com/article/union-government-hurdles-ahead-in-dsvs-16-billion-takeover-of-db-schenker-5727281">DSV confirming Friday it is acquiring DB Schenker for $16 billion</a>. Earlier in September, <a href="https://www.joc.com/article/dp-world-adds-hong-kong-forwarder-to-growing-3pl-network-5717969">DP World acquired Hong Kong-based Cargo Services Far East</a>. In March, <a href="https://www.joc.com/article/msc-unit-secures-takeover-of-french-forwarder-clasquin-5244502">Mediterranean Shipping Company acquired French forwarder Clasquin</a>. Contact Eric Johnson at <a href="mailto:eric.johnson@spglobal.com">eric.johnson@spglobal.com</a>. </div>

SEKO Logistics on Thursday confirmed it has reached a definitive agreement with its existing financial partners in a move to reinforce its financial position. The forwarder did not provide financial details or disclose which existing backers are involved, but CEO James Gagne told the Journal of Commerce the transaction puts SEKO on solid financial footing. “This recapitalization transaction strengthens our balance sheet and gives us capital to enhance our service offerings, further invest in our team, our network, and technology, and expand our global footprint,” he said. In a separate statement, Gagne noted that the ongoing freight recession has “impacted the entire market.” “…[B]y proactively addressing our balance sheet, we will be at the forefront of the industry and better equipped to navigate these challenges...,” he said. Private equity firm Ridgemont Equity Partners acquired a majority stake in SEKO in early 2021. North Carolina-based Ridgemont, a middle-market buyout and growth equity investor, took over as SEKO’s lead investor from Greenbriar Equity, a New York-based firm that retained a stake in the forwarder. The exact size of the ownership stakes in SEKO held by Ridgemont and Greenbriar were not disclosed at the time. The transaction announced Thursday, expected to close in the coming weeks, comes amid a flurry of acquisitions in the forwarding space, most notably DSV confirming Friday it is acquiring DB Schenker for $16 billion . Earlier in September, DP World acquired Hong Kong-based Cargo Services Far East . In March, Mediterranean Shipping Company acquired French forwarder Clasquin . Contact Eric Johnson at eric.johnson@spglobal.com .

SEKO secures fresh financial backing amid prolonged forwarding industry slump

<div class="phx-topic abstract-wrapper">Eight straight months of double-digit volume growth and a massive increase in trans-Pacific and Asia-Europe e-commerce volumes, mostly shipped from China by air, has left air cargo capacity in short supply.</div>

Eight straight months of double-digit volume growth and a massive increase in trans-Pacific and Asia-Europe e-commerce volumes, mostly shipped from China by air, has left air cargo capacity in short supply.

<div class="phx-topic">A strike-driven surge in demand for air cargo capacity if ports along the US East and Gulf coasts are shut down from Oct. 1 would come at the worst possible time for an air freight sector that is preparing for a strong peak season with capacity already severely limited. Eight straight months of double-digit growth and a massive increase in trans-Pacific and Asia-Europe e-commerce volumes this year, mostly shipped from China by air, have kept rates elevated and encouraged airlines <a href="https://www.joc.com/article/lure-of-robust-asian-peak-season-a-magnet-for-air-cargo-capacity-5728658">to shift freighter capacity from other trades</a> to the booming ex-Asia markets. Angel Rodriguez, president of ASF Air, said a port strike in the US would quickly create a backlog in shipments of “artificial or unplanned air freight” that would typically have moved by ocean. “Now consider this occurring during the busiest season for air freight with the increased demand for e-commerce, holiday season around the corner and new product launches such as smart phones, all fighting for the same capacity from similar markets,” Rodriguez told the Journal of Commerce. Air freight rates out of China to the US and Europe have been elevated all year with e-commerce volume dominating shipments and longer ship voyages around southern Africa to avoid the Red Sea shifting urgent freight from ocean to the air. Load factors in August were at 87% on Asia-North America and 86% on both the Asia-Europe and Asia-Middle East routes, meaning they are effectively full. Air freight rates are being pushed up by a wide supply-demand imbalance, with supply growth in August increasing 2% year over year while demand was up 11%, according to rate benchmarking platform Xeneta. Data from the Baltic Air Index (BAI) shows that rates for the week ending Sept. 16 from China to the US were up 30% year over year at $5.87 per kilogram and China to Europe up 28%, at $4.10/kg. <h3>Scramble for space </h3>Airline executives estimate the top four Chinese e-commerce platforms use 150 freighters per day to move online orders to destination markets, most of that capacity contracted directly with airlines. That is leaving forwarders serving traditional air freight customers scrambling to find space in an ever-tightening market. Alberto Mathia, regional head of air freight for the Americas at Hellmann Worldwide Logistics, said capacity was a growing issue and that air freight rates, especially from Asia, were already rising, regardless of a potential port strike in the US. “Capacity will become even tighter as passenger flights may reduce after the summer schedule, creating additional challenges for already limited air capacity due to e-commerce from Asia and Red Sea diversions,” Mathia said. Rodriguez said shippers should already be discussing contingency plans with their service providers to identify solutions to keep production lines moving undisturbed. “Many of our clients at ASF have already started looking at full and part charters to have a safety stock in the unfortunate event that a strike does indeed occur,” he said. Charter rates are also rising sharply, however, with reports of a return freighter flight on the Europe-South America trade lane recently contracted for more than $1 million. <h3>‘Storm coming’ to China export markets </h3>Niall van de Wouw, chief air freight officer at Xeneta, said the air cargo industry was facing “an extremely challenging year-end peak season,” when volumes traditionally increase in the run up to Christmas and New Year. “There is a storm coming to the outbound China air freight market,” he warned. “Shippers need to take action now and have a clear plan in place for when the storm hits, such as working with their vendor to minimize the use of spot market capacity, which will likely come at spiraling costs.” While a port strike along the US East and Gulf coasts will impact air cargo exports from China, the trans-Atlantic air freight market could be hit hard, said Glyn Hughes, director general of The International Air Cargo Association (Tiaca). “To satisfy the demand, much of which is driven by e-commerce, air cargo freighter operators have been repositioning freighters to serve these high demand-Asian markets,” Hughes told the Journal of Commerce. “This has resulted in some trans-Atlantic freighter operations being stopped. “If the...port strike goes ahead then some cargo will undoubtedly need to move by air, but capacity will be in short supply,” he added. “There will also be an expected reduction in passenger belly capacity as winter schedules may also see reduced services.” However, the tight capacity will push up air cargo rates, and Hughes said this could lead to airlines moving freighters back to the trans-Atlantic market. “But I think the capacity challenge will act as a form of volume restriction, and I wouldn’t expect to see cargo facilities [in the US] being overrun with air cargo volume,” he added. Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com">greg.knowler@spglobal.com</a>. </div>

A strike-driven surge in demand for air cargo capacity if ports along the US East and Gulf coasts are shut down from Oct. 1 would come at the worst possible time for an air freight sector that is preparing for a strong peak season with capacity already severely limited. Eight straight months of double-digit growth and a massive increase in trans-Pacific and Asia-Europe e-commerce volumes this year, mostly shipped from China by air, have kept rates elevated and encouraged airlines to shift freighter capacity from other trades to the booming ex-Asia markets. Angel Rodriguez, president of ASF Air, said a port strike in the US would quickly create a backlog in shipments of “artificial or unplanned air freight” that would typically have moved by ocean. “Now consider this occurring during the busiest season for air freight with the increased demand for e-commerce, holiday season around the corner and new product launches such as smart phones, all fighting for the same capacity from similar markets,” Rodriguez told the Journal of Commerce. Air freight rates out of China to the US and Europe have been elevated all year with e-commerce volume dominating shipments and longer ship voyages around southern Africa to avoid the Red Sea shifting urgent freight from ocean to the air. Load factors in August were at 87% on Asia-North America and 86% on both the Asia-Europe and Asia-Middle East routes, meaning they are effectively full. Air freight rates are being pushed up by a wide supply-demand imbalance, with supply growth in August increasing 2% year over year while demand was up 11%, according to rate benchmarking platform Xeneta. Data from the Baltic Air Index (BAI) shows that rates for the week ending Sept. 16 from China to the US were up 30% year over year at $5.87 per kilogram and China to Europe up 28%, at $4.10/kg. Scramble for space Airline executives estimate the top four Chinese e-commerce platforms use 150 freighters per day to move online orders to destination markets, most of that capacity contracted directly with airlines. That is leaving forwarders serving traditional air freight customers scrambling to find space in an ever-tightening market. Alberto Mathia, regional head of air freight for the Americas at Hellmann Worldwide Logistics, said capacity was a growing issue and that air freight rates, especially from Asia, were already rising, regardless of a potential port strike in the US. “Capacity will become even tighter as passenger flights may reduce after the summer schedule, creating additional challenges for already limited air capacity due to e-commerce from Asia and Red Sea diversions,” Mathia said. Rodriguez said shippers should already be discussing contingency plans with their service providers to identify solutions to keep production lines moving undisturbed. “Many of our clients at ASF have already started looking at full and part charters to have a safety stock in the unfortunate event that a strike does indeed occur,” he said. Charter rates are also rising sharply, however, with reports of a return freighter flight on the Europe-South America trade lane recently contracted for more than $1 million. ‘Storm coming’ to China export markets Niall van de Wouw, chief air freight officer at Xeneta, said the air cargo industry was facing “an extremely challenging year-end peak season,” when volumes traditionally increase in the run up to Christmas and New Year. “There is a storm coming to the outbound China air freight market,” he warned. “Shippers need to take action now and have a clear plan in place for when the storm hits, such as working with their vendor to minimize the use of spot market capacity, which will likely come at spiraling costs.” While a port strike along the US East and Gulf coasts will impact air cargo exports from China, the trans-Atlantic air freight market could be hit hard, said Glyn Hughes, director general of The International Air Cargo Association (Tiaca). “To satisfy the demand, much of which is driven by e-commerce, air cargo freighter operators have been repositioning freighters to serve these high demand-Asian markets,” Hughes told the Journal of Commerce. “This has resulted in some trans-Atlantic freighter operations being stopped. “If the...port strike goes ahead then some cargo will undoubtedly need to move by air, but capacity will be in short supply,” he added. “There will also be an expected reduction in passenger belly capacity as winter schedules may also see reduced services.” However, the tight capacity will push up air cargo rates, and Hughes said this could lead to airlines moving freighters back to the trans-Atlantic market. “But I think the capacity challenge will act as a form of volume restriction, and I wouldn’t expect to see cargo facilities [in the US] being overrun with air cargo volume,” he added. Contact Greg Knowler at greg.knowler@spglobal.com .

Air Cargo Carriers News

Air Cargo

Limited air freight capacity available for US port strike-driven cargo shift

<div class="phx-topic abstract-wrapper">Port users are concerned that if the technology and infrastructure needed to support a zero-emission environment is not built out, the industry’s only recourse will be to cap cargo volumes at Los Angeles and Long Beach.</div>

Port users are concerned that if the technology and infrastructure needed to support a zero-emission environment is not built out, the industry’s only recourse will be to cap cargo volumes at Los Angeles and Long Beach.

<div class="phx-topic">Shippers, transportation interests and the International Longshore and Warehouse Union (ILWU) are urging the mayors of Los Angeles and Long Beach to lead the effort against the implementation of new regional air emissions rules they say will cap cargo growth at the largest US port complex. In a letter dated Sept. 17 and sent to Los Angeles Mayor Karen Bass and Long Beach Mayor Rex Richardson, some 200 port stakeholders said the ambitious plan by the regional South Coast Air Quality Management District (AQMD) to adopt a so-called Port Independent Source Rule (ISR) would fail to achieve the goal of a zero-emission port environment without first building the electric and hydrogen fuel infrastructure needed to fuel trucks, cargo-handling equipment and vessel operations. “There is broad agreement among stakeholders that it would be more effective and productive to forego a Port ISR and instead focus on an infrastructure and streamlined permitting program to support current and future needs related to zero-emission infrastructure and equipment,” the letter said. Port users are concerned that if the technology and infrastructure needed to support a zero-emission environment is not built out, the industry’s only recourse will be to cap cargo volumes, which would limit the annual number of vessel, truck and rail movements in the Los Angeles-Long Beach port complex and at warehouses throughout Southern California that are served by port traffic. That was echoed by the Pacific Merchant Shipping Association (PMSA), which represents terminal operators and shipping lines on the West Coast. “Without necessary infrastructure, the proposed Port ISR would result in a cap on cargo volumes and ultimately punish ports, marine terminal operators and supply chain workers who have already worked hard to reduce diesel pollution by 90%,” PMSA said in a statement Wednesday. An existing regulatory framework from the US Environmental Protection Agency and California Air Resources Board (CARB) already limits emissions from cargo-handling equipment, trucks, locomotives, vessels and other port users, said Thomas Jelenic, PMSA’s vice president. “We have the regulations in place,” Jelenic told the Journal of Commerce Wednesday. “It doesn’t make sense to duplicate the Rail ISR and existing CARB requirements.” The AQMD board last month approved the Rail ISR and the regulatory agency has said it will focus on the Port ISR in the first quarter of 2025, according to Michele Grubbs, another PMSA vice president. Contact Bill Mongelluzzo at <a href="mailto:bill.mongelluzzo@spglobal.com">bill.mongelluzzo@spglobal.com</a>. </div>

Shippers, transportation interests and the International Longshore and Warehouse Union (ILWU) are urging the mayors of Los Angeles and Long Beach to lead the effort against the implementation of new regional air emissions rules they say will cap cargo growth at the largest US port complex. In a letter dated Sept. 17 and sent to Los Angeles Mayor Karen Bass and Long Beach Mayor Rex Richardson, some 200 port stakeholders said the ambitious plan by the regional South Coast Air Quality Management District (AQMD) to adopt a so-called Port Independent Source Rule (ISR) would fail to achieve the goal of a zero-emission port environment without first building the electric and hydrogen fuel infrastructure needed to fuel trucks, cargo-handling equipment and vessel operations. “There is broad agreement among stakeholders that it would be more effective and productive to forego a Port ISR and instead focus on an infrastructure and streamlined permitting program to support current and future needs related to zero-emission infrastructure and equipment,” the letter said. Port users are concerned that if the technology and infrastructure needed to support a zero-emission environment is not built out, the industry’s only recourse will be to cap cargo volumes, which would limit the annual number of vessel, truck and rail movements in the Los Angeles-Long Beach port complex and at warehouses throughout Southern California that are served by port traffic. That was echoed by the Pacific Merchant Shipping Association (PMSA), which represents terminal operators and shipping lines on the West Coast. “Without necessary infrastructure, the proposed Port ISR would result in a cap on cargo volumes and ultimately punish ports, marine terminal operators and supply chain workers who have already worked hard to reduce diesel pollution by 90%,” PMSA said in a statement Wednesday. An existing regulatory framework from the US Environmental Protection Agency and California Air Resources Board (CARB) already limits emissions from cargo-handling equipment, trucks, locomotives, vessels and other port users, said Thomas Jelenic, PMSA’s vice president. “We have the regulations in place,” Jelenic told the Journal of Commerce Wednesday. “It doesn’t make sense to duplicate the Rail ISR and existing CARB requirements.” The AQMD board last month approved the Rail ISR and the regulatory agency has said it will focus on the Port ISR in the first quarter of 2025, according to Michele Grubbs, another PMSA vice president. Contact Bill Mongelluzzo at bill.mongelluzzo@spglobal.com .

Transport, Trade and Regulation News

Port infrastructure

LA-LB port stakeholders urge mayors to act against proposed emissions rules

<div class="phx-topic abstract-wrapper">The contingency plans by the ports come as some ocean carriers are cutting off new export bookings ahead of the possible work stoppage and issuing surcharges for cargo en route to ports that may be closed on Oct. 1. </div>

The contingency plans by the ports come as some ocean carriers are cutting off new export bookings ahead of the possible work stoppage and issuing surcharges for cargo en route to ports that may be closed on Oct. 1.

<div class="phx-topic">This article has been corrected to reflect that Ocean Network Express is still accepting US export bookings and has not embargoed exports due to the potential strikeSome ports along the US East and Gulf coasts are going public with their contingency plans ahead of a planned strike by dockworkers on Oct. 1, including staying open for business on weekends. The plans for a work stoppage come as ocean carriers surcharges for cargo en route to potentially closed ports. <a href="https://www.joc.com/article/maritime-employers-prep-for-wind-down-of-operations-as-longshore-strike-looms-5728724">The contingency plans</a> come amid the increasing likelihood that <a href="https://www.joc.com/article/port-employers-urge-ila-to-return-to-contract-talks-5723976">the International Longshoremen’s Association (ILA) will not reach an agreement with the United States Maritime Alliance (USMX) for a new master contract covering East and Gulf coast dockworkers</a>. ILA President Harold Daggett has told his members that the union will not agree to an extension once the current contract expires on Sept. 30. The Georgia Ports Authority (GPA) said in a customer advisory Wednesday that shippers should take delivery of cargo before Oct. 1, noting its Garden City Terminal in Savannah will be closed after that in the event of a strike. In addition to opening for the two Saturdays remaining in September, Garden City will open for a full day on Sunday, Sept. 29 for cargo retrieval. The GPA said it will take export containers until Sept. 30, including refrigerated containers. But it said that if a reefer box does not make it onto a ship by that day, “they will not be monitored and maintained if the port is closed due to a work stoppage.” The GPA added that it will not charge terminal demurrage to shippers during a work stoppage. A notice Wednesday from the Port of Houston said its two container terminals plan to open truck gates and work on vessels up until 7 pm on Sept. 30, with the cutoff for export drop-offs an hour earlier. The port said it is evaluating the need for extending regular work hours for the terminals next week, with plans to open Saturday, Sept. 28. “We encourage imports to be picked up as soon as possible, anything in the yard after 7 pm on September 30th, 2024, will be unavailable until the work stoppage ends,” the notice said. Houston said it would waive an import dwell fee for containers. The Port of Virginia said in an operations alert that it will open its two main container terminals and the Pinner’s Point Container Yard, which handles empties and chassis, for the next two Saturdays and the Sunday immediately before a strike. <h2>Port Disruption Surcharges</h2>Ocean carriers have not been as public about what they plan to do in the event of a strike. The ILA has warned USMX carriers that it will monitor any ships diverted from East and Gulf coast ports. For now, liner operators are also preparing for a potential work stoppage. Several sources have told the Journal of Commerce that Cosco Shipping not accepting new export bookings from inland US destinations. Hapag-Lloyd notified customers it may speed up vessels and that import discharge will be prioritized once ships berth in the days before a possible strike begins. The carrier said it is also reviewing port rotation changes or which ports to omit in the event of a strike. Along with stopping some cargo bookings, some ocean carriers are levying new charges for handling any cargo that is currently en route to East and Gulf coast ports but may be affected by a port strike. Hapag-Lloyd announced Wednesday a “work disruption surcharge” of $1,000 per TEU that would apply to non-Asia exports headed to the US East and Gulf coasts. The surcharge goes into effect Oct. 18, <a href="https://www.joc.com/article/fmc-to-hold-february-hearing-on-carriers-red-sea-linked-surcharges-5200562">in accordance with the 30-day notice requirement under US shipping law</a>. CMA CGM announced last week that it would implement beginning Oct. 11 a “local port charge” of $1,500 per TEU for cargo destined to East and Gulf coast ports. Contact Michael Angell at <a href="mailto:michael.angell@spglobal.com">michael.angell@spglobal.com</a>.</div>

This article has been corrected to reflect that Ocean Network Express is still accepting US export bookings and has not embargoed exports due to the potential strike Some ports along the US East and Gulf coasts are going public with their contingency plans ahead of a planned strike by dockworkers on Oct. 1, including staying open for business on weekends. The plans for a work stoppage come as ocean carriers surcharges for cargo en route to potentially closed ports. The contingency plans come amid the increasing likelihood that the International Longshoremen’s Association (ILA) will not reach an agreement with the United States Maritime Alliance (USMX) for a new master contract covering East and Gulf coast dockworkers . ILA President Harold Daggett has told his members that the union will not agree to an extension once the current contract expires on Sept. 30. The Georgia Ports Authority (GPA) said in a customer advisory Wednesday that shippers should take delivery of cargo before Oct. 1, noting its Garden City Terminal in Savannah will be closed after that in the event of a strike. In addition to opening for the two Saturdays remaining in September, Garden City will open for a full day on Sunday, Sept. 29 for cargo retrieval. The GPA said it will take export containers until Sept. 30, including refrigerated containers. But it said that if a reefer box does not make it onto a ship by that day, “they will not be monitored and maintained if the port is closed due to a work stoppage.” The GPA added that it will not charge terminal demurrage to shippers during a work stoppage. A notice Wednesday from the Port of Houston said its two container terminals plan to open truck gates and work on vessels up until 7 pm on Sept. 30, with the cutoff for export drop-offs an hour earlier. The port said it is evaluating the need for extending regular work hours for the terminals next week, with plans to open Saturday, Sept. 28. “We encourage imports to be picked up as soon as possible, anything in the yard after 7 pm on September 30th, 2024, will be unavailable until the work stoppage ends,” the notice said. Houston said it would waive an import dwell fee for containers. The Port of Virginia said in an operations alert that it will open its two main container terminals and the Pinner’s Point Container Yard, which handles empties and chassis, for the next two Saturdays and the Sunday immediately before a strike. Port Disruption Surcharges Ocean carriers have not been as public about what they plan to do in the event of a strike. The ILA has warned USMX carriers that it will monitor any ships diverted from East and Gulf coast ports. For now, liner operators are also preparing for a potential work stoppage. Several sources have told the Journal of Commerce that Cosco Shipping not accepting new export bookings from inland US destinations. Hapag-Lloyd notified customers it may speed up vessels and that import discharge will be prioritized once ships berth in the days before a possible strike begins. The carrier said it is also reviewing port rotation changes or which ports to omit in the event of a strike. Along with stopping some cargo bookings, some ocean carriers are levying new charges for handling any cargo that is currently en route to East and Gulf coast ports but may be affected by a port strike. Hapag-Lloyd announced Wednesday a “work disruption surcharge” of $1,000 per TEU that would apply to non-Asia exports headed to the US East and Gulf coasts. The surcharge goes into effect Oct. 18, in accordance with the 30-day notice requirement under US shipping law . CMA CGM announced last week that it would implement beginning Oct. 11 a “local port charge” of $1,500 per TEU for cargo destined to East and Gulf coast ports. Contact Michael Angell at michael.angell@spglobal.com .

Container lines

Longshore labor

Some US ports extending gate hours ahead of strike deadline

<div class="phx-topic abstract-wrapper"> Alone among the modes, the railroads are not able to say “no” to the demands of interior point intermodal (IPI), most recently seen in the surge of imports through the US Pacific Northwest and the congestion that followed, writes intermodal analyst Larry Gross. </div>

Alone among the modes, the railroads are not able to say “no” to the demands of interior point intermodal (IPI), most recently seen in the surge of imports through the US Pacific Northwest and the congestion that followed, writes intermodal analyst Larry Gross.

<div class="phx-topic">Container dwell times are up in the Pacific Northwest (PNW) and the undertone of grumbling regarding the railroads’ inability to meet market demands can be heard. But is it reasonable to expect the railroads to be able to react to such giant swings in the market? There’s no doubt <a href="https://www.joc.com/article/rail-container-dwells-in-seattle-tacoma-still-high-but-relief-in-sight-5721796">that imports continue to run strong</a>. Loaded inbound TEUs arriving in the ports of the United States and Western Canada were up more than 18% in July versus 2023. The fact that we are not seeing similar increases in domestic truck demand suggests that there are some special factors at work driving imports. Most likely we are seeing the compound effect of strong retail sales (much more important for imports than for trucking in general) magnified by the desire of importers to get their goods in place earlier than normal. This is a sensible reaction to congestion concerns, the potential US East Coast port strike at the end of September, and the looming threat of big tariff increases, depending on the results of the presidential election. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="77c5d7bd-d3ce-4657-bd57-1af4e55919d8"></dynamic-object></div>But that’s not all, because the share of that import surge that is arriving in the PNW saw a huge spike in June, rising to 5.3% of all inbound loaded TEUs versus an average share over the past 12 months of 4.3%. It has since settled back to average in July but that big bump is still working its way through the system. <h3>Driving the shift </h3>There are good reasons why importers turned to the PNW as a preferred option for freight out of Asia bound for the North American interior. Neighboring Western Canadian ports, normally a sizeable player for freight bound for the US Midwest, were hampered by the prospect of a rail strike on both Canadian National Railway and Canadian Pacific Kansas City (CPKC). While the situation <a href="https://www.joc.com/article/canadian-rail-workers-back-on-job-after-failed-challenge-to-binding-arbitration-5712234">has recently been settled by government intervention</a> (at least for the moment, pending the resolution of legal challenges to the arbitration requirement by the union), from a routing perspective, the next month or two are already baked in. Importers have made their decisions, and the freight is inbound to alternative ports versus Vancouver and Prince Rupert. Things will eventually normalize but not before the bulk of peak season has passed. Southern California is another routing option, but Los Angeles and Long Beach have had their own share of congestion already. What this all means is that there has been a huge upswing in IPI volume moving east out of the Northwest region, as shown by the two charts below. Over the past 6 months, monthly international container originations out of the region have increased by 60%, with July coming in 41% above the prior year. Twenty-thousand more ISO boxes flowed out of the region in July than did in January, roughly 100 more 200-unit trains or about four or five per working day. Based on these numbers, I would say that the railroads have performed quite impressively. <h3>Take it or take it </h3>Alone among the modes, the railroads are not in a position to say ‘no’ to the demands of IPI. No-one seems surprised when the steamship lines roll cargo from one vessel to another during periods of peak demand. Sometimes extra loaders are scheduled, when the ocean carrier deems it to be profitable, but there is certainly not the expectation that the liner companies will automatically ramp up their sailing schedule when demand warrants. Similarly, truckers only accept the loads that they have the capacity to handle. This is normal, expected behavior and the BCO response typically is to start working their way down the company’s list of preferred carriers to place the overflow. But that’s not how IPI works for the railroads. They don’t have the opportunity or ability to say no. The cargo arrives in the port and the expectation is that the railroad will forward it inland without delay, no matter how much volatility or variation in demand. If there is some good news in all this, it’s that it appears that the pressure may be easing. TEUs arriving in PNW ports dropped over 15% from June to July. This has yet to be reflected in the IPI originations but likely we will see some relief when the August figures come out. Further, to the extent that a good chunk of this surge represents up-streamed volume, we should see a more rapid fall-off in demand in the coming months than the normal seasonal drop. Contact Larry Gross at <a href="mailto:lgross@iintermodalindepth.com">lgross@intermodalindepth.com</a>. </div>

Container dwell times are up in the Pacific Northwest (PNW) and the undertone of grumbling regarding the railroads’ inability to meet market demands can be heard. But is it reasonable to expect the railroads to be able to react to such giant swings in the market? There’s no doubt that imports continue to run strong . Loaded inbound TEUs arriving in the ports of the United States and Western Canada were up more than 18% in July versus 2023. The fact that we are not seeing similar increases in domestic truck demand suggests that there are some special factors at work driving imports. Most likely we are seeing the compound effect of strong retail sales (much more important for imports than for trucking in general) magnified by the desire of importers to get their goods in place earlier than normal. This is a sensible reaction to congestion concerns, the potential US East Coast port strike at the end of September, and the looming threat of big tariff increases, depending on the results of the presidential election. But that’s not all, because the share of that import surge that is arriving in the PNW saw a huge spike in June, rising to 5.3% of all inbound loaded TEUs versus an average share over the past 12 months of 4.3%. It has since settled back to average in July but that big bump is still working its way through the system. Driving the shift There are good reasons why importers turned to the PNW as a preferred option for freight out of Asia bound for the North American interior. Neighboring Western Canadian ports, normally a sizeable player for freight bound for the US Midwest, were hampered by the prospect of a rail strike on both Canadian National Railway and Canadian Pacific Kansas City (CPKC). While the situation has recently been settled by government intervention (at least for the moment, pending the resolution of legal challenges to the arbitration requirement by the union), from a routing perspective, the next month or two are already baked in. Importers have made their decisions, and the freight is inbound to alternative ports versus Vancouver and Prince Rupert. Things will eventually normalize but not before the bulk of peak season has passed. Southern California is another routing option, but Los Angeles and Long Beach have had their own share of congestion already. What this all means is that there has been a huge upswing in IPI volume moving east out of the Northwest region, as shown by the two charts below. Over the past 6 months, monthly international container originations out of the region have increased by 60%, with July coming in 41% above the prior year. Twenty-thousand more ISO boxes flowed out of the region in July than did in January, roughly 100 more 200-unit trains or about four or five per working day. Based on these numbers, I would say that the railroads have performed quite impressively. Take it or take it Alone among the modes, the railroads are not in a position to say ‘no’ to the demands of IPI. No-one seems surprised when the steamship lines roll cargo from one vessel to another during periods of peak demand. Sometimes extra loaders are scheduled, when the ocean carrier deems it to be profitable, but there is certainly not the expectation that the liner companies will automatically ramp up their sailing schedule when demand warrants. Similarly, truckers only accept the loads that they have the capacity to handle. This is normal, expected behavior and the BCO response typically is to start working their way down the company’s list of preferred carriers to place the overflow. But that’s not how IPI works for the railroads. They don’t have the opportunity or ability to say no. The cargo arrives in the port and the expectation is that the railroad will forward it inland without delay, no matter how much volatility or variation in demand. If there is some good news in all this, it’s that it appears that the pressure may be easing. TEUs arriving in PNW ports dropped over 15% from June to July. This has yet to be reflected in the IPI originations but likely we will see some relief when the August figures come out. Further, to the extent that a good chunk of this surge represents up-streamed volume, we should see a more rapid fall-off in demand in the coming months than the normal seasonal drop. Contact Larry Gross at lgross@intermodalindepth.com .

Intermodal providers

Rails have limited recourse to PNW import surge: analyst

<div class="phx-topic abstract-wrapper">The holy grail of end-to-end enablement within the container shipping booking process remains elusive, and automation can’t fix that, writes consultant John McCauley.</div>

The holy grail of end-to-end enablement within the container shipping booking process remains elusive, and automation can’t fix that, writes consultant John McCauley.

<div class="phx-topic">Don’t automate broken container processes, fix them first. That adage is as relevant now as ever as container shipping is swept up in the broader global AI fever. The fragmentation of shipping processes upstream and downstream is as equally problematic as the often-differing data standards across all actors, albeit with ongoing efforts to improve the data part through, for example, the Digital Container Shipping Association. That the standard booking process to place and receive confirmation of an order has improved significantly is a testimony to both the simplicity of the process and the advancement of multiple channels of access. (I am deliberately not addressing specialist booking processes for out of gauge or dangerous goods that require specific non-technology enabled processes). However, the booking process for most participants is a small part of wider processes and it is here that the process breaks down and the holy grail of end-to-end enablement remains elusive. Here is a typical example: Supplier A receives an order in its enterprise resource system (ERP) system from Customer B. The order has a unique reference set of characters, as does the automated purchase order generated toward the carrier either directly or through a non-vessel-operating common carrier (NVO). The order is placed with the carrier and acceptance is confirmed. If the ERP is not connected to the aggregated order process technology (e.g. CargoWise, Infor/GTN, et al.) then some form of interface mapping is required. If the data is incomplete or contains errors, then the flow stops, and A cannot confirm the order to B without intervention. If A is not using an aggregated technology and connects to each carrier individually, then the issues multiply. If any of these fail or are unreliable, manual monitoring and/or backup is needed. That this simple part of the process is broken does not include the major issues relating to reliability. Let’s assume the order placed by A is accepted. What percentage likelihood is there that the order will be shipped in full on the vessel nominated and/or on the ETA date scheduled and therefore with a likelihood of arrival at the next stage in the chain within an acceptable margin of on time to 48 hours’ delay? If you are lucky enough to be a last port load to first port arrival, then the transit time can be met but the other components are less likely to be achieved. If not, the reliability likelihood diminishes. The time for loading and discharging a vessel requires firm and reliable dates to plan at origin the production, storage, loading and domestic transportation, while at the receiving end, depending on the product, use receipt, inventory planning, sale, storage or any other number of dependent processes. <h3>Favoring other modes </h3>But here are the bigger points. Firstly, for many beneficial cargo owners (BCOs), movement of goods by container is a small part of their overall transportation volume. Far greater volume is sent by other modes, particularly road, and often this is the mode of transport directly interfacing with end-customers. So, for many BCOs, container shipping is at best a niche activity requiring specialist knowledge, and as with so much of logistics, only ever matters in a crisis such as a lack of space, rolled cargo, stratospheric price hikes, etc. For those that rely on container shipping for the functioning of their supply chain, such as retail customers, the profile is much higher. For me, there are the three main reasons why BCOs choose to favor other modes of transport when investing in a transportation management system (TMS). Firstly, the sheer volume of road transportation and its customer impact leads to this mode receiving top priority for TMS investment and enhancement. Secondly, the broken processes of container shipping (with its low likelihood of ever truly improving) will always play against any container TMS investment. Finally, people understand road, rail and air, but ocean shipping less so. So when we say that road transport “on time in full” is 95% and container shipping globally is about 60%, eyes glaze over as the logistics expert tries to summarize the difference. The typical investment criteria, aside from financial, will be “Does it help my customers, reliably and consistently?” and “Will it lead to efficiency in the end-to-end process?” Regrettably, the answer to both of these is “not enough.” Contact John McCauley at <a href="mailto:john-mccauley1@outlook.com">john-mccauley1@outlook.com</a>. John McCauley, formerly a long-standing vice president of transportation and logistics at Cargill, now consults for shippers. </div>

Don’t automate broken container processes, fix them first. That adage is as relevant now as ever as container shipping is swept up in the broader global AI fever. The fragmentation of shipping processes upstream and downstream is as equally problematic as the often-differing data standards across all actors, albeit with ongoing efforts to improve the data part through, for example, the Digital Container Shipping Association. That the standard booking process to place and receive confirmation of an order has improved significantly is a testimony to both the simplicity of the process and the advancement of multiple channels of access. (I am deliberately not addressing specialist booking processes for out of gauge or dangerous goods that require specific non-technology enabled processes). However, the booking process for most participants is a small part of wider processes and it is here that the process breaks down and the holy grail of end-to-end enablement remains elusive. Here is a typical example: Supplier A receives an order in its enterprise resource system (ERP) system from Customer B. The order has a unique reference set of characters, as does the automated purchase order generated toward the carrier either directly or through a non-vessel-operating common carrier (NVO). The order is placed with the carrier and acceptance is confirmed. If the ERP is not connected to the aggregated order process technology (e.g. CargoWise, Infor/GTN, et al.) then some form of interface mapping is required. If the data is incomplete or contains errors, then the flow stops, and A cannot confirm the order to B without intervention. If A is not using an aggregated technology and connects to each carrier individually, then the issues multiply. If any of these fail or are unreliable, manual monitoring and/or backup is needed. That this simple part of the process is broken does not include the major issues relating to reliability. Let’s assume the order placed by A is accepted. What percentage likelihood is there that the order will be shipped in full on the vessel nominated and/or on the ETA date scheduled and therefore with a likelihood of arrival at the next stage in the chain within an acceptable margin of on time to 48 hours’ delay? If you are lucky enough to be a last port load to first port arrival, then the transit time can be met but the other components are less likely to be achieved. If not, the reliability likelihood diminishes. The time for loading and discharging a vessel requires firm and reliable dates to plan at origin the production, storage, loading and domestic transportation, while at the receiving end, depending on the product, use receipt, inventory planning, sale, storage or any other number of dependent processes. Favoring other modes But here are the bigger points. Firstly, for many beneficial cargo owners (BCOs), movement of goods by container is a small part of their overall transportation volume. Far greater volume is sent by other modes, particularly road, and often this is the mode of transport directly interfacing with end-customers. So, for many BCOs, container shipping is at best a niche activity requiring specialist knowledge, and as with so much of logistics, only ever matters in a crisis such as a lack of space, rolled cargo, stratospheric price hikes, etc. For those that rely on container shipping for the functioning of their supply chain, such as retail customers, the profile is much higher. For me, there are the three main reasons why BCOs choose to favor other modes of transport when investing in a transportation management system (TMS). Firstly, the sheer volume of road transportation and its customer impact leads to this mode receiving top priority for TMS investment and enhancement. Secondly, the broken processes of container shipping (with its low likelihood of ever truly improving) will always play against any container TMS investment. Finally, people understand road, rail and air, but ocean shipping less so. So when we say that road transport “on time in full” is 95% and container shipping globally is about 60%, eyes glaze over as the logistics expert tries to summarize the difference. The typical investment criteria, aside from financial, will be “Does it help my customers, reliably and consistently?” and “Will it lead to efficiency in the end-to-end process?” Regrettably, the answer to both of these is “not enough.” Contact John McCauley at john-mccauley1@outlook.com . John McCauley, formerly a long-standing vice president of transportation and logistics at Cargill, now consults for shippers.

Solutions to the ‘broken processes’ of container shipping remain elusive: analyst

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<div class="phx-topic abstract-wrapper">Ports and ocean carriers are now figuring out the playbook for how to handle what would be the first strike to hit the US East and Gulf coasts in nearly half a century. </div>

Ports and ocean carriers are now figuring out the playbook for how to handle what would be the first strike to hit the US East and Gulf coasts in nearly half a century.

<div class="phx-topic">With talks stalled and more labor demands being put on the table, a dockworkers strike at ports along the US East and Gulf coasts looks increasingly inevitable with just two weeks remaining on the current contract between maritime employers and the International Longshoremen’s Association (ILA). And that means ports and ocean carriers are now figuring out the playbook for how to handle what would be the first strike to hit those coasts in nearly half a century. The United States Maritime Alliance (USMX), which represents maritime employers, said in a statement Friday “there has been no further progress” in negotiations with the ILA on a new master contract. The ILA said <a href="https://www.joc.com/article/ila-locals-prepping-for-coordinated-strike-at-us-east-gulf-coast-ports-5721164">its members will not work past the current contract’s Sept. 30 expiration if there is no new agreement in place</a>. More concerningly for employers, the USMX said the ILA has not been willing to meet for negotiations on a new contract. The USMX’s request for further meetings comes about <a href="https://www.joc.com/article/port-employers-urge-ila-to-return-to-contract-talks-5723976">a week after it said that the ILA “continues to strongly signal” that it has made the decision to strike</a>. “We need to sit down and negotiate a new agreement that avoids an unnecessary and costly strike that will be detrimental to both sides,” the USMX said in its statement. The Journal of Commerce spoke to marine terminal operators, port authorities, and employer representatives for this story. According to those sources, no further talks with the ILA have been scheduled. On the master contract, the gap over wages appears widest, with the union seeking a $5 per-hour increase for each year of the contract’s six-year term, while the USMX has proposed a $2.50 per-hour increase. Outside of wage increases for all dockworkers from Maine to Texas, the union has put out that it is seeking in the new contract <a href="https://www.joc.com/article/port-employers-urge-ila-to-return-to-contract-talks-5723976">an array of concessions from ocean carriers and terminal operators</a>, including a higher entry-level wage, increased employer contributions to pension and benefit funds, and stricter terms on the use of automation at marine terminals. For now, it appears that ocean carriers — which will bear most of the cost of a wage increase for longshore workers — <a href="https://www.joc.com/article/ocean-carriers-appear-willing-to-roll-the-dice-on-possible-us-port-strike-5728667">are taking a hard line on conceding to the ILA’s proposed wage increase</a>, much less its other demands. <h2>‘Not going in the right direction’ </h2>As required under federal labor law for collective bargaining agreements that could result in a strike, the ILA and USMX have alerted the US Federal Mediation and Conciliation Service that contract negotiations have stalled. The notification is procedural, however, with no mediator being appointed. Acting US Labor Secretary Julie Su called USMX President Dave Adam about progress on the ILA talks, according to sources familiar with matter, who said Adam characterized the talks as “not going in the right direction [and the] strike threat should be taken seriously.” The USMX declined to comment. The ILA’s executive leadership under President Harold Daggett, who is spearheading the union’s negotiations, drummed up <a href="">support for a strike from ILA’s coast-wide locals during two days of meetings of its wage-scale committees in New Jersey</a> earlier this month. This year’s event stood out from previous wage-scale meetings for not inviting a representative of the USMX to present its position, according to a source, underscoring the gulf between the two sides. Following the wage-scale meeting, delegates returned to their locals to garner support for a strike. According to a source familiar with the union’s bylaws, Daggett will not need a vote to call a strike, allowing one to go ahead quickly. Yet a strike will not mean port-wide closures. The ILA has pledged to keep handling military roll-on, roll-off cargo and cruise ships. Container operations will be affected, although it’s unclear how widespread the disruption will be. During the current contract talks, the ILA has largely targeted <a href="https://www.joc.com/article/ila-halts-talks-over-new-contract-until-maersk-apm-clarify-port-it-projects-5244243">Maersk for automation projects that it has undertaken at its APM Terminal’s facility at the Port of Mobile</a> in Alabama, leading some sources to speculate that its facilities will be specifically targeted for labor actions and slowdowns. However, if the union decides to target one member of the USMX for a labor action, the USMX’s bylaws require all its members to lock out the union, according to a source familiar with the issue, which would force the closure of all container operations. <h2>‘Preparing for a hurricane’ </h2>A port authority along the US East Coast that operates its own terminals has been meeting to discuss how it will handle an orderly wind down of its operations should a strike occur on Oct. 1, according to a source who asked that the agency not be identified. Any non-port operations, such as inland rail ramps, could remain open as they do not use ILA labor. But train service will be curtailed due to port closures. The discussions include the cut-off dates for receiving exports or empty containers and extending gate hours for picking up import boxes up until the strike, the source added. The source said the port authority is in discussions with the local union on how to maintain refrigerated containers at the port on a contingent basis. “It’s like we’re preparing for a hurricane,” the source said. It’s unclear what plans ocean carriers have for coast-wide container terminal shutdowns. CMA CGM’s North American President George Goldman told the Journal of Commerce that the carrier plans to step up empty container evacuations through the West Coast to ensure no backlog of empties sits at East and Gulf coast ports, taking “into account that there’s going to be a potential disruption.” An executive of a marine terminal operator told the Journal of Commerce that there is no contingency plan available other than an orderly shutdown. While shippers have raised questions about waiving terminal demurrage during a port strike, the source said it will be on a customer-by-customer basis. Other operations may also be affected, including container and chassis depots that employ ILA members. The East Coast port authority, which also operates its own chassis pool, said that it plans to waive any fees related to chassis returns affected by a strike. The Metropolitan Marine Maintenance Contractor’s Association, which represents container and chassis depot operators through the Port of New York and New Jersey, has an agreement with the local ILA union representing chassis and container maintenance workers that expires at the end of 2024. However, it’s unclear whether ILA maintenance workers will cross picket lines of ILA dockworkers, a source familiar with the issue said, adding that such an action could amount to a secondary boycott if operations outside of marine terminals were affected. Contact Michael Angell at <a href="mailto:michael.angell@spglobal.com">michael.angell@spglobal.com</a>.</div>

With talks stalled and more labor demands being put on the table, a dockworkers strike at ports along the US East and Gulf coasts looks increasingly inevitable with just two weeks remaining on the current contract between maritime employers and the International Longshoremen’s Association (ILA). And that means ports and ocean carriers are now figuring out the playbook for how to handle what would be the first strike to hit those coasts in nearly half a century. The United States Maritime Alliance (USMX), which represents maritime employers, said in a statement Friday “there has been no further progress” in negotiations with the ILA on a new master contract. The ILA said its members will not work past the current contract’s Sept. 30 expiration if there is no new agreement in place . More concerningly for employers, the USMX said the ILA has not been willing to meet for negotiations on a new contract. The USMX’s request for further meetings comes about a week after it said that the ILA “continues to strongly signal” that it has made the decision to strike . “We need to sit down and negotiate a new agreement that avoids an unnecessary and costly strike that will be detrimental to both sides,” the USMX said in its statement. The Journal of Commerce spoke to marine terminal operators, port authorities, and employer representatives for this story. According to those sources, no further talks with the ILA have been scheduled. On the master contract, the gap over wages appears widest, with the union seeking a $5 per-hour increase for each year of the contract’s six-year term, while the USMX has proposed a $2.50 per-hour increase. Outside of wage increases for all dockworkers from Maine to Texas, the union has put out that it is seeking in the new contract an array of concessions from ocean carriers and terminal operators , including a higher entry-level wage, increased employer contributions to pension and benefit funds, and stricter terms on the use of automation at marine terminals. For now, it appears that ocean carriers — which will bear most of the cost of a wage increase for longshore workers — are taking a hard line on conceding to the ILA’s proposed wage increase , much less its other demands. ‘Not going in the right direction’ As required under federal labor law for collective bargaining agreements that could result in a strike, the ILA and USMX have alerted the US Federal Mediation and Conciliation Service that contract negotiations have stalled. The notification is procedural, however, with no mediator being appointed. Acting US Labor Secretary Julie Su called USMX President Dave Adam about progress on the ILA talks, according to sources familiar with matter, who said Adam characterized the talks as “not going in the right direction [and the] strike threat should be taken seriously.” The USMX declined to comment. The ILA’s executive leadership under President Harold Daggett, who is spearheading the union’s negotiations, drummed up support for a strike from ILA’s coast-wide locals during two days of meetings of its wage-scale committees in New Jersey earlier this month. This year’s event stood out from previous wage-scale meetings for not inviting a representative of the USMX to present its position, according to a source, underscoring the gulf between the two sides. Following the wage-scale meeting, delegates returned to their locals to garner support for a strike. According to a source familiar with the union’s bylaws, Daggett will not need a vote to call a strike, allowing one to go ahead quickly. Yet a strike will not mean port-wide closures. The ILA has pledged to keep handling military roll-on, roll-off cargo and cruise ships. Container operations will be affected, although it’s unclear how widespread the disruption will be. During the current contract talks, the ILA has largely targeted Maersk for automation projects that it has undertaken at its APM Terminal’s facility at the Port of Mobile in Alabama, leading some sources to speculate that its facilities will be specifically targeted for labor actions and slowdowns. However, if the union decides to target one member of the USMX for a labor action, the USMX’s bylaws require all its members to lock out the union, according to a source familiar with the issue, which would force the closure of all container operations. ‘Preparing for a hurricane’ A port authority along the US East Coast that operates its own terminals has been meeting to discuss how it will handle an orderly wind down of its operations should a strike occur on Oct. 1, according to a source who asked that the agency not be identified. Any non-port operations, such as inland rail ramps, could remain open as they do not use ILA labor. But train service will be curtailed due to port closures. The discussions include the cut-off dates for receiving exports or empty containers and extending gate hours for picking up import boxes up until the strike, the source added. The source said the port authority is in discussions with the local union on how to maintain refrigerated containers at the port on a contingent basis. “It’s like we’re preparing for a hurricane,” the source said. It’s unclear what plans ocean carriers have for coast-wide container terminal shutdowns. CMA CGM’s North American President George Goldman told the Journal of Commerce that the carrier plans to step up empty container evacuations through the West Coast to ensure no backlog of empties sits at East and Gulf coast ports, taking “into account that there’s going to be a potential disruption.” An executive of a marine terminal operator told the Journal of Commerce that there is no contingency plan available other than an orderly shutdown. While shippers have raised questions about waiving terminal demurrage during a port strike, the source said it will be on a customer-by-customer basis. Other operations may also be affected, including container and chassis depots that employ ILA members. The East Coast port authority, which also operates its own chassis pool, said that it plans to waive any fees related to chassis returns affected by a strike. The Metropolitan Marine Maintenance Contractor’s Association, which represents container and chassis depot operators through the Port of New York and New Jersey, has an agreement with the local ILA union representing chassis and container maintenance workers that expires at the end of 2024. However, it’s unclear whether ILA maintenance workers will cross picket lines of ILA dockworkers, a source familiar with the issue said, adding that such an action could amount to a secondary boycott if operations outside of marine terminals were affected. Contact Michael Angell at michael.angell@spglobal.com .

Maritime employers prep for wind-down of operations as longshore strike looms

<div class="phx-topic abstract-wrapper">Sustained demand for air cargo on the trans-Pacific and Asia-Europe trades and the promise of rising rates through the end-of-year peak are encouraging airlines to pull capacity from less-lucrative lanes.</div>

Sustained demand for air cargo on the trans-Pacific and Asia-Europe trades and the promise of rising rates through the end-of-year peak are encouraging airlines to pull capacity from less-lucrative lanes.

<div class="phx-topic">Air cargo operators are shifting freighter aircraft from South America, India and Africa to the more lucrative Asian export trades where sustained demand from the US and Europe for both e-commerce and traditional cargo is keeping planes full and rates elevated.With <a href="https://www.joc.com/article/brace-for-impact-warning-as-air-cargo-heads-into-historic-peak-season-5725527">an anticipated fourth-quarter peak season bonanza</a> around the corner and a worsening supply-demand imbalance pushing up the spot market, airlines want as much capacity as possible to be deployed on the trans-Pacific and Asia-Europe trades. But the removal of air freight capacity is leaving exporters on the South America and Indian trade lanes scrambling for capacity, forwarders say.“We see it on the South American and India trades,” Angel Rodriguez, president of Charleston-based ASF Air, told the Journal of Commerce. “Unfortunately, China-US and China-Europe outweigh any trade with South America regardless of route, so it’s somewhat of a no-brainer.”Air freight rates from Shanghai to North America in the traditionally slow month of August were almost 30% higher compared with the same month last year, according to the Baltic Air Index (BAI).Holding the rates at elevated levels are load factors that rate benchmarking platform Xeneta estimated were at 87% on Asia-North America flights in early September and at 86% on both Asia-Europe and Asia-Middle East flights, which is effectively full for head-haul routes.Demand is expected to strengthen even further during November’s e-commerce shopping promotions such as Black Friday and Cyber Monday, which will follow the highly anticipated iPhone 16 launch later this month, with capacity already tightly constrained, said Rob Veltman, vice president of cargo in Europe for Qatar Airways.“With the seasonal patterns and the way the market is being treated, conventional shippers like Apple or HP will struggle to find capacity because e-commerce is so demanding,” Veltman said at the EU Cross Border E-Commerce Forum in Liege, Belgium, last week. “The top four e-commerce players in China need around 150 freighters per day to move the cargo out.”Tom Owen, director of cargo at Cathay Pacific, said the Hong Kong-based carrier was adding five freighters per week to its Asia-North America network in the fourth quarter to try to cover the demand.“We are a scheduled carrier so 40% of our freight goes on our widebodies [passenger planes] and that capacity doesn’t change, but for our freighters we move capacity around where it is needed,” Owen told the Journal of Commerce.Jeffrey Van Haeften, senior vice president for Emirates SkyCargo, warned at the Liege forum that capacity was already in short supply and would tighten further through the rest of the year, even with the widespread repositioning of capacity.“We are already full,” he said. “All the second legs into Europe [from Asia] serving 40 cities, some of them up to eight flights a day, are all full.”‘Ongoing volatility’DHL Express has announced plans to deploy eight new Boeing 777 freighters on the trans-Pacific and routes between Asia and Europe as it moves to capture soaring demand for e-commerce and business to business (B2B) cargo. The express operator is expecting global e-commerce to increase 8.8% in 2024, with a strong peak season through the fourth quarter.“With ongoing volatility in global freight markets and a continued strong flow of e-commerce volumes, we are expecting a healthy surge in demand for express services in the fourth quarter,” DHL Express CEO John Pearson said in a statement.British cargo airline One Air this week added a third Boeing 747 freighter to its fleet to meet strong demand for traditional cargo from forwarders on Asia-Europe. It operates ad hoc charter flights on several routes across Europe, the Middle East and Asia, as well as seven flights a week from Hong Kong to Europe.The injection of capacity into Asia, mostly China, is making a long-standing problem even worse. While aircraft are full flying out of China to the US and Europe, the return flights are virtually empty, which places significant pricing pressure on the carriers.Air cargo consultancy Rotate estimated the contribution of Boeing 777 freighter flights on several trade lanes and found the growing imbalance increased the profitability gap between the head-haul and back-haul flights.On the trans-Pacific, based on unit costs and revenue through the four weeks of August, cargo on China to US flights was carried at a profit of $3.07 per kilogram, while the return flight operated at a loss of $1.48 per kilogram.The route from Asia to Europe showed a profitability of $2.10 per kilogram and a return loss of $1.12 per kilogram, while the trans-Atlantic trade lane was unprofitable in both directions, Rotate found.“The freighters are all flying full out of Asia and the rest of the world is not performing as well,” Owen said. “It is not something new, but because of the e-commerce growth over the last couple of years there is a lot more capacity flying out than before and the return flights have gotten more challenging.”Rodriguez said the trade imbalance was something forwarders have become accustomed to over the years but it did impact pricing negotiations with carriers as charter agreements were mostly settled on a round-trip basis. “This is why pricing on freight on the trans-Pacific westbound US to China route amounts to only a fraction – approximately one quarter – of the cost for freight on the eastbound China to US route,” he told the Journal of Commerce. “Essentially, those (forwarders with) charter agreements are simply looking for any possible contribution to help offset the overall cost.” Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com">greg.knowler@spglobal.com</a>.</div>

Air cargo operators are shifting freighter aircraft from South America, India and Africa to the more lucrative Asian export trades where sustained demand from the US and Europe for both e-commerce and traditional cargo is keeping planes full and rates elevated. With an anticipated fourth-quarter peak season bonanza around the corner and a worsening supply-demand imbalance pushing up the spot market, airlines want as much capacity as possible to be deployed on the trans-Pacific and Asia-Europe trades. But the removal of air freight capacity is leaving exporters on the South America and Indian trade lanes scrambling for capacity, forwarders say. “We see it on the South American and India trades,” Angel Rodriguez, president of Charleston-based ASF Air, told the Journal of Commerce. “Unfortunately, China-US and China-Europe outweigh any trade with South America regardless of route, so it’s somewhat of a no-brainer.” Air freight rates from Shanghai to North America in the traditionally slow month of August were almost 30% higher compared with the same month last year, according to the Baltic Air Index (BAI). Holding the rates at elevated levels are load factors that rate benchmarking platform Xeneta estimated were at 87% on Asia-North America flights in early September and at 86% on both Asia-Europe and Asia-Middle East flights, which is effectively full for head-haul routes. Demand is expected to strengthen even further during November’s e-commerce shopping promotions such as Black Friday and Cyber Monday, which will follow the highly anticipated iPhone 16 launch later this month, with capacity already tightly constrained, said Rob Veltman, vice president of cargo in Europe for Qatar Airways. “With the seasonal patterns and the way the market is being treated, conventional shippers like Apple or HP will struggle to find capacity because e-commerce is so demanding,” Veltman said at the EU Cross Border E-Commerce Forum in Liege, Belgium, last week. “The top four e-commerce players in China need around 150 freighters per day to move the cargo out.” Tom Owen, director of cargo at Cathay Pacific, said the Hong Kong-based carrier was adding five freighters per week to its Asia-North America network in the fourth quarter to try to cover the demand. “We are a scheduled carrier so 40% of our freight goes on our widebodies [passenger planes] and that capacity doesn’t change, but for our freighters we move capacity around where it is needed,” Owen told the Journal of Commerce. Jeffrey Van Haeften, senior vice president for Emirates SkyCargo, warned at the Liege forum that capacity was already in short supply and would tighten further through the rest of the year, even with the widespread repositioning of capacity. “We are already full,” he said. “All the second legs into Europe [from Asia] serving 40 cities, some of them up to eight flights a day, are all full.” ‘Ongoing volatility’ DHL Express has announced plans to deploy eight new Boeing 777 freighters on the trans-Pacific and routes between Asia and Europe as it moves to capture soaring demand for e-commerce and business to business (B2B) cargo. The express operator is expecting global e-commerce to increase 8.8% in 2024, with a strong peak season through the fourth quarter. “With ongoing volatility in global freight markets and a continued strong flow of e-commerce volumes, we are expecting a healthy surge in demand for express services in the fourth quarter,” DHL Express CEO John Pearson said in a statement. British cargo airline One Air this week added a third Boeing 747 freighter to its fleet to meet strong demand for traditional cargo from forwarders on Asia-Europe. It operates ad hoc charter flights on several routes across Europe, the Middle East and Asia, as well as seven flights a week from Hong Kong to Europe. The injection of capacity into Asia, mostly China, is making a long-standing problem even worse. While aircraft are full flying out of China to the US and Europe, the return flights are virtually empty, which places significant pricing pressure on the carriers. Air cargo consultancy Rotate estimated the contribution of Boeing 777 freighter flights on several trade lanes and found the growing imbalance increased the profitability gap between the head-haul and back-haul flights. On the trans-Pacific, based on unit costs and revenue through the four weeks of August, cargo on China to US flights was carried at a profit of $3.07 per kilogram, while the return flight operated at a loss of $1.48 per kilogram. The route from Asia to Europe showed a profitability of $2.10 per kilogram and a return loss of $1.12 per kilogram, while the trans-Atlantic trade lane was unprofitable in both directions, Rotate found. “The freighters are all flying full out of Asia and the rest of the world is not performing as well,” Owen said. “It is not something new, but because of the e-commerce growth over the last couple of years there is a lot more capacity flying out than before and the return flights have gotten more challenging.” Rodriguez said the trade imbalance was something forwarders have become accustomed to over the years but it did impact pricing negotiations with carriers as charter agreements were mostly settled on a round-trip basis. “This is why pricing on freight on the trans-Pacific westbound US to China route amounts to only a fraction – approximately one quarter – of the cost for freight on the eastbound China to US route,” he told the Journal of Commerce. “Essentially, those (forwarders with) charter agreements are simply looking for any possible contribution to help offset the overall cost.” Contact Greg Knowler at greg.knowler@spglobal.com .

Lure of robust Asian peak season a magnet for air cargo capacity

<div class="phx-topic abstract-wrapper">It’s a play by carriers to tempt NVOs with a reopened annual contract that, while higher than the deal they signed last spring, is still below current spot rates that have fallen from an early-summer peak.</div>

It’s a play by carriers to tempt NVOs with a reopened annual contract that, while higher than the deal they signed last spring, is still below current spot rates that have fallen from an early-summer peak.

<div class="phx-topic">Ocean carriers in the eastbound trans-Pacific are increasingly confident that a rate war can be avoided through the Lunar New Year period when many factories in Asia will close for about two weeks beginning in late January. They are concerned, however, that spot rates may not rebound as they normally do in the spring because carriers are scheduled to add at least <a href="https://www.joc.com/article/container-shipping-still-has-an-overcapacity-problem-but-its-far-from-insurmountable-5234357">1.6 million TEUs of new capacity to the global fleet in 2024–25.</a>As a result, non-vessel-operating common carriers (NVOs) say some liners have approached them with offers to renegotiate their 2024–25 fixed rate, also known as named account contracts, most of which are set to expire on April 30. It’s a play by carriers to tempt NVOs with a reopened annual contract that, while higher than the deal they signed last spring, is still below current spot rates that have fallen from an early-summer peak. “We’ve had a couple of carriers approach us with that offer,” said Kurt McElroy, executive vice president of the NVO Kerry Apex. Current NVO named account rates range from about $1,600 to about $2,000 per FEU. If the NVO agrees to pay an additional $1,000 per FEU, carriers are offering to lock in the new rate through the contract expiration date of April 30. This would give NVOs a hedge if imports increase and they exceed their fixed rate allocations. When that happened in June, NVOs were paying freight-all-kinds (FAK) rates in excess of $6,000 per FEU. Terms and conditions of the contract, such as increasing the minimum quantity commitments (MQCs), are usually negotiable, McElroy said. Jon Monroe, who serves as an adviser to NVOs, said forwarders could use the contract re-negotiation as an opportunity to increase their MQCs and lock in the fixed rates for the next six months. In other words, if the named account rate is $2,000 per FEU to the West Coast and the NVO agrees to pay $3,000 and possibly increase the MQC, the NVO will have locked in a favorable fixed rate for the life of the contract, Monroe said. However, an opposite scenario could also play out, according to Rachel Shames, vice president for pricing and procurement at the NVO CV International. If FAK rates tumble, as they did this January, the NVO would save money by just paying the FAK rate. “There’s a good chance [FAK] rates will keep falling,” Shames said. “You have to look at what your risks are. Nobody knows what the last six months of these contracts will look like.” <h3>Frontloading for spring ‘25 </h3>Meanwhile, the frontloading of spring ‘25 merchandise by retailers could lift US import volumes from Asia during the normally slack months of November and December and prevent a collapse of spot rates later this year in the eastbound trans-Pacific, forwarders say. Imports of merchandise linked to Valentine’s Day and spring activities that would normally begin shipping in December should start moving two months earlier in October, said James Caradonna, executive vice president of the forwarder M&amp;R Spedag Group. That’s a similar cadence to year-end holiday merchandise that began arriving at US ports in June this year rather than in August. “The entire 12-month cycle is shifting several months earlier,” Caradonna told the Journal of Commerce. “There’s almost no ‘normal’ now,” said Shames, noting that carriers this year began levying <a href="https://www.joc.com/article/loading-worries-drive-early-peak-season-frenzy-on-eastbound-trans-pacific-5192196">peak season surcharges (PSSs) in June</a> rather than in August, traditionally the beginning of the peak shipping season. Carriers are likewise optimistic about import volumes from Asia in the fourth quarter. The eastbound trans-Pacific “still looks pretty healthy from our perspective, between now and the end of the year,” George Goldman, president and CEO at CMA CGM North America, told the Journal of Commerce. “The reality is there was more cargo in the system than we all anticipated.” <h3>Normal cadence disrupted </h3>The normal seasonal cadence on the Asia-North American trades has been disrupted by longshore labor, geopolitical conflicts and weather-related events dating back to last fall. The threat of a <a href="https://www.joc.com/article/port-employers-urge-ila-to-return-to-contract-talks-5723976">strike by the International Longshoremen’s Association</a> against maritime employers along the East and Gulf coasts was a dominant factor in forcing retailers to frontload fall and year-end holiday merchandise this past spring. The labor threat <a href="https://www.joc.com/article/canadian-rail-workers-back-on-job-after-failed-challenge-to-binding-arbitration-5712234">extended to the Canadian rail industry as well.</a><a href="https://www.joc.com/article/maersk-to-resume-panama-canal-transits-on-oc1-service-as-vessel-restrictions-ease-5225404">Drought restrictions along the Panama Canal</a> have been a factor, as are the ongoing attacks by Houthi militants <a href="https://www.joc.com/article/container-shipping-market-continues-to-be-reset-by-ongoing-red-sea-crisis-5713700">on vessels transiting the Red Sea</a> that forced most container carriers to re-route vessels around the southern tip of Africa, adding time and cost to all-water services that would have gone through the Suez Canal. Freight rates in the eastbound trans-Pacific have been fluctuating all year. The spot rate from Asia to the West Coast spiked to $8,133 per FEU in early July after a series of general rate increases (GRIs) but is now down to $4,500 per FEU, according to Platts, a Journal of Commerce sister company within S&amp;P Global. The East Coast spot rate surged to $10,133 per FEU on July 5 but has fallen to $5,600 per FEU, according to Platts. Amid the rising rates, carriers this <a href="https://www.joc.com/article/asia-uswc-spot-rates-edge-lower-as-new-capacity-takes-edge-off-overheated-market-5192314">year launched or re-instated 10 services from Asia to the West Coast</a>. Liners are also <a href="https://www.joc.com/article/carriers-to-deploy-extra-loaders-to-los-angeles-long-beach-amid-import-surge-5714861">running 28 single-voyage extra-loader vessels</a> to the ports of Los Angeles and Long Beach — 14 to each port — in September and October. As a result, NVOs say they are encountering no space limitations to the West Coast. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="e7a65aab-9aac-4f07-9b74-1793746c01ef"></dynamic-object></div>“We’re getting all of the space we need,” Caradonna said. Vessel capacity has been tight to the East Coast, but since most of the holiday season merchandise was shipped from Asian load ports before Sept. 1, NVOs said space is now opening on the all-water services on the trade lane. Contact Bill Mongelluzzo at <a href="mailto:bill.mongelluzzo@spglobal.com ">bill.mongelluzzo@spglobal.com</a>.</div>

Ocean carriers in the eastbound trans-Pacific are increasingly confident that a rate war can be avoided through the Lunar New Year period when many factories in Asia will close for about two weeks beginning in late January. They are concerned, however, that spot rates may not rebound as they normally do in the spring because carriers are scheduled to add at least 1.6 million TEUs of new capacity to the global fleet in 2024–25. As a result, non-vessel-operating common carriers (NVOs) say some liners have approached them with offers to renegotiate their 2024–25 fixed rate, also known as named account contracts, most of which are set to expire on April 30. It’s a play by carriers to tempt NVOs with a reopened annual contract that, while higher than the deal they signed last spring, is still below current spot rates that have fallen from an early-summer peak. “We’ve had a couple of carriers approach us with that offer,” said Kurt McElroy, executive vice president of the NVO Kerry Apex. Current NVO named account rates range from about $1,600 to about $2,000 per FEU. If the NVO agrees to pay an additional $1,000 per FEU, carriers are offering to lock in the new rate through the contract expiration date of April 30. This would give NVOs a hedge if imports increase and they exceed their fixed rate allocations. When that happened in June, NVOs were paying freight-all-kinds (FAK) rates in excess of $6,000 per FEU. Terms and conditions of the contract, such as increasing the minimum quantity commitments (MQCs), are usually negotiable, McElroy said. Jon Monroe, who serves as an adviser to NVOs, said forwarders could use the contract re-negotiation as an opportunity to increase their MQCs and lock in the fixed rates for the next six months. In other words, if the named account rate is $2,000 per FEU to the West Coast and the NVO agrees to pay $3,000 and possibly increase the MQC, the NVO will have locked in a favorable fixed rate for the life of the contract, Monroe said. However, an opposite scenario could also play out, according to Rachel Shames, vice president for pricing and procurement at the NVO CV International. If FAK rates tumble, as they did this January, the NVO would save money by just paying the FAK rate. “There’s a good chance [FAK] rates will keep falling,” Shames said. “You have to look at what your risks are. Nobody knows what the last six months of these contracts will look like.” Frontloading for spring ‘25 Meanwhile, the frontloading of spring ‘25 merchandise by retailers could lift US import volumes from Asia during the normally slack months of November and December and prevent a collapse of spot rates later this year in the eastbound trans-Pacific, forwarders say. Imports of merchandise linked to Valentine’s Day and spring activities that would normally begin shipping in December should start moving two months earlier in October, said James Caradonna, executive vice president of the forwarder M&R Spedag Group. That’s a similar cadence to year-end holiday merchandise that began arriving at US ports in June this year rather than in August. “The entire 12-month cycle is shifting several months earlier,” Caradonna told the Journal of Commerce. “There’s almost no ‘normal’ now,” said Shames, noting that carriers this year began levying peak season surcharges (PSSs) in June rather than in August, traditionally the beginning of the peak shipping season. Carriers are likewise optimistic about import volumes from Asia in the fourth quarter. The eastbound trans-Pacific “still looks pretty healthy from our perspective, between now and the end of the year,” George Goldman, president and CEO at CMA CGM North America, told the Journal of Commerce. “The reality is there was more cargo in the system than we all anticipated.” Normal cadence disrupted The normal seasonal cadence on the Asia-North American trades has been disrupted by longshore labor, geopolitical conflicts and weather-related events dating back to last fall. The threat of a strike by the International Longshoremen’s Association against maritime employers along the East and Gulf coasts was a dominant factor in forcing retailers to frontload fall and year-end holiday merchandise this past spring. The labor threat extended to the Canadian rail industry as well. Drought restrictions along the Panama Canal have been a factor, as are the ongoing attacks by Houthi militants on vessels transiting the Red Sea that forced most container carriers to re-route vessels around the southern tip of Africa, adding time and cost to all-water services that would have gone through the Suez Canal. Freight rates in the eastbound trans-Pacific have been fluctuating all year. The spot rate from Asia to the West Coast spiked to $8,133 per FEU in early July after a series of general rate increases (GRIs) but is now down to $4,500 per FEU, according to Platts, a Journal of Commerce sister company within S&P Global. The East Coast spot rate surged to $10,133 per FEU on July 5 but has fallen to $5,600 per FEU, according to Platts. Amid the rising rates, carriers this year launched or re-instated 10 services from Asia to the West Coast . Liners are also running 28 single-voyage extra-loader vessels to the ports of Los Angeles and Long Beach — 14 to each port — in September and October. As a result, NVOs say they are encountering no space limitations to the West Coast. “We’re getting all of the space we need,” Caradonna said. Vessel capacity has been tight to the East Coast, but since most of the holiday season merchandise was shipped from Asian load ports before Sept. 1, NVOs said space is now opening on the all-water services on the trade lane. Contact Bill Mongelluzzo at bill.mongelluzzo@spglobal.com .

Some carriers seek to reopen 2024–25 fixed-rate contracts in trans-Pac: NVOs

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The world of LTL is slow to embrace change. Business anachronisms permeate current supply chain processes. These vestiges of the way things used to work define the LTL freight transportation procurement process of many modern shippers.David Knuth, logistics specialist at IEWC, a global supplier of cable and wire based in Wisconsin, is happy to have modernized the RFP process, automating the entire LTL bidding procedure with Bid$ense, SMC³’s automated truckload and LTL freight transportation sourcing solution. But when prompted, he can still recall what once was.In his previous job, a large part of his duties were consumed by creating an intermodal bid package for carriers. In a spreadsheet, Knuth detailed the company’s volumes lane by lane, taking care to delete any errant keystrokes or misleading data. He would then email out the information to each carrier, taking time to respond to detailed technical questions about the spreadsheet data. Finally, he had to compile all the results, create an algorithm that would compare the carriers on each lane, and award the business.“It was a huge undertaking. It took about four months to do,” Knuth said of the old process. “It was almost a full-time job for that part of the year, every year.”In his new job at IEWC, he sat down with Bid$ense on day one and was amazed at the capabilities. Knuth had never before used a bid tool. SMC³’s latest versions of Bid$ense automate the process even further, taking truckload and LTL RFPs entirely online. The tool draws on RFP best-practices protocols to streamline the bidding communication process, enabling bidding carriers to respond accurately and promptly to shipper requests. The solution also does all the distribution work automatically, electronically submitting shipper bid data to carriers based on their actual service capabilities and performance records. Carriers are alerted with timely prompts for RFP deliverables, so shippers aren’t waiting by the phone for responses.Another benefit of automating the process is the data-cleansing assistance. When Knuth sent spreadsheets to carriers, data errors might cloud the bidding process; he might have to resend data or simply accept a price that did not truly reflect the costs of doing business. Data cleansing is incredibly beneficial, he said.The spreadsheet technique also made bidding analysis an onerous task. Since Bid$ense automates and streamlines the entire RFP process, intensive examination is now simple. SMC³ knows that each bid has more than one best outcome. With uniform responses from each carrier, shippers can quickly rank results and create an unlimited quantity of what-if scenarios to make the optimal procurement decision.Jesse Burnett of Central Garden &amp; Pet experiences many of the same benefits. Founded in 1980, Central Garden &amp; Pet has spent the last three decades growing from a small garden supply company to a provider of a range of products from dog chews and bird seed to soil supplements and natural insecticides. For much of its life, the company shipped these disparate goods via LTL and truckload carriers to retailers throughout the country, relying on each business unit to negotiate directly with their freight transportation providers. This arrangement worked fairly well for a small company, but as Central Garden &amp; Pet expanded, leadership decided to consolidate decision making.Burnett helped centralize the transportation decision making in 2015 with SMC³’s Bid$ense. Before Bid$ense, every business unit operated independently as far as negotiating with carriers.“There were a lot of different things just floating around,” he said. “We didn’t have master agreements in place; no national pricing at all. The pricing from carriers was just all over the place, depending on where you were.”The transformations he saw with Bid$ense were immediate. Burnett has been using the tool about every other year since its implementation at the company. Central Garden and Pet’s $19.6 million 2019 LTL bid saved the company just more than 9 percent when compared to its historical average. For Burnett, though, bid automation extends far beyond savings.“We knew that we weren’t getting the best pricing offer from our carriers just because nothing was centralized,” he continued. “We knew that if we combined everything from all these business units and paired it with one corporate offering, then it would drive some cost benefit with it.”When the company initially decided to centralize bid procurement, executives researched a number of different methodologies and technologies. In the end, though, Burnett found that Bid$ense was both widespread and well known, and that his carrier partners already knew how to use the application. Burnett also highlighted the data-cleansing process as a major benefit, saying the rigorous process ensures that carriers always return the best price.“It definitely has helped drive savings,” he said. “Any time you go out there and you drive that competitiveness with the carriers and they know they’re in a bid environment, it seems to sharpen their pencils.”Transportation procurement is an integral part of the modern supply chain. With Bid$ense, shippers can develop a strategic implementation plan that saves them time and money, but also helps them create strong relationships with their carrier partners. These carriers appreciate the solution’s data-cleansing process; when carriers receive a complete shipment history and future volume forecast, they don’t have to guess on pricing. Carriers that receive more data from shippers get a complete picture of that shipper’s freight, allowing them to accurately plan instead of simply preparing for the worst-case scenario. Clean data presented through an automated system can lead to both bigger shipment savings and a lasting partnership between carrier and customer.Whether customers are looking to streamline over-the-road transportation bidding by automating the RFP process or create an entirely new, centralized sourcing process, Bid$ense has the analytical horsepower to get the job done.SMC³ 2020 Customer Case Study

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Shippers save money, time with automated transportation bidding tools

If there’s one immutable truth in the world of logistics, it’s this: LTL is an inherently complex form of transportation. Tariffs, rates, DIM weights, transit times — it’s enough to confuse even seasoned logistics professionals. The solution to this knowledge gap has historically been on-the-job training or university supply chain education, but for a variety of reasons there is now a pressing need for third-party, remote LTL training that prepares logistics workers for transportation success. Global Scope Can Overlook Local Intricacies In the past, professionals looking to move into a supply chain career learned about the basics of supply chain from universities. However, many of these college supply chain programs are now global in scope, focusing on worldwide supply chain management instead of the intricacies of specialized domestic transportation. And even these programs, which used to be widespread, are becoming less common. LTL is not an industry of broad-brush strokes; supply chain professionals really need a pointillistic understanding of the logistics of LTL in order to excel in the industry. Accelerating Need for Dedicated LTL Education This lack of specified training put the onus on employers to prepare new hires with the LTL knowledge needed to do their jobs. Dedicated LTL study is a necessity, not a luxury. At the same time, changes in LTL and the broader supply chain world are accelerating. The reliance on e-commerce has ballooned since the start of the pandemic, and last-mile LTL shipments and related e-commerce strains on the supply chain won’t diminish once social distancing abates. That genie isn’t going back into the bottle. So supply chain employers need logistics workers that are fully versed in all aspects of the industry, ready to solve unique shipping and delivery problems based on their extensive supply chain knowledge But why care about LTL? It’s been reported that some shippers in today’s world are no longer concerned with what mode is used to ship their goods. A Multimodal Approach Ensures On-Time Delivery This mode agnosticism means supply chain stakeholders have to be well versed in all modes of transportation. As unforeseen weather events and other disruptions, such as protests, become more common, savvy logistics employees will need to be armed with familiarity of all modes, not just the most popular, to ensure that freight is delivered on time, without damage, and in the most financially expedient way possible. Offerings like SMC³’s LTL online education courses cover a wide range of topics from LTL basics and operations to more advanced concepts like pricing analytics and transportation law. The company also has plans to continually refresh content, adding new expert presenters and taking the feedback of students to make the courses even better as time goes on. Learn more about&nbsp;<a href="https://logisticstrainingcenter.com/smc3-courses/" rel="noreferrer" class="joc_admin__link">SMC³’s LTL Online Education program</a>&nbsp;and view the 2021 hybrid schedule, featuring live industry experts,&nbsp;<a href="https://www.smc3.com/onlinelearning2021/" rel="noreferrer" class="joc_admin__link">here.</a>

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<div class="phx-topic abstract-wrapper">The shippers were joined this time by a group of House Republicans, who in a separate letter warned of the “dire impacts” to the US economy from a possible port strike. </div>

The shippers were joined this time by a group of House Republicans, who in a separate letter warned of the “dire impacts” to the US economy from a possible port strike.

<div class="phx-topic">US shippers on Tuesday renewed their call for the Biden administration to directly intervene in stalled contract negotiations between maritime employers and the longshore union representing dockworkers along the East and Gulf coasts, saying the country is on the verge of another supply chain shock should a strike occur on Oct. 1. The shippers were joined this time by a group of House Republicans, who in a separate letter warned of the “dire impacts” to the US economy from a possible port strike. A group of 177 national and state trade associations signed the letter to President Joe Biden, urging his administration to help the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) “<a href="https://www.joc.com/article/ila-halts-talks-over-new-contract-until-maersk-apm-clarify-port-it-projects-5244243">return to the bargaining table to restart stalled negotiations</a>” over a new six-year master contract covering about 45,000 dockworkers. The letter — <a href="https://www.joc.com/article/us-trade-groups-urge-bidens-help-in-restarting-stalled-ila-usmx-talks-5192234">the group’s second in three months</a> — comes as the two sides have not formally met for talks on a master contract since June. “We call upon the administration to immediately work with both parties to resume contract negotiations and ensure there is no disruption to port operations and cargo fluidity if a new contract is not reached by the expiration date,” the letter said. At this point, <a href="https://www.joc.com/article/maritime-employers-prep-for-wind-down-of-operations-as-longshore-strike-looms-5728724">a strike looks inevitable</a> with <a href="https://www.joc.com/article/ila-locals-prepping-for-coordinated-strike-at-us-east-gulf-coast-ports-5721164">the union having received the support of its rank-and-file for a walkout during its wage-scale committee meetings in early September</a>. The ILA issued a statement Tuesday saying its members are “united as never before in their determination to win a new contract.” “A sleeping giant is ready to roar on Tuesday, Oct. 1, 2024,” ILA President Harold Daggett said in the statement. “My members have been preparing for over a year for the possibility of a strike.” The letter from the trade groups reminded the White House of its previous interventions in collective bargaining negotiations, including between UPS and the Teamsters, the Class I railroads and their unions, and <a href="https://www.joc.com/article/maritime-employers-seek-white-house-help-with-west-coast-contract-impasse-5241841">the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union</a>. Saying the Biden administration helped avoid major supply chain snarls in those situations, the groups said the time is now to do the same for the talks between the ILA and USMX. “It is imperative that the administration engage with the parties to quickly negotiate a new deal or agree to continue negotiations while keeping the ports open and the cargo flowing,” the letter said. The USMX, in response, said in a statement late Tuesday it is “in strong agreement” with the letter sent by the trade groups, but warned it appeared unlikely that talks would resume anytime soon. “We have tremendous respect for the ILA and its members, but it is disappointing that we have reached this point where the ILA is unwilling to reopen dialogue unless all of its demands are met,” the USMX said. “The only way to resolve this impasse is to resume negotiations, which we are willing to do at any time.” <h2>Republicans wade in on port strike </h2>Daggett has made no secret of the fact he wants the White House to stay out of the ILA-USMX talks, <a href="https://www.joc.com/article/ila-looking-for-local-ports-to-bring-in-more-union-foremen-5244993">claiming West Coast dockworkers received a lesser deal from the PMA last year due to the Biden administration’s intervention</a>. The timing of a possible strike is also a political minefield for Biden and Democratic presidential nominee Kamala Harris. While the optics of supply chain chaos along the East and Gulf coasts a month before the election would be terrible for Harris, the White House doesn’t want to alienate union workers across the country by appearing to coerce ILA dockworkers into a deal or forcing them back to the negotiating table via the Taft-Hartley Act. A separate letter signed by 25 House Republications, led by Transportation and Infrastructure Committee Chairman Sam Graves and Maritime Transportation Subcommittee Chairman Daniel Webster, warned that a port strike along the East and Gulf coasts “would result in delays and dire impacts to our supply chains, our economy, and the American consumer.” “Given the devastating economic consequences of a potential strike and the administration’s lack of engagement to date, we urge you to give immediate attention to this matter, to aid in these negotiations, and find a reasonable resolution to these contract disputes,” the Representatives’ letter said. Contact Michael Angell at <a href="mailto:michael.angell@spglobal.com">michael.angell@spglobal.com</a>.</div>

US shippers on Tuesday renewed their call for the Biden administration to directly intervene in stalled contract negotiations between maritime employers and the longshore union representing dockworkers along the East and Gulf coasts, saying the country is on the verge of another supply chain shock should a strike occur on Oct. 1. The shippers were joined this time by a group of House Republicans, who in a separate letter warned of the “dire impacts” to the US economy from a possible port strike. A group of 177 national and state trade associations signed the letter to President Joe Biden, urging his administration to help the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) “ return to the bargaining table to restart stalled negotiations ” over a new six-year master contract covering about 45,000 dockworkers. The letter — the group’s second in three months — comes as the two sides have not formally met for talks on a master contract since June. “We call upon the administration to immediately work with both parties to resume contract negotiations and ensure there is no disruption to port operations and cargo fluidity if a new contract is not reached by the expiration date,” the letter said. At this point, a strike looks inevitable with the union having received the support of its rank-and-file for a walkout during its wage-scale committee meetings in early September . The ILA issued a statement Tuesday saying its members are “united as never before in their determination to win a new contract.” “A sleeping giant is ready to roar on Tuesday, Oct. 1, 2024,” ILA President Harold Daggett said in the statement. “My members have been preparing for over a year for the possibility of a strike.” The letter from the trade groups reminded the White House of its previous interventions in collective bargaining negotiations, including between UPS and the Teamsters, the Class I railroads and their unions, and the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union . Saying the Biden administration helped avoid major supply chain snarls in those situations, the groups said the time is now to do the same for the talks between the ILA and USMX. “It is imperative that the administration engage with the parties to quickly negotiate a new deal or agree to continue negotiations while keeping the ports open and the cargo flowing,” the letter said. The USMX, in response, said in a statement late Tuesday it is “in strong agreement” with the letter sent by the trade groups, but warned it appeared unlikely that talks would resume anytime soon. “We have tremendous respect for the ILA and its members, but it is disappointing that we have reached this point where the ILA is unwilling to reopen dialogue unless all of its demands are met,” the USMX said. “The only way to resolve this impasse is to resume negotiations, which we are willing to do at any time.” Republicans wade in on port strike Daggett has made no secret of the fact he wants the White House to stay out of the ILA-USMX talks, claiming West Coast dockworkers received a lesser deal from the PMA last year due to the Biden administration’s intervention . The timing of a possible strike is also a political minefield for Biden and Democratic presidential nominee Kamala Harris. While the optics of supply chain chaos along the East and Gulf coasts a month before the election would be terrible for Harris, the White House doesn’t want to alienate union workers across the country by appearing to coerce ILA dockworkers into a deal or forcing them back to the negotiating table via the Taft-Hartley Act. A separate letter signed by 25 House Republications, led by Transportation and Infrastructure Committee Chairman Sam Graves and Maritime Transportation Subcommittee Chairman Daniel Webster, warned that a port strike along the East and Gulf coasts “would result in delays and dire impacts to our supply chains, our economy, and the American consumer.” “Given the devastating economic consequences of a potential strike and the administration’s lack of engagement to date, we urge you to give immediate attention to this matter, to aid in these negotiations, and find a reasonable resolution to these contract disputes,” the Representatives’ letter said. Contact Michael Angell at michael.angell@spglobal.com .

US shippers again ask White House to intervene in longshore contract talks

<div class="phx-topic abstract-wrapper">For shippers fending off one supply chain shock after another, all the while trying to keep inventory and other supply costs in control, what is happening on the carrier front for them is yet another headache, and one not likely curable any time soon.</div>

For shippers fending off one supply chain shock after another, all the while trying to keep inventory and other supply costs in control, what is happening on the carrier front for them is yet another headache, and one not likely curable any time soon.

<div class="phx-topic">It started when the pandemic swiftly <a href="https://www.joc.com/article/post-covid-market-shocks-challenge-long-held-container-shipping-truisms-5192158">disabused shippers of the assumed status quo</a> that supply chains are cost effective and consistent, even if this form of value creation for them came, through no fault of their own, at the expense of value destruction for carriers. It continued when out of the pandemic came not the respite shippers were hoping for, but rather a form of perpetual upheaval such that the next disruptive event is fully expected but the source, severity, onset and duration remains a mystery. Taken together, those factors have recast supply chains as chronically at risk, clashing with corporate leaders’ aversion to investing in resilience — an insurance policy of buffer stock, front-loading and technology that may all be for naught if the next expected shock were to somehow not materialize. But even then, the coast isn’t clear. Newly perilous terrain confronts shippers — not from the dangerous external world of geopolitics, climate, natural disaster or public health, but rather from within the industry itself. Those same carriers who could be reliably counted on to over-order on tonnage and then mercilessly raid each other’s cargo to fill those ships at whatever price have, many believe, emerged out of the pandemic as a different industry where this behavior can longer be taken as a given. Many industry sources were asked in recent months if they believe there are aspects of carrier behavior that are new and permanent, irrespective of the ebbs and flows of the market. Not universally, but overwhelmingly, the answer has been “yes.” <h3>Strained relationships </h3>The big context — but not the whole story — is consolidation and the refinement of alliances as able adjustors of short-term capacity. All those years of below-par profits led to wave after wave of mergers, acquisition and bankruptcy such that the top 10 carriers control over 84% of global capacity, according to maritime analyst Alphaliner. Heavy concentration for sure, but also leaving room for further consolidation that senior industry figures believe is still possible. But for shippers, the implications go beyond the simple reality of consolidation and alliances. Among other things, consolidation means what once was a big piece of business for a carrier has become progressively smaller as the customer’s share of a carrier’s book of business shrinks. A beneficial cargo owner (BCO) shipping 25,000 containers and spending $50 million on ocean freight annually sounds big, but it does not hold the level of importance it once did for the largest carriers. If even some of the largest shippers are less important than they once were, then hopefully the relationship could hang on other factors such as trust, win-win relationships and collaboration. (A pause here while the reader chokes back laughter) The shipper-carrier relationship has always been strained and confrontational at some level. That is freight transportation writ large. But veterans believe that within container shipping, it has sunk to a new low from which it will be hard to recover. How many truly strategic relationships does a carrier have, a senior executive at one of the largest lines was asked over the summer. The answer was none, or virtually none. <h3>Loyalty is rare </h3>With few exceptions, carriers and shippers are not riding the cyclical waves together. The zero-sum game where my gain is your loss and vice versa, is the default. A few large BCOs got stuck so badly during COVID-19 that they saw the light and became converts, but not many. The expectation at this point among carriers is simple and stark: Shippers will take full advantage when the opportunity presents itself. The expectation among shippers is — or should be — that carriers will do the same. Signed, legally vetted contracts are not at the end of the day enforceable, as inexplicable as that may sound. Can the government step in to change that? The answer will be a long time coming. Too many carriers walk away from signed agreements when space gets tight, denying space on ships to contracted customers in favor of spot market business. Too many customers — often directed from the C-suite — walk away from those same signed agreements when a better deal is to be had on the open market. Those carriers who thought they could “invest” in customer relationships during the height of the pandemic by honoring contracts that other carriers didn’t learned the costly lesson that loyalty is rare, a concept embraced by a much smaller segment of the shipping public than what was thought. For shippers fending off one supply chain shock after another, all the while trying to keep inventory and other supply costs in control, what is happening on the carrier front for them is yet another headache, and one not likely curable any time soon. Contact Peter Tirschwell at <a href="mailto:peter.tirschwell@spglobal.com">peter.tirschwell@spglobal.com</a>. </div>

It started when the pandemic swiftly disabused shippers of the assumed status quo that supply chains are cost effective and consistent, even if this form of value creation for them came, through no fault of their own, at the expense of value destruction for carriers. It continued when out of the pandemic came not the respite shippers were hoping for, but rather a form of perpetual upheaval such that the next disruptive event is fully expected but the source, severity, onset and duration remains a mystery. Taken together, those factors have recast supply chains as chronically at risk, clashing with corporate leaders’ aversion to investing in resilience — an insurance policy of buffer stock, front-loading and technology that may all be for naught if the next expected shock were to somehow not materialize. But even then, the coast isn’t clear. Newly perilous terrain confronts shippers — not from the dangerous external world of geopolitics, climate, natural disaster or public health, but rather from within the industry itself. Those same carriers who could be reliably counted on to over-order on tonnage and then mercilessly raid each other’s cargo to fill those ships at whatever price have, many believe, emerged out of the pandemic as a different industry where this behavior can longer be taken as a given. Many industry sources were asked in recent months if they believe there are aspects of carrier behavior that are new and permanent, irrespective of the ebbs and flows of the market. Not universally, but overwhelmingly, the answer has been “yes.” Strained relationships The big context — but not the whole story — is consolidation and the refinement of alliances as able adjustors of short-term capacity. All those years of below-par profits led to wave after wave of mergers, acquisition and bankruptcy such that the top 10 carriers control over 84% of global capacity, according to maritime analyst Alphaliner. Heavy concentration for sure, but also leaving room for further consolidation that senior industry figures believe is still possible. But for shippers, the implications go beyond the simple reality of consolidation and alliances. Among other things, consolidation means what once was a big piece of business for a carrier has become progressively smaller as the customer’s share of a carrier’s book of business shrinks. A beneficial cargo owner (BCO) shipping 25,000 containers and spending $50 million on ocean freight annually sounds big, but it does not hold the level of importance it once did for the largest carriers. If even some of the largest shippers are less important than they once were, then hopefully the relationship could hang on other factors such as trust, win-win relationships and collaboration. (A pause here while the reader chokes back laughter) The shipper-carrier relationship has always been strained and confrontational at some level. That is freight transportation writ large. But veterans believe that within container shipping, it has sunk to a new low from which it will be hard to recover. How many truly strategic relationships does a carrier have, a senior executive at one of the largest lines was asked over the summer. The answer was none, or virtually none. Loyalty is rare With few exceptions, carriers and shippers are not riding the cyclical waves together. The zero-sum game where my gain is your loss and vice versa, is the default. A few large BCOs got stuck so badly during COVID-19 that they saw the light and became converts, but not many. The expectation at this point among carriers is simple and stark: Shippers will take full advantage when the opportunity presents itself. The expectation among shippers is — or should be — that carriers will do the same. Signed, legally vetted contracts are not at the end of the day enforceable, as inexplicable as that may sound. Can the government step in to change that? The answer will be a long time coming. Too many carriers walk away from signed agreements when space gets tight, denying space on ships to contracted customers in favor of spot market business. Too many customers — often directed from the C-suite — walk away from those same signed agreements when a better deal is to be had on the open market. Those carriers who thought they could “invest” in customer relationships during the height of the pandemic by honoring contracts that other carriers didn’t learned the costly lesson that loyalty is rare, a concept embraced by a much smaller segment of the shipping public than what was thought. For shippers fending off one supply chain shock after another, all the while trying to keep inventory and other supply costs in control, what is happening on the carrier front for them is yet another headache, and one not likely curable any time soon. Contact Peter Tirschwell at peter.tirschwell@spglobal.com .

Tale of woe for ocean container shippers going from bad to worse

<div class="phx-topic abstract-wrapper">Carriers tell the Journal of Commerce they would prefer to avoid a strike and the lengthy operational upheaval a stoppage would cause along the East and Gulf coasts, but unlike in the past, they feel no urgency to get a deal done, writes Peter Tirschwell.</div>

Carriers tell the Journal of Commerce they would prefer to avoid a strike and the lengthy operational upheaval a stoppage would cause along the East and Gulf coasts, but unlike in the past, they feel no urgency to get a deal done, writes Peter Tirschwell.

<div class="phx-topic">For decades, a simple philosophy dictated how ocean carriers approached contract negotiations with US dockworkers: Keep the ports open. Even if it meant making major concessions on wages or benefits, carriers were primarily motivated to avoid disruption on the docks and were willing to pay handsomely to achieve that result. Carriers were “highly motivated to keep the ports open,” said a former management leader. <a href="https://www.joc.com/article/anxious-white-house-weighing-options-as-ila-contract-deadline-nears-5725622">But in the current showdown over labor at East and Gulf coast container ports</a>, that philosophy no longer applies. Yes, ocean carriers tell the Journal of Commerce, they would prefer to avoid a strike and the lengthy operational upheaval and chaos for supply chains that a stoppage would cause. But unlike in the past, they feel no urgency to get a deal done. Carriers appear unwilling — at least this time around — to make major concessions to the International Longshoremen’s Association and its president, Harold Daggett, in the interest of keeping the ports open. Unlike in prior negotiations, there is no urgency or sense of high alarm among the carriers that the burden is on them to solve the problem. Thus, with no talks scheduled and the existing contract expiring in two weeks, it means the odds of a strike are high and growing. Indeed, sources close to the negotiations say they now expect the union will go on strike on Oct. 1. How long it will last and whether the Biden administration will invoke the Taft-Hartley Act to force dockworkers back to work are currently unknown. <h3>Recent negativity in US for carriers </h3>There is no specific reason why the carriers who dominate the board of the United States Maritime Alliance are thinking about these negotiations differently than prior bargaining cycles. Rather, their point of view is colored by recent negative experiences in the US market, from being personally blamed by President Joe Biden and members of Congress for the high rates and lack of capacity experienced by shippers during the pandemic, to the Ocean Shipping Reform Act of 2022 becoming law over their objections, to the Federal Maritime Commission morphing from a traditionally carrier-friendly body into what some now call a consumer protection agency for shippers. The resistance of carriers to capitulating at the negotiating table is also influenced by their inability in the US market, different from virtually everywhere else in the world, to recoup terminal handling charges from shippers. Thus, not only are US terminal costs, including labor, among the highest in the world, but carriers cannot assess a terminal handling charge on shipments to the shipper. So any pay increase for dockworkers that carriers agree to will come directly out of their pockets in the coming years, a fact the carriers are already painfully aware of from prior wage concessions on both the East and West coasts.Carriers also may find it difficult to imagine how in the event of a strike the Biden administration could find ways to pressure them to accept an agreement with the union they don’t like. There is no known leverage the White House could use to make carriers go higher than the reported 32% wage increase they have offered the union over a new six-year contract, or to get them to accept new rules for automation, as the union suggested it wanted in a Sept. 11 email. Contact Peter Tirschwell at <a href="peter.tirschwell@spglobal.com">peter.tirschwell@spglobal.com</a>. </div>

For decades, a simple philosophy dictated how ocean carriers approached contract negotiations with US dockworkers: Keep the ports open. Even if it meant making major concessions on wages or benefits, carriers were primarily motivated to avoid disruption on the docks and were willing to pay handsomely to achieve that result. Carriers were “highly motivated to keep the ports open,” said a former management leader. But in the current showdown over labor at East and Gulf coast container ports , that philosophy no longer applies. Yes, ocean carriers tell the Journal of Commerce, they would prefer to avoid a strike and the lengthy operational upheaval and chaos for supply chains that a stoppage would cause. But unlike in the past, they feel no urgency to get a deal done. Carriers appear unwilling — at least this time around — to make major concessions to the International Longshoremen’s Association and its president, Harold Daggett, in the interest of keeping the ports open. Unlike in prior negotiations, there is no urgency or sense of high alarm among the carriers that the burden is on them to solve the problem. Thus, with no talks scheduled and the existing contract expiring in two weeks, it means the odds of a strike are high and growing. Indeed, sources close to the negotiations say they now expect the union will go on strike on Oct. 1. How long it will last and whether the Biden administration will invoke the Taft-Hartley Act to force dockworkers back to work are currently unknown. Recent negativity in US for carriers There is no specific reason why the carriers who dominate the board of the United States Maritime Alliance are thinking about these negotiations differently than prior bargaining cycles. Rather, their point of view is colored by recent negative experiences in the US market, from being personally blamed by President Joe Biden and members of Congress for the high rates and lack of capacity experienced by shippers during the pandemic, to the Ocean Shipping Reform Act of 2022 becoming law over their objections, to the Federal Maritime Commission morphing from a traditionally carrier-friendly body into what some now call a consumer protection agency for shippers. The resistance of carriers to capitulating at the negotiating table is also influenced by their inability in the US market, different from virtually everywhere else in the world, to recoup terminal handling charges from shippers. Thus, not only are US terminal costs, including labor, among the highest in the world, but carriers cannot assess a terminal handling charge on shipments to the shipper. So any pay increase for dockworkers that carriers agree to will come directly out of their pockets in the coming years, a fact the carriers are already painfully aware of from prior wage concessions on both the East and West coasts. Carriers also may find it difficult to imagine how in the event of a strike the Biden administration could find ways to pressure them to accept an agreement with the union they don’t like. There is no known leverage the White House could use to make carriers go higher than the reported 32% wage increase they have offered the union over a new six-year contract, or to get them to accept new rules for automation, as the union suggested it wanted in a Sept. 11 email. Contact Peter Tirschwell at peter.tirschwell@spglobal.com .

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