<div class="phx-topic abstract-wrapper">The Oregon gateway is moving closer to becoming a landlord port after it reached a framework agreement with a third-party operator for its only international container terminal.</div>

The Oregon gateway is moving closer to becoming a landlord port after it reached a framework agreement with a third-party operator for its only international container terminal.

Feature image

<div class="phx-topic">The Port of Portland has struck a tentative deal with its long-serving stevedore to oversee the Oregon port’s container terminal, which had faced closure this year due to its mounting financial losses. The port on Monday said it reached a framework agreement for Harbor Industrial to become the long-term operator of Portland’s Terminal 6. The framework lays out initial terms of the deal and a timeline, with a final agreement expected to be ready by the summer of 2025. Portland is getting out of the terminal business after <a href="https://www.joc.com/article/portland-plans-to-end-container-business-by-october-5240957">recording losses totaling over $26 million</a> from 2023 through 2024 due to a drop in container volumes and below-market lift rates.The new agreement relieves the port of having to market T6 to ocean carriers, establish lift rates and handle other management responsibilities, deferring those tasks to Harbor Industrial, which now schedules and supervises longshore labor at the port. The deal with Harbor also includes $5 million in stopgap funding from the state to help cover the losses, as well as another $20 million for capital improvements at T6. Oregon has also pledged more money toward maintenance dredging of the Columbia River navigation channel. ”This milestone is a fundamental positive shift in support of the Oregon importers and exporters to ensure an ongoing, reliable and efficient gateway for Oregon businesses,” Tim McCarthy, COO of Harbor Industrial, said in a statement.The Port of Portland hopes to double its current volume to 120,000 containers per year by 2032, with an eventual target of 180,000 containers annually after that.Contact Michael Angell at <a href="mailto:michael.angell@spglobal.com">michael.angell@spglobal.com</a>.</div>

The Port of Portland has struck a tentative deal with its long-serving stevedore to oversee the Oregon port’s container terminal, which had faced closure this year due to its mounting financial losses. The port on Monday said it reached a framework agreement for Harbor Industrial to become the long-term operator of Portland’s Terminal 6. The framework lays out initial terms of the deal and a timeline, with a final agreement expected to be ready by the summer of 2025. Portland is getting out of the terminal business after recording losses totaling over $26 million from 2023 through 2024 due to a drop in container volumes and below-market lift rates. The new agreement relieves the port of having to market T6 to ocean carriers, establish lift rates and handle other management responsibilities, deferring those tasks to Harbor Industrial, which now schedules and supervises longshore labor at the port. The deal with Harbor also includes $5 million in stopgap funding from the state to help cover the losses, as well as another $20 million for capital improvements at T6. Oregon has also pledged more money toward maintenance dredging of the Columbia River navigation channel. ”This milestone is a fundamental positive shift in support of the Oregon importers and exporters to ensure an ongoing, reliable and efficient gateway for Oregon businesses,” Tim McCarthy, COO of Harbor Industrial, said in a statement. The Port of Portland hopes to double its current volume to 120,000 containers per year by 2032, with an eventual target of 180,000 containers annually after that. Contact Michael Angell at michael.angell@spglobal.com .

Container Shipping News

Marine terminals

North American ports

Port of Portland strikes deal with stevedore to operate container terminal

<div class="phx-topic abstract-wrapper">Carrier executives who dominate the board of the United States Maritime Alliance tell the Journal of Commerce they are done with what they consider to be an overly passive approach demonstrated in recent months by USMX staff in the face of repeated provocations by ILA leadership.</div>

Carrier executives who dominate the board of the United States Maritime Alliance tell the Journal of Commerce they are done with what they consider to be an overly passive approach demonstrated in recent months by USMX staff in the face of repeated provocations by ILA leadership.

<div class="phx-topic">Container lines, after months of trying to maintain a low profile, are pushing harder on the need for automation at US East and Gulf coast ports as longshore labor refuses to negotiate on the technology issue and the union’s Jan. 15 strike threat nears. The United States Maritime Alliance’s (USMX’s) newfound assertiveness was on display last week in a <a href="https://www.usmx.com/assets/content/public-resources/12-3-24_Port_Modernization_and_Investment_in_Technology.pdf">rejoinder to the International Longshoremen’s Association (ILA) blaming</a> the contract impasse on rail-mounted gantry cranes sought by carriers: <div class="wrapper-narrow float-right-element"><img src="/images/phoenix/5896864_0.1.jpg"></img></div> “Modernization and investment in new technology are core priorities required to successfully bargain a new master contract with the ILA.” The missive was the first issue-focused statement from USMX, which until Dec. 3 had kept its messaging within negotiation updates. In comparison, the ILA has released a fiery video and multiple searing statements, including one even <a href="https://ilaunion.org/usmx-continues-weak-publicity-campaign-against-ila-with-unfair-labor-practices-suit-foreign-shipping-companies-exploiting-american-longshoremen-is-unfair-labor-practice-ila/">knocking USMX’s “weak publicity campaign.”</a> Carrier executives who dominate the board of the USMX tell the Journal of Commerce they are done with what they consider to be an overly passive approach demonstrated in recent months by USMX staff in the face of repeated provocations by ILA leadership. Sources told the Journal of Commerce that USMX staff advised the carriers to lay low and not confront the dockworkers over issues such as pay, productivity and automation even as the ILA castigated them as greedy, foreign-owned and bent on replacing American jobs with automation. Carriers are still smarting from the Biden administration <a href="https://www.joc.com/article/behind-the-scenes-white-house-arm-twisting-got-ila-wage-deal-done-5747241">essentially forcing their group CEOs</a> during an early October conference call to accept a 62% pay increase for dockworkers over a new six-year contract, which ended a three-day strike. “The carriers were assured by USMX that things would work out, that [ILA President Harold] Daggett is only posturing, so they weren’t aggressive in communicating how bad a deal this was,” a knowledgeable source told the Journal of Commerce. “In retrospect, we were advised to stay out of the spotlight, not engage in a fight in the media, [and] allow Harold to sound off unchecked, without resistance.” According to two sources, frustration with that strategy led to recent changes in responsibility among senior staff at USMX. At least among some of the carrier members of USMX, there’s a preference to take a harder line even if that means another ILA strike that is likely to draw in the new Trump administration. Key, at least for some carriers, is the fact that this time around the US presidential election isn’t hanging in the balance as it was in October. Back then, carrier CEOs were not willing to keep the strike going and potentially be exposed as a target for blame for influencing the election outcome. <h3>Gauging the Trump factor </h3>Similar to the Biden administration, President-elect Donald Trump has emphasized the foreign ownership of major container lines. On Oct. 1, the first day of the ILA’s strike, <a href="https://www.politico.com/news/2024/10/02/harris-trump-dockworkers-strike-00182238">the Trump camp told Politico</a>: “American workers should be able to negotiate for better wages, especially since the shipping companies are mostly foreign flag vessels...” In a Nov. 25 statement featuring a photo of Daggett’s “constructive meeting” with Trump that took place in late 2023, the union boss <a href="https://www.joc.com/article/trumps-labor-pick-draws-longshore-and-teamster-praise-but-trucker-ire-5846861">praised the incoming president’s nomination</a> of Rep. Lori Chavez-DeRemer as US labor secretary. Trump during the ILA’s three-day strike expressed sympathy for the dockworkers who “were decimated by this inflation.” Still, Trump’s labor sympathies aren’t shared by Elon Musk, his adviser and biggest reelection backer financially. Musk on Saturday <a href="https://x.com/elonmusk/status/1865426504886137218?s=46">retweeted a video</a> by libertarian pundit John Stossel titled, “America’s Stone Age Ports: How Unions Block Progress.” Flexport CEO Ryan Petersen, who estimates there’s an 80% chance of ILA striking come Jan. 15 due to a lack of an agreement on automation, notes the differing stances of Trump and Musk. “The big uncertainty is that Trump was very much pro-union back in October, while Elon has long been pro-automation,” Petersen said. “Does Trump listen to Elon or follow his natural instinct which is to be the man of the people?” Contact Peter Tirschwell at <a href="mailto:peter.tirschwell@spglobal.com">peter.tirschwell@spglobal.com</a>.</div>

Container lines, after months of trying to maintain a low profile, are pushing harder on the need for automation at US East and Gulf coast ports as longshore labor refuses to negotiate on the technology issue and the union’s Jan. 15 strike threat nears. The United States Maritime Alliance’s (USMX’s) newfound assertiveness was on display last week in a rejoinder to the International Longshoremen’s Association (ILA) blaming the contract impasse on rail-mounted gantry cranes sought by carriers: “Modernization and investment in new technology are core priorities required to successfully bargain a new master contract with the ILA.” The missive was the first issue-focused statement from USMX, which until Dec. 3 had kept its messaging within negotiation updates. In comparison, the ILA has released a fiery video and multiple searing statements, including one even knocking USMX’s “weak publicity campaign.” Carrier executives who dominate the board of the USMX tell the Journal of Commerce they are done with what they consider to be an overly passive approach demonstrated in recent months by USMX staff in the face of repeated provocations by ILA leadership. Sources told the Journal of Commerce that USMX staff advised the carriers to lay low and not confront the dockworkers over issues such as pay, productivity and automation even as the ILA castigated them as greedy, foreign-owned and bent on replacing American jobs with automation. Carriers are still smarting from the Biden administration essentially forcing their group CEOs during an early October conference call to accept a 62% pay increase for dockworkers over a new six-year contract, which ended a three-day strike. “The carriers were assured by USMX that things would work out, that [ILA President Harold] Daggett is only posturing, so they weren’t aggressive in communicating how bad a deal this was,” a knowledgeable source told the Journal of Commerce. “In retrospect, we were advised to stay out of the spotlight, not engage in a fight in the media, [and] allow Harold to sound off unchecked, without resistance.” According to two sources, frustration with that strategy led to recent changes in responsibility among senior staff at USMX. At least among some of the carrier members of USMX, there’s a preference to take a harder line even if that means another ILA strike that is likely to draw in the new Trump administration. Key, at least for some carriers, is the fact that this time around the US presidential election isn’t hanging in the balance as it was in October. Back then, carrier CEOs were not willing to keep the strike going and potentially be exposed as a target for blame for influencing the election outcome. Gauging the Trump factor Similar to the Biden administration, President-elect Donald Trump has emphasized the foreign ownership of major container lines. On Oct. 1, the first day of the ILA’s strike, the Trump camp told Politico : “American workers should be able to negotiate for better wages, especially since the shipping companies are mostly foreign flag vessels...” In a Nov. 25 statement featuring a photo of Daggett’s “constructive meeting” with Trump that took place in late 2023, the union boss praised the incoming president’s nomination of Rep. Lori Chavez-DeRemer as US labor secretary. Trump during the ILA’s three-day strike expressed sympathy for the dockworkers who “were decimated by this inflation.” Still, Trump’s labor sympathies aren’t shared by Elon Musk, his adviser and biggest reelection backer financially. Musk on Saturday retweeted a video by libertarian pundit John Stossel titled, “America’s Stone Age Ports: How Unions Block Progress.” Flexport CEO Ryan Petersen, who estimates there’s an 80% chance of ILA striking come Jan. 15 due to a lack of an agreement on automation, notes the differing stances of Trump and Musk. “The big uncertainty is that Trump was very much pro-union back in October, while Elon has long been pro-automation,” Petersen said. “Does Trump listen to Elon or follow his natural instinct which is to be the man of the people?” Contact Peter Tirschwell at peter.tirschwell@spglobal.com .

Port News

Container lines

Longshore labor

Maritime

Ocean carriers take harder line with ILA as January strike date nears

<div class="phx-topic abstract-wrapper">Fears that methanol will not be available in the coming years at the scale required to power a growing and thirsty ocean fleet are pushing the order book deeper down the LNG pathway.</div>

Fears that methanol will not be available in the coming years at the scale required to power a growing and thirsty ocean fleet are pushing the order book deeper down the LNG pathway.

<div class="phx-topic">The availability of green fuels to power vessels on the fast-growing dual-fuel order book as they come online over the next few years is “the single biggest worry we have,” according to Hapag-Lloyd’s Rolf Habben Jansen. “In five or 10 years from today, there will be significantly more ships that can sail on green fuel than there is green fuel available,” the Hamburg-based carrier CEO told customers during an online briefing Monday. “That keeps us awake and is why we are prepared to sign offtake agreements with suppliers for longer periods,” Habben Jansen added. “We are talking to various producers about the availability of green fuel, but we see the availability of green fuel as a big problem.” Hapag-Lloyd and Seaspan are converting five 10,100-TEU charter ships to a methanol dual-fuel propulsion system that will be ready in 2026. Maersk <a href="https://www.joc.com/article/maersks-methanol-ship-conversion-tests-retrofitting-business-case-5822762">retrofitted its first vessel to methanol</a> and returned it to service in November to join the nine 16,592-TEU methanol-capable ships that have so far been delivered from an 18-ship order. Other carriers that will also be hunting for methanol to power the vessels coming off their order books are Ocean Network Express, Evergreen, HMM and Cosco. In mid-November, Cosco Shipping Holdings <a href="https://www.joc.com/article/cosco-shareholders-back-22-billion-order-for-12-methanol-fueled-ships-5818358">made a $2.2 billion deal</a> for 12 dual-fuel 14,000-TEU vessels for delivery in 2027. <h3>Urgent moves for supply deals </h3>Carriers have been urgently trying to secure supply deals for the future as their dual-fuel ships are delivered. While the vessels will be able to sail on conventional bunker fuels, <a href="https://www.joc.com/article/tightening-europe-decarbonization-measures-will-raise-shipper-costs-carriers-5833489">tightening emissions controls by regulators</a> and <a href="https://www.joc.com/article/midterm-emissions-plan-to-take-center-stage-at-upcoming-imo-meeting-5731399">a global pricing measure</a> that the International Maritime Organization (IMO) wants in place by next October have lent an urgency to the sourcing of green fuel. Hapag-Lloyd in late November <a href="https://www.joc.com/article/hapag-lloyd-joins-maersk-in-chinese-methanol-supply-deal-5866031">signed an agreement with Chinese energy producer Goldwind</a> for the annual supply of 250,000 tons of green methanol per year from 2026, joining <a href="https://www.joc.com/article/hapag-lloyd-says-gemini-alliance-cargo-bookings-to-open-dec-3-5846853">Gemini Cooperation</a> partner Maersk <a href="https://www.joc.com/article/maersk-inks-new-methanol-sourcing-deal-with-chinese-supplier-5234419">that already has a 500,000-tons-per-year green methanol deal</a> with Goldwind. But Steve Esau, COO of LNG multi-sector industry coalition SEA-LNG, said many of the memorandums of understanding that ocean carriers have signed with methanol fuel producers have not yet matured into projects, raising concerns among shipowners. “The big energy suppliers are not really that interested in producing large volumes of green methanol for the shipping industry for various commercial reasons, and there is a realization that the fuel was not going to become available at the scale needed by the shipping industry,” Esau told the Journal of Commerce in a recent interview. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="1a054077-7728-4ffd-abb8-b7aff17c3235"></dynamic-object></div>Esau said there was an emerging recognition within the shipping supply chain that methanol was a tiny market. “If you converted methanol into LNG equivalent, you’re looking at a methanol fossil fuel market of 50 million tons, most of it produced and consumed locally,” Esau said. “Compare that to LNG, which is closer to 500 million tons and has infrastructure for another billion tons of regasification capacity. You just don’t have that infrastructure in place for methanol.” The growing methanol supply concerns have seen carriers hedging their bets and directing significant investment toward building vessels capable of sailing on LNG. Alphaliner reports that six of the top 10 ocean carriers now have LNG-capable ships on their order books. That includes Maersk that last week confirmed an order for 20 dual-fuel LNG-capable ships totaling 300,000 TEUs, and Hapag-Lloyd, which last month <a href="https://www.joc.com/article/hapag-lloyd-makes-4-billion-move-down-lng-path-with-24-ship-dual-fuel-order-5787368">announced its preference for LNG-powered vessels</a> with an order for 24 ships. Mediterranean Shipping Co. (MSC) has also decided to move in the direction of LNG, CEO Soren Toft said in October. About 70% of the total 1.7 million TEUs of ship orders made so far this year were for ships capable of sailing on methanol or LNG, with LNG comprising 63% of the new orders, according to data from Sea-web, a sister company of the Journal of Commerce within S&amp;P Global. In 2023, the methanol-LNG split was 66% in favor of methanol ships, Sea-web data shows. Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com">greg.knowler@spglobal.com</a>. </div>

The availability of green fuels to power vessels on the fast-growing dual-fuel order book as they come online over the next few years is “the single biggest worry we have,” according to Hapag-Lloyd’s Rolf Habben Jansen. “In five or 10 years from today, there will be significantly more ships that can sail on green fuel than there is green fuel available,” the Hamburg-based carrier CEO told customers during an online briefing Monday. “That keeps us awake and is why we are prepared to sign offtake agreements with suppliers for longer periods,” Habben Jansen added. “We are talking to various producers about the availability of green fuel, but we see the availability of green fuel as a big problem.” Hapag-Lloyd and Seaspan are converting five 10,100-TEU charter ships to a methanol dual-fuel propulsion system that will be ready in 2026. Maersk retrofitted its first vessel to methanol and returned it to service in November to join the nine 16,592-TEU methanol-capable ships that have so far been delivered from an 18-ship order. Other carriers that will also be hunting for methanol to power the vessels coming off their order books are Ocean Network Express, Evergreen, HMM and Cosco. In mid-November, Cosco Shipping Holdings made a $2.2 billion deal for 12 dual-fuel 14,000-TEU vessels for delivery in 2027. Urgent moves for supply deals Carriers have been urgently trying to secure supply deals for the future as their dual-fuel ships are delivered. While the vessels will be able to sail on conventional bunker fuels, tightening emissions controls by regulators and a global pricing measure that the International Maritime Organization (IMO) wants in place by next October have lent an urgency to the sourcing of green fuel. Hapag-Lloyd in late November signed an agreement with Chinese energy producer Goldwind for the annual supply of 250,000 tons of green methanol per year from 2026, joining Gemini Cooperation partner Maersk that already has a 500,000-tons-per-year green methanol deal with Goldwind. But Steve Esau, COO of LNG multi-sector industry coalition SEA-LNG, said many of the memorandums of understanding that ocean carriers have signed with methanol fuel producers have not yet matured into projects, raising concerns among shipowners. “The big energy suppliers are not really that interested in producing large volumes of green methanol for the shipping industry for various commercial reasons, and there is a realization that the fuel was not going to become available at the scale needed by the shipping industry,” Esau told the Journal of Commerce in a recent interview. Esau said there was an emerging recognition within the shipping supply chain that methanol was a tiny market. “If you converted methanol into LNG equivalent, you’re looking at a methanol fossil fuel market of 50 million tons, most of it produced and consumed locally,” Esau said. “Compare that to LNG, which is closer to 500 million tons and has infrastructure for another billion tons of regasification capacity. You just don’t have that infrastructure in place for methanol.” The growing methanol supply concerns have seen carriers hedging their bets and directing significant investment toward building vessels capable of sailing on LNG. Alphaliner reports that six of the top 10 ocean carriers now have LNG-capable ships on their order books. That includes Maersk that last week confirmed an order for 20 dual-fuel LNG-capable ships totaling 300,000 TEUs, and Hapag-Lloyd, which last month announced its preference for LNG-powered vessels with an order for 24 ships. Mediterranean Shipping Co. (MSC) has also decided to move in the direction of LNG, CEO Soren Toft said in October. About 70% of the total 1.7 million TEUs of ship orders made so far this year were for ships capable of sailing on methanol or LNG, with LNG comprising 63% of the new orders, according to data from Sea-web, a sister company of the Journal of Commerce within S&P Global. In 2023, the methanol-LNG split was 66% in favor of methanol ships, Sea-web data shows. Contact Greg Knowler at greg.knowler@spglobal.com .

Transport, Trade and Regulation News

Potential shortage of green fuels ‘keeps us awake’: Hapag-Lloyd CEO

<div class="phx-topic abstract-wrapper">Limited air freight options for specialized cargoes are not expected to ease in the short term. </div>

Limited air freight options for specialized cargoes are not expected to ease in the short term.

<div class="phx-topic">A combination of strong heavy-lift and outsized cargo demand, tight air cargo capacity and surging air freight rates has led to a modal shift in shipments from air to multipurpose vessels (MPVs), carriers and brokers say.Over the past two years, charter rates for aircraft specializing in heavy-lift and outsized cargo have surged more than 50% on strong demand and capacity shortages, Andriy Blagovisniy, global director of air chartering at LP Aero, part of Logistics Plus, told the Journal of Commerce.This has pushed charter rates for the heavy-lift air industry workhorse Antonov An-124 to over $2 million for a flight from Asia to the US. Heavy-lift and project cargo customers charter the entire airplane on an aircraft, crew, maintenance and insurance (ACMI) basis, unlike general air freight which is charged per kilogram. Actual rates are dependent on the type of cargo, flight duration and route.“Charter rates are high, but at the same time it cannot be said that they are not affordable,” Blagovisniy said. “When customers make the decision to use air transport their choice is always based on whether to gain time or save money given the significant financial losses that can arise from delays in delivery of project cargo.”However, he said that strong demand has led to longer lead times for specialized air freight. “To transport project cargo by air it is now necessary to book an aircraft approximately six to seven weeks in advance,” Blagovisniy said. That’s at least double the time needed two years ago. Time also needs to be factored in for the bespoke preparations necessary for the carriage of project cargoes, including the design and manufacture of frames to hold the cargo and the provision of lashing and lifting points to ensure safe weight distribution in the aircraft.The supply squeeze has meant that the waiting time for aircraft availability is now comparable with the time taken to deliver cargo by sea – though sea transportation is considerably cheaper, Blagovisniy said.“Consequently, customers who previously traditionally considered air delivery as the fastest and most convenient option are now, from the very beginning, planning and building their logistics needs on the delivery of project cargo by ship,” Blagovisniy added.<h3>MPV carrier welcomes modal shift</h3>Blagovisniy’s comments were echoed by Marc Willim, general manager and head of chartering at MPV operator AAL Shipping. “We have heard about such cases of heavy-lift air freight shipments moving to ocean freight from our forwarder clients,” Willim told the Journal of Commerce. “It is, however, difficult for us to quantify how many times or which cargoes specifically have shifted.“Due to the typically urgent nature of these shipments, we have a policy of earliest possibly engagement and forward planning with our project customers…and we can plan and lock in sailings early to satisfy individual project or customer needs,” he added.There are few aircraft capable of transporting heavy-lift or outsized project cargo loads. These include the AN-124, the world’s largest commercial cargo aircraft operated by Ukraine’s Antonov Airlines, Boeing 747-400s and Ilyushin IL-76s, all with a 50-ton payload. The Airbus Beluga ST, based on an Airbus A300, can carry up to 40 mt.Due to the Russia-Ukraine war, only six AN-124 Ukraine-registered aircraft remain active in the global heavy-lift transportation market, but “two of these are dedicated to transporting arms and supplies to Ukraine,” a broker said.Ongoing aircraft maintenance means that only two to four AN-124s currently operate on the global commercial market, said the broker, who did not want to be identified.Volga-Dnepr Airlines, which claims to have a fleet of 10 AN-124s, only operates two aircraft because the rest are grounded due to Western sanctions imposed on Russia following its invasion of Ukraine. The two aircraft only operate between Russia and “friendly” countries including China, India and Kazakhstan. There are just two Ilyushin IL-76s available on the market today.“Boeing 747s are more widely available, operated by cargo airlines including Cargolux and Kalitta Air, and have the flexibility to load project cargo through their nose door. But technically, they are more limited due to cargo door dimensions and maximum permissible floor loads,” the broker added.<h3>Shippers hold for Beluga capacity</h3>Tight specialized air freight capacity is expected to continue into next year. Benoît Lemonnier, Airbus Beluga Transport’s managing director, anticipates the situation will improve next year when the airline, specially created by European aircraft maker Airbus, starts to more actively promote its five Beluga Super Transporter (ST) aircraft.The priorities for 2025 are Airbus-related cargoes including satellites and helicopters “and the upcoming transport of new payloads for external strategic customers,” Lemonnier told the Journal of Commerce. “Aeronautics, defense and space are the most active with Beluga at the moment.”Airbus Beluga Transport, which received its air operator’s certificate in November 2023, has focused on developing its operations, flying around 700 hours in the first nine months of this year mainly on European and a few long-range flights, he said.The Beluga ST has a 40 mt payload and the world’s largest interior cross-section of any transport aircraft, accommodating outsized cargo of up to 23 feet wide and 22 feet high.Contact Keith Wallis at <a href="mailto:keithwallis@hotmail.com">keithwallis@hotmail.com</a>.</div>

A combination of strong heavy-lift and outsized cargo demand, tight air cargo capacity and surging air freight rates has led to a modal shift in shipments from air to multipurpose vessels (MPVs), carriers and brokers say. Over the past two years, charter rates for aircraft specializing in heavy-lift and outsized cargo have surged more than 50% on strong demand and capacity shortages, Andriy Blagovisniy, global director of air chartering at LP Aero, part of Logistics Plus, told the Journal of Commerce. This has pushed charter rates for the heavy-lift air industry workhorse Antonov An-124 to over $2 million for a flight from Asia to the US. Heavy-lift and project cargo customers charter the entire airplane on an aircraft, crew, maintenance and insurance (ACMI) basis, unlike general air freight which is charged per kilogram. Actual rates are dependent on the type of cargo, flight duration and route. “Charter rates are high, but at the same time it cannot be said that they are not affordable,” Blagovisniy said. “When customers make the decision to use air transport their choice is always based on whether to gain time or save money given the significant financial losses that can arise from delays in delivery of project cargo.” However, he said that strong demand has led to longer lead times for specialized air freight. “To transport project cargo by air it is now necessary to book an aircraft approximately six to seven weeks in advance,” Blagovisniy said. That’s at least double the time needed two years ago. Time also needs to be factored in for the bespoke preparations necessary for the carriage of project cargoes, including the design and manufacture of frames to hold the cargo and the provision of lashing and lifting points to ensure safe weight distribution in the aircraft. The supply squeeze has meant that the waiting time for aircraft availability is now comparable with the time taken to deliver cargo by sea – though sea transportation is considerably cheaper, Blagovisniy said. “Consequently, customers who previously traditionally considered air delivery as the fastest and most convenient option are now, from the very beginning, planning and building their logistics needs on the delivery of project cargo by ship,” Blagovisniy added. MPV carrier welcomes modal shift Blagovisniy’s comments were echoed by Marc Willim, general manager and head of chartering at MPV operator AAL Shipping. “We have heard about such cases of heavy-lift air freight shipments moving to ocean freight from our forwarder clients,” Willim told the Journal of Commerce. “It is, however, difficult for us to quantify how many times or which cargoes specifically have shifted. “Due to the typically urgent nature of these shipments, we have a policy of earliest possibly engagement and forward planning with our project customers…and we can plan and lock in sailings early to satisfy individual project or customer needs,” he added. There are few aircraft capable of transporting heavy-lift or outsized project cargo loads. These include the AN-124, the world’s largest commercial cargo aircraft operated by Ukraine’s Antonov Airlines, Boeing 747-400s and Ilyushin IL-76s, all with a 50-ton payload. The Airbus Beluga ST, based on an Airbus A300, can carry up to 40 mt. Due to the Russia-Ukraine war, only six AN-124 Ukraine-registered aircraft remain active in the global heavy-lift transportation market, but “two of these are dedicated to transporting arms and supplies to Ukraine,” a broker said. Ongoing aircraft maintenance means that only two to four AN-124s currently operate on the global commercial market, said the broker, who did not want to be identified. Volga-Dnepr Airlines, which claims to have a fleet of 10 AN-124s, only operates two aircraft because the rest are grounded due to Western sanctions imposed on Russia following its invasion of Ukraine. The two aircraft only operate between Russia and “friendly” countries including China, India and Kazakhstan. There are just two Ilyushin IL-76s available on the market today. “Boeing 747s are more widely available, operated by cargo airlines including Cargolux and Kalitta Air, and have the flexibility to load project cargo through their nose door. But technically, they are more limited due to cargo door dimensions and maximum permissible floor loads,” the broker added. Shippers hold for Beluga capacity Tight specialized air freight capacity is expected to continue into next year. Benoît Lemonnier, Airbus Beluga Transport’s managing director, anticipates the situation will improve next year when the airline, specially created by European aircraft maker Airbus, starts to more actively promote its five Beluga Super Transporter (ST) aircraft. The priorities for 2025 are Airbus-related cargoes including satellites and helicopters “and the upcoming transport of new payloads for external strategic customers,” Lemonnier told the Journal of Commerce. “Aeronautics, defense and space are the most active with Beluga at the moment.” Airbus Beluga Transport, which received its air operator’s certificate in November 2023, has focused on developing its operations, flying around 700 hours in the first nine months of this year mainly on European and a few long-range flights, he said. The Beluga ST has a 40 mt payload and the world’s largest interior cross-section of any transport aircraft, accommodating outsized cargo of up to 23 feet wide and 22 feet high. Contact Keith Wallis at keithwallis@hotmail.com .

Heavy-haul transport

Project cargo

Breakbulk News

Lack of heavy-lift air freight capacity forces shift to ocean transport

<div class="phx-topic abstract-wrapper">Steady-but-uninspiring demand for MPVs has kept freight rates at a sustainable level.</div>

Steady-but-uninspiring demand for MPVs has kept freight rates at a sustainable level.

<div class="phx-topic">Momentum for the multipurpose vessel (MPV) fleet has eased as renewables projects move slower than anticipated, leaving forward-booked tonnage free to re-enter the charter market and keeping freight rates in check.Michael Mørland, project cargo director/Atlantic at G2 Ocean, told the Journal of Commerce that the renewable segment has not really delivered the volume that was expected in 2024. “And the outlook for the remaining pipeline of projects is the same -- things are going slower than anticipated as the financing climate has been harder, and there are less volumes than anticipated,” Mørland said.This has led to an easing in freight rates because tonnage that had been allocated for the pipeline isn’t being utilized. “That ruins some of the momentum for the multipurpose fleets,” he said.One notable trend is US manufacturers switching supply to near-field production where possible, including from Mexico. “The more they get that bit right, the less they have to ship deepsea,” Mørland said. Toepfer Transport said in its Dec. 6 Multipurpose Shipping Report that the Atlantic trades have shown “gradual and modest positive development,” but are still below the level considered normal.“On both sides of the Atlantic, economic growth is slow, and there are some uncertainties about the impact of the next US presidency on global trade,” Toepfer said.Nevertheless, robust demand for tonnage in Asia still provides for stable vessel utilization, Toepfer added. The broker said it anticipates that the current sideways movement will “persist for a few more months,” although an improvement in rates is expected from the second quarter of 2025 onwards, subject to developments in the US. Toepfer projects a 2.57% increase in its Toepfer Multipurpose Index (TMI) by November 2025, year over year.Drewry Shipping Consultants’ indices echoed the steady, but uninspiring market. Published Dec. 6, its new Project Cargo Transport Index reached 175 points in November, up 0.6% from October, while its new General Cargo Index rose 1.4% to 145 points. The base point for both indices is 100 as of January 2019, and they have been calculated forward from that point.<div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="67c43007-3a39-487a-b219-50013baafc2a"></dynamic-object></div><h3>US cargo demand expected to pivot towards oil </h3>Looking to 2025, Mørland expects a shift in the cargo base for MPVs in the US.“It's quite clear that Donald Trump’s new government is not very pro-renewables,” he said. “They're more into the hydrocarbons and fossil fuels, and I do expect that will trickle down to the MPV fleet with more oil and gas and LNG-related projects in the future.”Fleet changes will also play into the sector’s capacity balance in the coming year. “When you look at the fleet balance, there will be a fair amount of tonnage exiting the fleet in the coming years,” Mørland said. “From G2 Ocean’s perspective in the next few years, there are quite a few ships that will be leaving because they're aging and, as publicized, we will be commencing a newbuild program to futureproof our fleet.”He said G2 Ocean is not the only carrier in that situation, and while there are newbuild programs in place, there is expected to be more MPV capacity exiting than being built. This will lead to tighter capacity. “So even if the market compresses, the market will flatten rather than reduce,” Mørland said.Toepfer’s TMI is based on expected average rates for six- to 12-month time charters for 12,500 dwt “F-Type” vessels with safe working load of 240 to 360 mt, as reported to Toepfer by owners and operators. Drewry’s new general cargo index is based on time charter rates collected from a range of stakeholders for general cargo, dry bulk, car and container carriers and on container freight rates. Drewry weights the various vessel types using estimates, based on its vessel supply/demand model, of how much non-containerized general cargo each sector is carrying and vessel utilization levels in those sectors. Drewry’s project cargo index incorporates time charter rates for various project carrier size categories along with direct competing sectors included in the general cargo index. Vessel types are again weighted according to proportion of project cargo estimated to be carried as per the supply/demand model.Contact Carly Fields at <a href="mailto:carly.fields@spglobal.com">carly.fields@spglobal.com</a>.</div>

Momentum for the multipurpose vessel (MPV) fleet has eased as renewables projects move slower than anticipated, leaving forward-booked tonnage free to re-enter the charter market and keeping freight rates in check. Michael Mørland, project cargo director/Atlantic at G2 Ocean, told the Journal of Commerce that the renewable segment has not really delivered the volume that was expected in 2024. “And the outlook for the remaining pipeline of projects is the same -- things are going slower than anticipated as the financing climate has been harder, and there are less volumes than anticipated,” Mørland said. This has led to an easing in freight rates because tonnage that had been allocated for the pipeline isn’t being utilized. “That ruins some of the momentum for the multipurpose fleets,” he said. One notable trend is US manufacturers switching supply to near-field production where possible, including from Mexico. “The more they get that bit right, the less they have to ship deepsea,” Mørland said. Toepfer Transport said in its Dec. 6 Multipurpose Shipping Report that the Atlantic trades have shown “gradual and modest positive development,” but are still below the level considered normal. “On both sides of the Atlantic, economic growth is slow, and there are some uncertainties about the impact of the next US presidency on global trade,” Toepfer said. Nevertheless, robust demand for tonnage in Asia still provides for stable vessel utilization, Toepfer added. The broker said it anticipates that the current sideways movement will “persist for a few more months,” although an improvement in rates is expected from the second quarter of 2025 onwards, subject to developments in the US. Toepfer projects a 2.57% increase in its Toepfer Multipurpose Index (TMI) by November 2025, year over year. Drewry Shipping Consultants’ indices echoed the steady, but uninspiring market. Published Dec. 6, its new Project Cargo Transport Index reached 175 points in November, up 0.6% from October, while its new General Cargo Index rose 1.4% to 145 points. The base point for both indices is 100 as of January 2019, and they have been calculated forward from that point. US cargo demand expected to pivot towards oil Looking to 2025, Mørland expects a shift in the cargo base for MPVs in the US. “It's quite clear that Donald Trump’s new government is not very pro-renewables,” he said. “They're more into the hydrocarbons and fossil fuels, and I do expect that will trickle down to the MPV fleet with more oil and gas and LNG-related projects in the future.” Fleet changes will also play into the sector’s capacity balance in the coming year. “When you look at the fleet balance, there will be a fair amount of tonnage exiting the fleet in the coming years,” Mørland said. “From G2 Ocean’s perspective in the next few years, there are quite a few ships that will be leaving because they're aging and, as publicized, we will be commencing a newbuild program to futureproof our fleet.” He said G2 Ocean is not the only carrier in that situation, and while there are newbuild programs in place, there is expected to be more MPV capacity exiting than being built. This will lead to tighter capacity. “So even if the market compresses, the market will flatten rather than reduce,” Mørland said. Toepfer’s TMI is based on expected average rates for six- to 12-month time charters for 12,500 dwt “F-Type” vessels with safe working load of 240 to 360 mt, as reported to Toepfer by owners and operators. Drewry’s new general cargo index is based on time charter rates collected from a range of stakeholders for general cargo, dry bulk, car and container carriers and on container freight rates. Drewry weights the various vessel types using estimates, based on its vessel supply/demand model, of how much non-containerized general cargo each sector is carrying and vessel utilization levels in those sectors. Drewry’s project cargo index incorporates time charter rates for various project carrier size categories along with direct competing sectors included in the general cargo index. Vessel types are again weighted according to proportion of project cargo estimated to be carried as per the supply/demand model. Contact Carly Fields at carly.fields@spglobal.com .

Breakbulk carriers

Energy projects

Slow-moving renewable projects curtail MPV enthusiasm

<div class="phx-topic abstract-wrapper">The Global Port Tracker upgraded its forecast for imports over the next several months despite the threat of labor unrest and new tariffs by the incoming Trump administration. </div>

The Global Port Tracker upgraded its forecast for imports over the next several months despite the threat of labor unrest and new tariffs by the incoming Trump administration.

<div class="phx-topic">US retailers said Monday they expect a “continued surge” in imports through the spring due to cargo frontloading amid the specter of labor strife and new tariffs, although they held out hope both threats can be avoided. “Either a strike or new tariffs would be a blow to the economy and retailers are doing what they can to avoid the impact of either for as long as they can,” Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation (NRF), said in a statement. “We hope that both can be avoided, but bringing in cargo early is a prudent step to mitigate the impact on our industry, consumers and the nation’s economy.” Gold’s comments came as the NRF and Hackett Associates released their monthly Global Port Tracker (GPT), which significantly upgraded its import forecast from the November GPT. December imports are now projected at 2.14 million TEUs, up 14.3% year over year. Last month, retailers said December’s year-over-year gain would be 6.1%. The NRF now expects January imports to jump 12% compared with January 2024, up from the 2.5% gain forecast last month. February’s imports are expected to fall 4.1% year over year, although that’s an upgrade from the 9.3% decline originally forecast. March volumes are expected to jump 12.7% and April by 6.6% compared with the same months in 2024, according to the GPT. Total US imports for 2024 are now projected at 25.6 million TEUs, up 14.8% from 2023, the NRF said. Shippers are working <a href="https://www.joc.com/article/trans-pac-settles-into-sedate-december-before-new-years-uncertainties-5877172">to move goods</a> ahead of a potential Jan. 15 strike by the International Longshoremen’s Association (ILA), the threat of new tariffs by the incoming Trump administration, and an early Lunar New Year holiday on Jan. 29. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="ec643cb2-b145-4f56-a0a1-51d368e4b4fc"></dynamic-object></div>The most recent data available from PIERS, a sister product of the Journal of Commerce within S&amp;P Global, showed October imports climbing 10% over the year, maintaining a months-long pattern of double-digit year-over-year increases. October marked the 18th consecutive month of US imports above 2 million TEUs. If NRF forecasts come to fruition as projected, November and December imports will break the pandemic-era record of 19 straight months. Still, October did mark the first month since May where month-over-month imports didn’t increase, instead sliding by about 3% to 2.44 million TEUs — the softest month since June. Contact Laura Robb at <a href="mailto:laura.robb@spglobal.com">laura.robb@spglobal.com</a>.  </div>

US retailers said Monday they expect a “continued surge” in imports through the spring due to cargo frontloading amid the specter of labor strife and new tariffs, although they held out hope both threats can be avoided. “Either a strike or new tariffs would be a blow to the economy and retailers are doing what they can to avoid the impact of either for as long as they can,” Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation (NRF), said in a statement. “We hope that both can be avoided, but bringing in cargo early is a prudent step to mitigate the impact on our industry, consumers and the nation’s economy.” Gold’s comments came as the NRF and Hackett Associates released their monthly Global Port Tracker (GPT), which significantly upgraded its import forecast from the November GPT. December imports are now projected at 2.14 million TEUs, up 14.3% year over year. Last month, retailers said December’s year-over-year gain would be 6.1%. The NRF now expects January imports to jump 12% compared with January 2024, up from the 2.5% gain forecast last month. February’s imports are expected to fall 4.1% year over year, although that’s an upgrade from the 9.3% decline originally forecast. March volumes are expected to jump 12.7% and April by 6.6% compared with the same months in 2024, according to the GPT. Total US imports for 2024 are now projected at 25.6 million TEUs, up 14.8% from 2023, the NRF said. Shippers are working to move goods ahead of a potential Jan. 15 strike by the International Longshoremen’s Association (ILA), the threat of new tariffs by the incoming Trump administration, and an early Lunar New Year holiday on Jan. 29. The most recent data available from PIERS, a sister product of the Journal of Commerce within S&P Global, showed October imports climbing 10% over the year, maintaining a months-long pattern of double-digit year-over-year increases. October marked the 18th consecutive month of US imports above 2 million TEUs. If NRF forecasts come to fruition as projected, November and December imports will break the pandemic-era record of 19 straight months. Still, October did mark the first month since May where month-over-month imports didn’t increase, instead sliding by about 3% to 2.44 million TEUs — the softest month since June. Contact Laura Robb at laura.robb@spglobal.com . 

Supply chain

US import ‘surge’ to persist into spring amid continued frontloading: retailers

<div class="phx-topic abstract-wrapper">The cyclical nature of container shipping hasn’t changed, but the industry has reached a point in which the big carriers can look forward to good long-term returns on investment and outside investor parties looking for a way in, writes Jeremy Masters. </div>

The cyclical nature of container shipping hasn’t changed, but the industry has reached a point in which the big carriers can look forward to good long-term returns on investment and outside investor parties looking for a way in, writes Jeremy Masters.

<div class="phx-topic">The industry has, in recent years, produced some eye-popping profits. It hasn’t always been that way. For a very long period since the advent of containerization, carriers made very poor average returns on investment. The consolidation of the industry after the 2016 demise of Hanjin started to tip the scales more in favor of the carriers, but COVID-19 and the Red Sea crisis, with their attendant implications for capacity demand exceeding supply, opened the door to mega returns, albeit temporary. The cyclical nature of the business has not changed (and it would not be surprising to see red ink next year) but we have reached a point now where the big carriers can look forward to good long-term returns on investment and investor parties outside the industry taking note. There are limited routes to ownership, however. The most obvious observation is that the barriers to entry are now high to starting a new carrier, particularly if the aspirant wants to acquire new capacity and operate in the major east-west container trades. Even if a new carrier emerges, with the possible exception of the Premier alliance, it is unlikely that the other consortiums would entertain a new entrant. Slot charters may be possible, but a new entrant would have to bring sufficient tonnage to the table that Mediterranean Shipping Co. and the three consortiums would see it in their interest to cooperate. The bill for getting critical mass is big. Fourteen 24,000-TEU ships to support a single Asia to Europe loop will cost approximately $3.5 billion at current newbuilding prices. Secondhand ships could be targeted, but older vessels operating conventional fuels are going to be an increasing issue in many trades. The charter market is expensive and particularly constrained in the larger, newer built sizes. Then there is the matter of operating such ships. Running a carrier is a complex task and expertise will be required in general management, finance, marketing and sales, vessel operations, container management, etc. — some of it in multiple geographies. A major stake in an existing top 10 carrier is a possibility, avoiding an injection of new disruptive capacity. But if a controlling interest is desired as well as freedom from government encumbrances then the list of potential targets will likely be small or even nil. Of course, if red ink really starts to flow among the major carriers, the selling price will tend to be more reasonable and home country governments and other interests will have to be more flexible, although their preference will undoubtedly be to find a domestic solution. A more viable approach might then be to enter regional trades by launching a new carrier or buying existing ones, and then stealthily advance into a deep sea route. For example, an entrant could serve intra-Asia first before expanding to regional trades such as in intra-East Mediterranean and the Black Sea. A new entrant could then launch a deepsea service between the two trades once operations are stable and could go on to gradually connect more markets with the same formula. Current carriers have employed similar techniques but tended in the opposite direction, with the main trades driving regional acquisitions or setting up regional networks to strengthen the overall network. Venturing into the territory of the carriers outside the top 10 may be more financially manageable and more easily achievable, but it doesn’t necessarily offer a competitive edge. For the more risk-accepting investors, the route to more rapid penetration and high returns would be to bring a new business model to the market. One area that is ripe for a disrupter is the ongoing conflict between carriers and their clients in the selling/buying of assured future space at an assured rate. Any carrier that can present a reliable and flexible model that ties both sides in will attract not just regular business but also some degree of speculative hedging business. The bottom line then is that the biggest carriers are in a very strong position now, and it’s tough to see a new entrant to the industry — even a cash rich one — being able to buy into the top echelons. There is still room in the industry, however, to enter the regional trades in a substantive way and to build outward. Alternatively, for those prepared to challenge the existing commercial model there could be a very successful future. The joke used to be that you could make a small fortune in container shipping by starting with a big one. Today there really is the possibility of going the other way. Contact Jeremy Masters at <a href="jeremy@shippingmastershk.com">jeremy@shippingmastershk.com</a>. </div>

The industry has, in recent years, produced some eye-popping profits. It hasn’t always been that way. For a very long period since the advent of containerization, carriers made very poor average returns on investment. The consolidation of the industry after the 2016 demise of Hanjin started to tip the scales more in favor of the carriers, but COVID-19 and the Red Sea crisis, with their attendant implications for capacity demand exceeding supply, opened the door to mega returns, albeit temporary. The cyclical nature of the business has not changed (and it would not be surprising to see red ink next year) but we have reached a point now where the big carriers can look forward to good long-term returns on investment and investor parties outside the industry taking note. There are limited routes to ownership, however. The most obvious observation is that the barriers to entry are now high to starting a new carrier, particularly if the aspirant wants to acquire new capacity and operate in the major east-west container trades. Even if a new carrier emerges, with the possible exception of the Premier alliance, it is unlikely that the other consortiums would entertain a new entrant. Slot charters may be possible, but a new entrant would have to bring sufficient tonnage to the table that Mediterranean Shipping Co. and the three consortiums would see it in their interest to cooperate. The bill for getting critical mass is big. Fourteen 24,000-TEU ships to support a single Asia to Europe loop will cost approximately $3.5 billion at current newbuilding prices. Secondhand ships could be targeted, but older vessels operating conventional fuels are going to be an increasing issue in many trades. The charter market is expensive and particularly constrained in the larger, newer built sizes. Then there is the matter of operating such ships. Running a carrier is a complex task and expertise will be required in general management, finance, marketing and sales, vessel operations, container management, etc. — some of it in multiple geographies. A major stake in an existing top 10 carrier is a possibility, avoiding an injection of new disruptive capacity. But if a controlling interest is desired as well as freedom from government encumbrances then the list of potential targets will likely be small or even nil. Of course, if red ink really starts to flow among the major carriers, the selling price will tend to be more reasonable and home country governments and other interests will have to be more flexible, although their preference will undoubtedly be to find a domestic solution. A more viable approach might then be to enter regional trades by launching a new carrier or buying existing ones, and then stealthily advance into a deep sea route. For example, an entrant could serve intra-Asia first before expanding to regional trades such as in intra-East Mediterranean and the Black Sea. A new entrant could then launch a deepsea service between the two trades once operations are stable and could go on to gradually connect more markets with the same formula. Current carriers have employed similar techniques but tended in the opposite direction, with the main trades driving regional acquisitions or setting up regional networks to strengthen the overall network. Venturing into the territory of the carriers outside the top 10 may be more financially manageable and more easily achievable, but it doesn’t necessarily offer a competitive edge. For the more risk-accepting investors, the route to more rapid penetration and high returns would be to bring a new business model to the market. One area that is ripe for a disrupter is the ongoing conflict between carriers and their clients in the selling/buying of assured future space at an assured rate. Any carrier that can present a reliable and flexible model that ties both sides in will attract not just regular business but also some degree of speculative hedging business. The bottom line then is that the biggest carriers are in a very strong position now, and it’s tough to see a new entrant to the industry — even a cash rich one — being able to buy into the top echelons. There is still room in the industry, however, to enter the regional trades in a substantive way and to build outward. Alternatively, for those prepared to challenge the existing commercial model there could be a very successful future. The joke used to be that you could make a small fortune in container shipping by starting with a big one. Today there really is the possibility of going the other way. Contact Jeremy Masters at jeremy@shippingmastershk.com .

New entrants have few paths into container shipping

<div class="phx-topic abstract-wrapper">It’s hard to see a world where AI isn’t a necessary component for financial durability in a sector that will always grapple with the volatility of freight rates and the ebbs and flows of demand and volumes. </div>

It’s hard to see a world where AI isn’t a necessary component for financial durability in a sector that will always grapple with the volatility of freight rates and the ebbs and flows of demand and volumes.

<div class="phx-topic">The last two years have been characterized by flat demand, volatile rates and increased costs in the logistics industry. But executives looking at data and comparing it with the pre-COVID era should bear in mind that one thing is vastly different this time around: We’re in the throes of a new technological wave around artificial intelligence (AI) that sets the stage for a meaningfully different environment of business building. AI has dominated discussions across industries in the last two years as buyers seek to separate signal from noise. This has sparked both enthusiasm and skepticism. Is AI in supply chain management merely a temporary trend, or does it possess the potential for lasting impact? Moreover, which AI applications are most likely to transform supply chain operations in the long run? At a supply chain conference earlier this year, I asked a room of about 200 executives how many were using generative AI in their everyday jobs. Almost every single hand went up. What was once a new, scary technology is proving to provide operational leverage in a period where margins are under secular pressure. Among service-intensive logistics services providers (LSPs) such as forwarders and freight brokers, AI is proving to be a valuable asset for coping with a litany of freight operations and back-office tasks. It turns out this tooling can help increase productivity in a way that reduces the cost to serve, or the expense required to execute a shipment. While it’s early days, we’re seeing harsh skepticism now turning into praise as early indicators of AI’s return on investment (ROI) are hard to ignore in an environment where companies have typically managed long-term margins through phases of retrenching and expansion. Given the service orientation of the supply chain, sales enablement is a key area of focus. We know of one upstart who has developed their own AI voice agent to handle preliminary sales calls on behalf of insurance brokers placing trucking liability policies. That is expected to improve sales conversions by at least 25% when rolled out across the organization. In another instance, a large freight broker mentioned cost reductions of 20% by having a voice agent qualify inbound calls from truckers looking for freight. This helps carrier sales professionals focus only on the higher-value carriers they believe fit their network and the needs of their shipper-clients. <h3>Understanding the promise of AI </h3>Lastly, emerging new business models are galvanizing the disruptive nature of AI. The adage among investors is to dub this new business model as “service-as-software.” It simply means that software now does the work rather than enabling it. Business models reflect that by simply “charging for the work,” allowing companies to bill directly for automated processes. That’s a shift akin to the previous migration to software-as-a-service (SaaS), but with an operational twist. Take customs brokerage and trade compliance, for example. Regardless of your politics, it’s clear that trade regulation will increase in complexity in the years to come. But the supply of customs brokers has been relatively flat, with more than 5,000 retirements expected by the end of the decade. Customs brokerage businesses are hard to manage to profitability and are often a loss-leader to cross-sell other freight services given how loyal customers can be to their customs broker. We’ve seen several startups develop an AI-native ability to broker customs at gross margins in excess of 50% and handle volumes per employee two to three times greater than incumbents. They’re also able to tie that to trade compliance workflows so organizations can make more informed decisions around sourcing and distribution to manage expenses while staying within the parameters of the law. We’re still in the early innings of understanding the promise AI brings to the supply chain, as well as how to develop and scale key processes around its capabilities. The thing that’s clear to me is that we cannot view the business environment and operational best practices of a bygone era as the baseline for the future. AI is something that’s here to stay and brings with it a large promise for an industry as service-heavy as supply chain. Data from these early deployments suggests that smaller teams can handle more volume without forsaking customer outcomes. If this continues, it’s hard to see a world where AI isn’t a necessary component for financial durability in a sector that will always grapple with the volatility of rates and the ebbs and flows of demand and freight volumes. Contact Santosh Sankar at <a href="mailto:santosh@dynamo.vc ">santosh@dynamo.vc</a>.</div>

The last two years have been characterized by flat demand, volatile rates and increased costs in the logistics industry. But executives looking at data and comparing it with the pre-COVID era should bear in mind that one thing is vastly different this time around: We’re in the throes of a new technological wave around artificial intelligence (AI) that sets the stage for a meaningfully different environment of business building. AI has dominated discussions across industries in the last two years as buyers seek to separate signal from noise. This has sparked both enthusiasm and skepticism. Is AI in supply chain management merely a temporary trend, or does it possess the potential for lasting impact? Moreover, which AI applications are most likely to transform supply chain operations in the long run? At a supply chain conference earlier this year, I asked a room of about 200 executives how many were using generative AI in their everyday jobs. Almost every single hand went up. What was once a new, scary technology is proving to provide operational leverage in a period where margins are under secular pressure. Among service-intensive logistics services providers (LSPs) such as forwarders and freight brokers, AI is proving to be a valuable asset for coping with a litany of freight operations and back-office tasks. It turns out this tooling can help increase productivity in a way that reduces the cost to serve, or the expense required to execute a shipment. While it’s early days, we’re seeing harsh skepticism now turning into praise as early indicators of AI’s return on investment (ROI) are hard to ignore in an environment where companies have typically managed long-term margins through phases of retrenching and expansion. Given the service orientation of the supply chain, sales enablement is a key area of focus. We know of one upstart who has developed their own AI voice agent to handle preliminary sales calls on behalf of insurance brokers placing trucking liability policies. That is expected to improve sales conversions by at least 25% when rolled out across the organization. In another instance, a large freight broker mentioned cost reductions of 20% by having a voice agent qualify inbound calls from truckers looking for freight. This helps carrier sales professionals focus only on the higher-value carriers they believe fit their network and the needs of their shipper-clients. Understanding the promise of AI Lastly, emerging new business models are galvanizing the disruptive nature of AI. The adage among investors is to dub this new business model as “service-as-software.” It simply means that software now does the work rather than enabling it. Business models reflect that by simply “charging for the work,” allowing companies to bill directly for automated processes. That’s a shift akin to the previous migration to software-as-a-service (SaaS), but with an operational twist. Take customs brokerage and trade compliance, for example. Regardless of your politics, it’s clear that trade regulation will increase in complexity in the years to come. But the supply of customs brokers has been relatively flat, with more than 5,000 retirements expected by the end of the decade. Customs brokerage businesses are hard to manage to profitability and are often a loss-leader to cross-sell other freight services given how loyal customers can be to their customs broker. We’ve seen several startups develop an AI-native ability to broker customs at gross margins in excess of 50% and handle volumes per employee two to three times greater than incumbents. They’re also able to tie that to trade compliance workflows so organizations can make more informed decisions around sourcing and distribution to manage expenses while staying within the parameters of the law. We’re still in the early innings of understanding the promise AI brings to the supply chain, as well as how to develop and scale key processes around its capabilities. The thing that’s clear to me is that we cannot view the business environment and operational best practices of a bygone era as the baseline for the future. AI is something that’s here to stay and brings with it a large promise for an industry as service-heavy as supply chain. Data from these early deployments suggests that smaller teams can handle more volume without forsaking customer outcomes. If this continues, it’s hard to see a world where AI isn’t a necessary component for financial durability in a sector that will always grapple with the volatility of rates and the ebbs and flows of demand and freight volumes. Contact Santosh Sankar at santosh@dynamo.vc .

Logistics Technology News

Supply chains embrace the AI takeover to slash costs

Container spot rates are produced by S&P Global Platts editors who are engaging with market participants to assess the current value of freight-of-all-kinds (FAK) rates on major container trades. The rates include bunker adjustment factors, general rate increases and emergency rare restoration. They also include low-sulfur, equipment imbalance, and repositioning surcharges. The rates exclude terminal handling, port security, overweight container, delivery, and detention and demurrage charges. [Platts](https://www.spglobal.com/commodityinsights)

North Asia to UK and Mediterranean container spot rates (Platts)

Platts North Asia to Mediterranean and UK Continent Weekly Gateway

<div class="phx-topic abstract-wrapper">A host of factors can raise transit times on the 11,000-plus-kilometer rail network, undermining the trust of cargo owners that is a crucial selling point of the Asia-Europe connection.</div>

A host of factors can raise transit times on the 11,000-plus-kilometer rail network, undermining the trust of cargo owners that is a crucial selling point of the Asia-Europe connection.

<div class="phx-topic">VIENNA — The ability to deliver on promised schedules remains one of the main challenges facing rail transport providers on the so-called middle corridor connecting China and Europe, according to executives at an intercontinental rail conference here last week. But on-time performance was the point of an iceberg of underlying reliability challenges, attendees at the European Silk Road Summit in Vienna were told. ”As long as everything goes well, the customer is happy, but if something goes wrong, the customer will start to doubt rail more than they would do for sea freight,” said Alona Toprak, managing director at DB Cargo Eurasia. Containerized freight on the middle corridor uses multiple cargo handovers — from rail to ferry to road and back to rail — with delays at key modal change points. Cross-border customs issues can add to delays, with volatile rates and equipment imbalances all placing service level promises under pressure. Still, meeting those promises is a selling point for the intercontinental rail network that cannot be compromised, logistics executives warned delegates. Thomas Kargl, director of Eurasian logistics provider Smartlog, told the summit that rail services from China to Europe had always suffered from a lack of reliability and it took much consulting time with shippers to change that impression. “If I say we are running between 12 and 15 days, we must hold that time,” Kargl said. “To attract customers, they must recognize that rail is available and is reliable. We are talking about containers valued at hundreds of thousands of dollars, so an increase of the transit time by a few days will tie up a lot of capital.” Toprak agreed and said customers of high-value products moving by rail had high expectations and were “very demanding.” DB Cargo Eurasia introduced an express rail service from China to Europe at the end of 2023 and expanded the offering this year. Toprak said it was now possible to offer shippers a nine-day transit time from China to the Malaszewicze rail hub in Poland via the northern corridor that was attractive to e-commerce, but it also raised the reliability bar even higher. ”The lead time of nine days is a real option for e-commerce, but if we promise nine days, we must stick to it because if not the customer will be penalized, lose money and then the service will not be trusted,” she said. <h3>Peak time delays </h3>There are several hurdles that must be overcome by service providers offering fast rail transit times, especially on the middle corridor with the intermodal requirements and the repeated border crossings, Kargl noted. China’s railways have a different gauge to those used in Europe that requires cargo to be transhipped at the China-Kazakhstan border and again at European entry points. At peak times, that can lead to delays. The service providers must also manage other factors, including the documentation for shipments and ensuring it is communicated electronically to all customs authorities along the route. In addition, sufficient equipment and access to rolling stock need to be guaranteed, while the provision of advance bookings and cargo closing times need to be ensured. “If you manage this all in a smooth way, the nine days transit will be reachable 80% of the time,” Kargl said. Following the Russian invasion of Ukraine in February 2022, containerized trade on the northern route from China to North Europe largely dried up. Most of the cargo was moved to ocean, but forwarders and rail freight operators began testing the middle corridor that runs from China through Central Asia, across the Caspian and Black seas, and on into Turkey or Eastern Europe. While some cargo has returned to the northern route through Russia, concerns over sanctions breaches and moral opposition to contributing revenue to Russian Railways is limiting volume. However, Kelvin Tang, the head of global cross-border business and multimodal leader at CEVA Logistics, said shipping containerized cargo on the middle corridor was not just a political solution, it was a product offering. “If customers can accept 60 days transit, they will choose ocean, but if they want 30 days or less, they need to choose rail,” Tang told the summit. “If rail service becomes more stable with reliable lead times and competitive prices, it will become more attractive.” Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com">greg.knowler@spglobal.com</a>. </div>

VIENNA — The ability to deliver on promised schedules remains one of the main challenges facing rail transport providers on the so-called middle corridor connecting China and Europe, according to executives at an intercontinental rail conference here last week. But on-time performance was the point of an iceberg of underlying reliability challenges, attendees at the European Silk Road Summit in Vienna were told. ”As long as everything goes well, the customer is happy, but if something goes wrong, the customer will start to doubt rail more than they would do for sea freight,” said Alona Toprak, managing director at DB Cargo Eurasia. Containerized freight on the middle corridor uses multiple cargo handovers — from rail to ferry to road and back to rail — with delays at key modal change points. Cross-border customs issues can add to delays, with volatile rates and equipment imbalances all placing service level promises under pressure. Still, meeting those promises is a selling point for the intercontinental rail network that cannot be compromised, logistics executives warned delegates. Thomas Kargl, director of Eurasian logistics provider Smartlog, told the summit that rail services from China to Europe had always suffered from a lack of reliability and it took much consulting time with shippers to change that impression. “If I say we are running between 12 and 15 days, we must hold that time,” Kargl said. “To attract customers, they must recognize that rail is available and is reliable. We are talking about containers valued at hundreds of thousands of dollars, so an increase of the transit time by a few days will tie up a lot of capital.” Toprak agreed and said customers of high-value products moving by rail had high expectations and were “very demanding.” DB Cargo Eurasia introduced an express rail service from China to Europe at the end of 2023 and expanded the offering this year. Toprak said it was now possible to offer shippers a nine-day transit time from China to the Malaszewicze rail hub in Poland via the northern corridor that was attractive to e-commerce, but it also raised the reliability bar even higher. ”The lead time of nine days is a real option for e-commerce, but if we promise nine days, we must stick to it because if not the customer will be penalized, lose money and then the service will not be trusted,” she said. Peak time delays There are several hurdles that must be overcome by service providers offering fast rail transit times, especially on the middle corridor with the intermodal requirements and the repeated border crossings, Kargl noted. China’s railways have a different gauge to those used in Europe that requires cargo to be transhipped at the China-Kazakhstan border and again at European entry points. At peak times, that can lead to delays. The service providers must also manage other factors, including the documentation for shipments and ensuring it is communicated electronically to all customs authorities along the route. In addition, sufficient equipment and access to rolling stock need to be guaranteed, while the provision of advance bookings and cargo closing times need to be ensured. “If you manage this all in a smooth way, the nine days transit will be reachable 80% of the time,” Kargl said. Following the Russian invasion of Ukraine in February 2022, containerized trade on the northern route from China to North Europe largely dried up. Most of the cargo was moved to ocean, but forwarders and rail freight operators began testing the middle corridor that runs from China through Central Asia, across the Caspian and Black seas, and on into Turkey or Eastern Europe. While some cargo has returned to the northern route through Russia, concerns over sanctions breaches and moral opposition to contributing revenue to Russian Railways is limiting volume. However, Kelvin Tang, the head of global cross-border business and multimodal leader at CEVA Logistics, said shipping containerized cargo on the middle corridor was not just a political solution, it was a product offering. “If customers can accept 60 days transit, they will choose ocean, but if they want 30 days or less, they need to choose rail,” Tang told the summit. “If rail service becomes more stable with reliable lead times and competitive prices, it will become more attractive.” Contact Greg Knowler at greg.knowler@spglobal.com .

Rail News

Forwarding

International rail

Surface

Schedule reliability remains key challenge for China-Europe rail

<div class="phx-topic abstract-wrapper">Hapag-Lloyd has contracted with a Chinese energy producer for green methanol to power five 10,100-TEU chartered ships with methanol dual-fuel propulsion systems.</div>

Hapag-Lloyd has contracted with a Chinese energy producer for green methanol to power five 10,100-TEU chartered ships with methanol dual-fuel propulsion systems.

<div class="phx-topic">Chinese energy producer Goldwind will be supplying both members of the <a href="https://www.joc.com/article/hapag-lloyd-says-gemini-alliance-cargo-bookings-to-open-dec-3-5846853">Gemini Cooperation</a> with green methanol from 2026. Hapag-Lloyd will receive 250,000 tons per year in a deal signed this week while its partner <a href="https://www.joc.com/article/maersk-inks-new-methanol-sourcing-deal-with-chinese-supplier-5234419">Maersk will get 500,000 tons a year</a> according to an agreement made last year. The green methanol will consist of a blend of bio- and e-methanol and enable a greenhouse gas (GHG) emissions reduction of at least 70%, Hapag-Lloyd said in a statement Thursday. “With the agreement, we are securing a significant proportion of our requirements for green fuels,” said Hapag-Lloyd CEO Rolf Habben Jansen. “This will bring us an important step closer to our goal of achieving net-zero fleet operations by 2045.” Hapag-Lloyd and Seaspan are converting five 10,100-TEU charter ships to a methanol dual-fuel propulsion system that will be ready in 2026. The carrier also made a recent order for 24 dual-fuel vessels capable of sailing on liquefied natural gas (LNG). By 2030, Hapag-Lloyd aims to reduce the absolute GHG emissions of the fleet by about one-third compared with 2022. Compared with conventional fuels, the ordered quantity of green methanol can save a total of up to 400,000 metric tons of CO2e emissions in fleet operations per year. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="1a054077-7728-4ffd-abb8-b7aff17c3235"></dynamic-object></div>Hapag-Lloyd’s decarbonization credentials were burnished by its recent <a href="https://www.joc.com/article/hapag-lloyd-wins-asia-europe-green-shipping-tender-to-launch-next-year-5240949">winning of a tender from the Zero Emission Maritime Buyers Alliance</a> (ZEMBA) aimed at fast-tracking commercial deployment of green shipping services at scale to create a competitive market for those services. About 70% of the total 1.7 million TEUs of ship orders made so far this year were for ships capable of sailing on methanol, LNG or hydrogen, according to Sea-web, a sister company of the Journal of Commerce within S&amp;P Global. The need to keep fuel options open and avoid being locked into one pathway was illustrated <a href="https://www.joc.com/article/maersks-lng-order-hedges-bet-on-green-fuel-technology-ceo-5703200">in a recent Maersk order for dual-fuel vessels totaling 800,000 TEUs</a> capable of sailing on methanol as well as LNG. Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com">greg.knowler@spglobal.com</a>. </div>

Chinese energy producer Goldwind will be supplying both members of the Gemini Cooperation with green methanol from 2026. Hapag-Lloyd will receive 250,000 tons per year in a deal signed this week while its partner Maersk will get 500,000 tons a year according to an agreement made last year. The green methanol will consist of a blend of bio- and e-methanol and enable a greenhouse gas (GHG) emissions reduction of at least 70%, Hapag-Lloyd said in a statement Thursday. “With the agreement, we are securing a significant proportion of our requirements for green fuels,” said Hapag-Lloyd CEO Rolf Habben Jansen. “This will bring us an important step closer to our goal of achieving net-zero fleet operations by 2045.” Hapag-Lloyd and Seaspan are converting five 10,100-TEU charter ships to a methanol dual-fuel propulsion system that will be ready in 2026. The carrier also made a recent order for 24 dual-fuel vessels capable of sailing on liquefied natural gas (LNG). By 2030, Hapag-Lloyd aims to reduce the absolute GHG emissions of the fleet by about one-third compared with 2022. Compared with conventional fuels, the ordered quantity of green methanol can save a total of up to 400,000 metric tons of CO2e emissions in fleet operations per year. Hapag-Lloyd’s decarbonization credentials were burnished by its recent winning of a tender from the Zero Emission Maritime Buyers Alliance (ZEMBA) aimed at fast-tracking commercial deployment of green shipping services at scale to create a competitive market for those services. About 70% of the total 1.7 million TEUs of ship orders made so far this year were for ships capable of sailing on methanol, LNG or hydrogen, according to Sea-web, a sister company of the Journal of Commerce within S&P Global. The need to keep fuel options open and avoid being locked into one pathway was illustrated in a recent Maersk order for dual-fuel vessels totaling 800,000 TEUs capable of sailing on methanol as well as LNG. Contact Greg Knowler at greg.knowler@spglobal.com .

Hapag-Lloyd joins Maersk in Chinese methanol supply deal

<div class="phx-topic abstract-wrapper">NYSHEX is making a renewed effort to solve the fundamental problem of ocean container supply chains, promoting the use of index-linked contracts to build contract integrity and certainty. </div>

NYSHEX is making a renewed effort to solve the fundamental problem of ocean container supply chains, promoting the use of index-linked contracts to build contract integrity and certainty.

<div class="phx-topic">From its origins over a decade ago, NYSHEX, founded and led by Gordon Downes, has always aimed to advance a simple yet stubbornly elusive concept in container shipping: integrity of contracts. Incomprehensible to outsiders, signed contracts — many pages long and vetted by lawyers — are unenforceable when confronted by the real-world forces of supply and demand and volatile pricing. “The big problem that prompted us to start NYSHEX is contracts in our industry don’t perform,” Downes told the Journal of Commerce. In many cases, the shipper or carrier fails to live up to the contract terms, whether that be a carrier unwilling to provide vessel space or a shipper steering cargo to other carriers or non-vessel-operating common carriers (NVOs) to obtain a lower rate, thus failing to deliver the agreed-upon volumes. Triggers for failed contracts occur when spot rates deviate significantly from contract rates and carriers blank sailings or omit ports on short notice due to changes in demand, creating shortfalls in available capacity. Downes said ocean container contracts have just a 65% fulfillment rate. Although such practices undermine trust and stress relationships to the breaking point, no scenario results in serious consequences for the offending party. Litigation or government enforcement remain rare outside of a tiny handful of highly publicized cases. Originally, NYSHEX, founded by Downes in 2015 “to solve the problem of poor contract fulfillment,” aimed to create an exchange whereby mutually committed — meaning enforceable — contracts could be executed by shippers, NVOs and carriers under full approval of the US Federal Maritime Commission (FMC) and the auspices of the NYSHEX brand. To the limited extent the market availed itself of such contracts, they worked: in the vast majority of cases, both parties lived up to what they committed to. Still, the penalties meant to ensure compliance “can put a lot of strain on relationships, especially when the spot rates are so volatile,” Downes said. But while the concept found some uptake, demand was cyclical and could not overcome at scale the market forces that, in peculiar container shipping mentality, frequently lead each side to seek near-term pricing gain, if it is to be had, at the expense of longer-term certainty of space or volumes. Whether it’s an obsessively procurement-based mindset on the part of shippers in seeking to drive prices lower whenever possible, or carriers seeing better opportunities on the spot market, sacrifices in pursuit of certainty have yet to take hold on an industrywide level. If there was ever a moment for that mentality to be challenged, it was the pandemic, which showed shippers how quickly and painfully vessel space can dry up in a crisis. And yet the problem remains. <h3>New technology and products</h3>But NYSHEX persevered with its original vision, even if that meant applying it in new ways. The company developed technology that enables parties to monitor contract performance, drawing them into a real-time collaborative environment where issues can be identified and resolved on the spot, versus after the fact during increasingly infrequent quarterly performance reviews. In other words, if contracts can be mutually monitored in real time, the odds are better the parties will comply. Now NYSHEX is delving yet further into solving the fundamental problem: promoting the use of index-linked contracts as a way to build contract integrity and certainty into ocean container supply chains. In announcing a Series C funding round last week, NYSHEX made a strong statement that there is traction in the idea, however long it may have been around. The funding round attracted participation from existing investors, including Goldman Sachs, and new ones, including the Intercontinental Exchange (NYSE:ICE), a leading exchange operator which will calculate the new indices based on actual rates paid by shippers. Other container freight rate indices tend to be based on traditional price discovery performed by analysts. It said it will launch a new series of indices and tools to administer index-linked contracts. The question, then, is whether index-linked contracts are able to move the industry forward in addressing the continuing core problem of a lack of contract integrity. Linking pricing to an index means shippers’ rates face less risk of falling out of the range of prevailing rates and cargo being left behind at origin. But there is less budget certainty which clashes with annual budgeting cycles at beneficial cargo owners (BCOs). And while there are futures contracts traded, such as an active market of day traders on the Shanghai International Energy Exchange (INE China), which launched trading in a Containerized Freight Index Futures Contract in 2023, they haven’t built the liquidity or credibility to be of interest to BCO finance teams who would engage in hedging against adverse movements in ocean rates. And carriers have been outspoken about their declining interest in container freight futures. Index-linked contracts have a history of going in and out of fashion; they fell into fashion during the pandemic when shippers were desperate for space but fell out once the extremes of the disruptions were over. Also holding back index-linked contracts are shipper and carrier lawyers needing to come to agree on terms and conditions, frequently a difficult hurdle to overcome. Now, amid a continuing tight market fueled by Red Sea reroutings and robust 2024 volumes, there is more talk of using index-linked contracts. But just as it was before, that could just be cyclical. Contact Peter Tirschwell at <a href="mailto:peter.tirschwell@spglobal.com">peter.tirschwell@spglobal.com</a>.</div>

From its origins over a decade ago, NYSHEX, founded and led by Gordon Downes, has always aimed to advance a simple yet stubbornly elusive concept in container shipping: integrity of contracts. Incomprehensible to outsiders, signed contracts — many pages long and vetted by lawyers — are unenforceable when confronted by the real-world forces of supply and demand and volatile pricing. “The big problem that prompted us to start NYSHEX is contracts in our industry don’t perform,” Downes told the Journal of Commerce. In many cases, the shipper or carrier fails to live up to the contract terms, whether that be a carrier unwilling to provide vessel space or a shipper steering cargo to other carriers or non-vessel-operating common carriers (NVOs) to obtain a lower rate, thus failing to deliver the agreed-upon volumes. Triggers for failed contracts occur when spot rates deviate significantly from contract rates and carriers blank sailings or omit ports on short notice due to changes in demand, creating shortfalls in available capacity. Downes said ocean container contracts have just a 65% fulfillment rate. Although such practices undermine trust and stress relationships to the breaking point, no scenario results in serious consequences for the offending party. Litigation or government enforcement remain rare outside of a tiny handful of highly publicized cases. Originally, NYSHEX, founded by Downes in 2015 “to solve the problem of poor contract fulfillment,” aimed to create an exchange whereby mutually committed — meaning enforceable — contracts could be executed by shippers, NVOs and carriers under full approval of the US Federal Maritime Commission (FMC) and the auspices of the NYSHEX brand. To the limited extent the market availed itself of such contracts, they worked: in the vast majority of cases, both parties lived up to what they committed to. Still, the penalties meant to ensure compliance “can put a lot of strain on relationships, especially when the spot rates are so volatile,” Downes said. But while the concept found some uptake, demand was cyclical and could not overcome at scale the market forces that, in peculiar container shipping mentality, frequently lead each side to seek near-term pricing gain, if it is to be had, at the expense of longer-term certainty of space or volumes. Whether it’s an obsessively procurement-based mindset on the part of shippers in seeking to drive prices lower whenever possible, or carriers seeing better opportunities on the spot market, sacrifices in pursuit of certainty have yet to take hold on an industrywide level. If there was ever a moment for that mentality to be challenged, it was the pandemic, which showed shippers how quickly and painfully vessel space can dry up in a crisis. And yet the problem remains. New technology and products But NYSHEX persevered with its original vision, even if that meant applying it in new ways. The company developed technology that enables parties to monitor contract performance, drawing them into a real-time collaborative environment where issues can be identified and resolved on the spot, versus after the fact during increasingly infrequent quarterly performance reviews. In other words, if contracts can be mutually monitored in real time, the odds are better the parties will comply. Now NYSHEX is delving yet further into solving the fundamental problem: promoting the use of index-linked contracts as a way to build contract integrity and certainty into ocean container supply chains. In announcing a Series C funding round last week, NYSHEX made a strong statement that there is traction in the idea, however long it may have been around. The funding round attracted participation from existing investors, including Goldman Sachs, and new ones, including the Intercontinental Exchange (NYSE:ICE), a leading exchange operator which will calculate the new indices based on actual rates paid by shippers. Other container freight rate indices tend to be based on traditional price discovery performed by analysts. It said it will launch a new series of indices and tools to administer index-linked contracts. The question, then, is whether index-linked contracts are able to move the industry forward in addressing the continuing core problem of a lack of contract integrity. Linking pricing to an index means shippers’ rates face less risk of falling out of the range of prevailing rates and cargo being left behind at origin. But there is less budget certainty which clashes with annual budgeting cycles at beneficial cargo owners (BCOs). And while there are futures contracts traded, such as an active market of day traders on the Shanghai International Energy Exchange (INE China), which launched trading in a Containerized Freight Index Futures Contract in 2023, they haven’t built the liquidity or credibility to be of interest to BCO finance teams who would engage in hedging against adverse movements in ocean rates. And carriers have been outspoken about their declining interest in container freight futures. Index-linked contracts have a history of going in and out of fashion; they fell into fashion during the pandemic when shippers were desperate for space but fell out once the extremes of the disruptions were over. Also holding back index-linked contracts are shipper and carrier lawyers needing to come to agree on terms and conditions, frequently a difficult hurdle to overcome. Now, amid a continuing tight market fueled by Red Sea reroutings and robust 2024 volumes, there is more talk of using index-linked contracts. But just as it was before, that could just be cyclical. Contact Peter Tirschwell at peter.tirschwell@spglobal.com .

NYSHEX keeps core vision while evolving in volatile container shipping market

Access Journal of Commerce content for 30 days

Free Trial - Wide Box

START A FREE TRIAL TODAY

Choose a subscription plan that works best for you

Subscribe Now - Anonymous - Wide Box

SUBSCRIBE TODAY

Use code STSW20 at checkout and save 20% on first year of any annual subscription plan

Subscribe Now - Free Trials - Wide Box

SUBSCRIBE AND SAVE 20%

Use code CM24W695 at checkout and upgrade to Gold for just $695! Valid for first year of subscription. Offer ends December 8.

Upgrade Subscription - Wide Box

CYBER MONDAY SALE EXTENDED

Register today to redeem your Gold subscriber discount!

TPM Discount - Gold

Save 20% on TPM25

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

SMC3rates_shutterstock_5247046.jpg

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>

SMC3rates_shutterstock_5247046 (1).jpg

Filling the Supply Chain Education Gap with LTL Education Courses

SUBSCRIBE TODAY: Choose a subscription plan that works best for you

Subscribe Now - Anonymous - Offer Box

Subscribe Today

20% OFF ON TPM25: Register today and redeem your Gold subscriber discount!

TPM Discount - Gold 

20% OFF ON TPM25

SUBSCRIBE AND SAVE 20%: Use code STSW20 at checkout to save 20% on first year of any subscription plan


Subscribe Now - Free Trials - Offer Box

START A FREE TRIAL: Access Journal of Commerce content for 30 days

Free Trial - Offer Box

Free Trial

UPGRADE TODAY AND SAVE: Use code GUW795 at checkout and save $700 on first year of a Gold subscription

Upgrade Subscription - Offer Box

Upgrade Subscription

An in-depth analysis of transport trends in the multipurpose and heavy-lift fleet segment

Breakbulk Report - Rectangle Box

Breakbulk Quarterly

A premium access index of savings using domestic intermodal vs. OTR 

ISI Report - Rectangle Box

Intermodal Savings Index

Customers scoring their intermodal partners to identify the best service providers

Intermodal Service Scorecard - Rectangle Box

Intermodal Service Scorecard

A premium access outlook critical to shippers and transportation providers

QI Report - Rectangle Box

Quarterly Intelligence

The only editorially independent conference for the breakbulk & project cargo industry

Breakbulk Conference - Rectangle Box

Attend Breakbulk25

The premier conference for the global container shipping and supply chain community

TPM Conference - Rectangle Box

Attend TPM25

An extensive dashboard of charts organized by trade lane, mode, and topic

Gateway - Rectangle Box

Gateway

<div class="phx-topic abstract-wrapper">The union representing 45,000 longshore workers along the East and Gulf coasts is seeking to block technology that management says is critical for land-constrained ports to handle larger ships. </div>

The union representing 45,000 longshore workers along the East and Gulf coasts is seeking to block technology that management says is critical for land-constrained ports to handle larger ships.

<div class="phx-topic">Rail-mounted gantry cranes (RMGs) at container terminals have emerged as the deciding factor for the International Longshoremen’s Association (ILA) in whether they will agree to a new master contract that avoids another port strike in January. The union was unable to block the introduction of RMGs at two East Coast ports under three previous contracts but sees their further usage as a line in the sand in current contract talks. The semi-automated RMGs — which have been in use in the US since 2007 — are seen as the key method for land-constrained terminals, particularly those near urban East Coast ports, to expand. And now they are at the heart of another longshore labor dispute in North America. In a statement Monday, ILA Executive Vice President Dennis Daggett singled out RMGs for being “at the center of this [current] impasse” with the US Maritime Alliance (USMX) over resuming talks for <a href="https://www.joc.com/article/ila-usmx-agree-on-new-wage-offer-and-contract-extension-that-reopens-ports-5741882">a new master contract before a Jan. 15 deadline when the existing contract extension expires</a>. <a href="https://www.joc.com/article/ila-breaks-off-contract-talks-accuses-usmx-of-semi-automation-push-5810392">The union broke off talks with the USMX</a> over what it said was the employer group’s push for “semi automation” language in the new contract. Daggett said the equipment has failed to show it can outperform individual longshore machine operators. And in addition to taking away jobs, the RMGs, he said, are a target for hacking. He cast the fight against RMGs as existential for a union that under two previous administrations did not challenge the equipment’s rollout at the ports of Norfolk, Virginia, and Bayonne, New Jersey. “The ILA is not against progress, innovation, or modernization, but we cannot support technology that jeopardizes jobs, threatens national security, and puts the future of the workforce at risk,” Daggett said. “This is a pivotal moment in our history,” he added. “The decisions we make today will determine the future for generations to come.” No talks between the ILA and USMX are currently scheduled. <h3>‘Sold the ILA a vision’ </h3>RMGs, two of which will straddle a long row of stacked containers, move boxes forward and backward between the berth and truck lanes. As truckers enter the terminal, the RMG picks out the box from each stack and delivers it to the front of the row for mounting on chassis, or in reverse for loading operations. Stacks can also be “groomed” by RMGs overnight to push containers for morning delivery to the front of the row. RMGs allow for much denser container yards as less space is required for the operation of straddle carriers or rubber tire gantry cranes, which require an individual operator on the machine. In contrast, the RMG is operated remotely from an office, with an operator also capable of operating several RMGs at once depending on volume. RMG operations are considered safer as fewer workers are required in the yard around rolling machinery. Breaks and shift changes can also be done faster as RMG operators just move away from desks rather than yard equipment. Maersk’s APM Terminals subsidiary was the first to roll out RMG technology in the US when it began developing the Portsmouth marine terminal in Norfolk. Opened in 2007, APM Portsmouth, which had design capacity of 1.5 million TEUs on 291 acres of land, originally had 30 RMG cranes and six ship-to-shore cranes. The Portsmouth terminal was developed years earlier under the then-current 1996–2001 master contract between the USMX and ILA under its previous president John Bowers. That contract had no language about technology. Daggett said in his Monday statement that “under a different ILA administration, the employers introduced semi-automated RMGs at a greenfield terminal on the East Coast.” “They sold the ILA a vision that this new terminal would create thousands of jobs,” Daggett said. “It was a loophole that came at a cost to ILA members and their families.” Increasingly aware of the potential for job losses, the union’s 2004–2010 master contract was the first to contain terms addressing technology usage at container terminals. Those original contract terms did not outright bar marine terminals from implementing new technology but require management to notify the affected local and the international longshore union about the new technology and work with the unions to mitigate any job losses. The ILA has the right to contest any technology implementation through a grievance process before a three-member panel comprised of ILA and USMX representatives and an arbitrator. <h3>Canal expansion drove RMG growth on East Coast </h3>APM eventually sold Portsmouth in 2014 to Alinda Capital Partners and a UK-based pension fund, which renamed it the Virginia International Gateway (VIG). The buyers said at the time the acquisition of the VIG was due to its “<a href="https://www.joc.com/article/apm-terminals-facility-in-virginia-to-be-sold-5195342">modern design and high levels of automation, which ensure that the facility will be a key component of the port’s infrastructure now and in the future</a>.” In 2016, as the Panama Canal’s expansion opened up the East Coast to larger ships, the Virginia Port Authority, which operates the VIG, began installing another 26 RMGs and four new ship-to-shore cranes that increased its capacity by another 500,000 TEUs. About that time, Virginia also began to convert the south berth of the nearby Norfolk International Terminal into an RMG operation. In 2014, Global Container Terminals (GCT) debuted the installation of 20 RMGs as part of a $325 million expansion of its Bayonne container terminal that also added 70 acres to its 100-acre footprint. The expansion more than doubled Bayonne’s effective capacity from 435,000 container lifts to 1.1 million container lifts per year, making what Bayonne’s executives called the most “<a href="https://www.joc.com/article/nys-global-terminal-ila-in-arbitration-5219271">technologically advanced terminal in the United States.</a>” The rollout at Bayonne was not entirely without controversy, though. The ILA and GCT had to enter arbitration over whether <a href="https://www.joc.com/article/nys-global-terminal-ila-in-arbitration-5219271">the union had jurisdiction over an RMG safety device that required truckers to press a button that they were in a safe area when a container was being loaded</a>. The 2012–2018 master contract negotiated by ILA President Harold Daggett, Dennis’ father, did not contain an outright ban on any type of automation at marine terminals or the RMGs at Bayonne. However, the language around technology implementation became stricter, requiring that any automation project at a marine terminal go before a 10-member committee of ILA and USMX members that would study the workforce effects of automation. By the time of the 2018–2024 contract, the ILA negotiated a prohibition on full automation at ports but still left the question of semi-automation technology open to collective bargaining. “We had learned from these mistakes,” Dennis Daggett said. “Under new leadership, the ILA secured workforce protections and guarantees, ensuring that automation would no longer be implemented without consideration of its impact on jobs. These agreements set clear limits on how far technology could go in replacing human labor.” <h3>Ports ‘must evolve’ </h3>The USMX, however, has laid out an opposite stance, seeing the ability to implement new technology as critical for land-constrained US ports and their workers to remain competitive. It, too, noted that RMGs were allowed under previous agreements and allowed one unidentified terminal to double its container throughput. “Port operations must evolve, and embracing modern technology is critical to this evolution,” the USMX said in a statement Tuesday in response to the ILA’s statement. “Due to the lack of available new land in most ports, the only way for US East and Gulf coast ports to handle more volume is to densify terminals.” “USMX is not, nor has it ever been, seeking to eliminate jobs, but to simply implement and maintain the use of equipment and technology already allowed under the current contract agreement and already widely in use, including at some USMX ports,” it added. Daggett said that the densification argument is designed to deflect from the job losses stemming from RMGs, which still require longshore workers at either end to move containers from the ship or onto chassis. Daggett said there’s no evidence that terminals with RMG technology are more efficient, adding that RMGs face the risk of hacking attacks due to their reliance on communications networks rather than longshore workers inside an operator’s cab. His warning comes after the ports of <a href="https://www.joc.com/article/port-of-houston-aims-for-thursday-reopening-after-gate-outage-5249163">Houston</a> and <a href="https://www.joc.com/article/sc-ports-chief-outlines-plans-for-charleston-to-hit-10-million-teu-mark-5749894">Charleston</a> experienced multi-day gate outages that have gone mostly unexplained. “This isn’t about safety or productivity, it’s about job elimination,” he said. “The ILA has proven through data and real-world operations that RMGs are not more productive than traditional equipment operated by human workers.” Since their rollout, the VIG now has 56 RMGs and can handle 2.2 million TEUs per year on approximately the same amount of land it had since 2007. Virginia’s NIT now has 96 RMGs that allow it to handle 3.6 million TEUs per year on some 378 acres of land. GCT Bayonne handles about 1 million TEUs per year with its 20 RMGs. <a href="https://www.joc.com/article/gct-adding-berth-for-ultra-large-ships-to-new-jersey-terminal-5224198">A third berth that will open in 2025</a> also means additional RMGs at the site that will further increase its capacity. <a href="https://www.joc.com/article/cma-cgms-ny-nj-home-offers-it-southeast-asia-trade-growth-saade-5226190">CMA CGM purchased GCT Bayonne last year, citing its efficiency</a>. A New Jersey terminal management source who asked not to be identified said that it’s not a matter of RMG operations being more efficient, but rather that it allows them to make the best use of available land and keep up with other operators. Maher Terminals, the largest privately operated marine terminal on the East Coast, uses over 200 straddle carriers operated individually to move over 3 million TEUs per year. But it has 450 acres of land to do so. The Bayonne terminal only moves one-third of that volume, but it does so on one-third of the land mass. “If you look at man-hours per lift, there’s very little difference,” the source said. RMGs have also been implemented at <a href="https://www.joc.com/article/us-ports-eye-more-automation-as-discharges-from-large-vessels-intensify-5213519">the fully automated Long Beach Container Terminal on the US West Coast</a>, which has been the target of longshore union criticisms over productivity. <a href="https://www.joc.com/article/centerm-terminal-expansion-gives-vancouver-critical-boost-in-capacity-5227056">DP World has also rolled out RMG technology at its Centerm facility in Vancouver</a>, following a similar rollout of RMGs at the nearby GCT Deltaport facility in 2020. Longshore foremen at the Port of Vancouver, however, <a href="https://www.joc.com/article/dp-worlds-centerm-project-at-heart-of-employer-union-dispute-in-vancouver-5225162">have unsuccessfully tried to negotiate a new staffing agreement with DP World</a> over the RMG introduction, resulting in a port-wide lockout that ended as <a href="https://www.joc.com/article/bc-ports-to-reopen-but-longshore-union-plans-challenge-to-back-to-work-order-5810473">both sides have been forced by Canada’s government into arbitration</a>. Contact Michael Angell at <a href="mailto:michael.angell@spglobal.com ">michael.angell@spglobal.com</a>.</div>

Rail-mounted gantry cranes (RMGs) at container terminals have emerged as the deciding factor for the International Longshoremen’s Association (ILA) in whether they will agree to a new master contract that avoids another port strike in January. The union was unable to block the introduction of RMGs at two East Coast ports under three previous contracts but sees their further usage as a line in the sand in current contract talks. The semi-automated RMGs — which have been in use in the US since 2007 — are seen as the key method for land-constrained terminals, particularly those near urban East Coast ports, to expand. And now they are at the heart of another longshore labor dispute in North America. In a statement Monday, ILA Executive Vice President Dennis Daggett singled out RMGs for being “at the center of this [current] impasse” with the US Maritime Alliance (USMX) over resuming talks for a new master contract before a Jan. 15 deadline when the existing contract extension expires . The union broke off talks with the USMX over what it said was the employer group’s push for “semi automation” language in the new contract. Daggett said the equipment has failed to show it can outperform individual longshore machine operators. And in addition to taking away jobs, the RMGs, he said, are a target for hacking. He cast the fight against RMGs as existential for a union that under two previous administrations did not challenge the equipment’s rollout at the ports of Norfolk, Virginia, and Bayonne, New Jersey. “The ILA is not against progress, innovation, or modernization, but we cannot support technology that jeopardizes jobs, threatens national security, and puts the future of the workforce at risk,” Daggett said. “This is a pivotal moment in our history,” he added. “The decisions we make today will determine the future for generations to come.” No talks between the ILA and USMX are currently scheduled. ‘Sold the ILA a vision’ RMGs, two of which will straddle a long row of stacked containers, move boxes forward and backward between the berth and truck lanes. As truckers enter the terminal, the RMG picks out the box from each stack and delivers it to the front of the row for mounting on chassis, or in reverse for loading operations. Stacks can also be “groomed” by RMGs overnight to push containers for morning delivery to the front of the row. RMGs allow for much denser container yards as less space is required for the operation of straddle carriers or rubber tire gantry cranes, which require an individual operator on the machine. In contrast, the RMG is operated remotely from an office, with an operator also capable of operating several RMGs at once depending on volume. RMG operations are considered safer as fewer workers are required in the yard around rolling machinery. Breaks and shift changes can also be done faster as RMG operators just move away from desks rather than yard equipment. Maersk’s APM Terminals subsidiary was the first to roll out RMG technology in the US when it began developing the Portsmouth marine terminal in Norfolk. Opened in 2007, APM Portsmouth, which had design capacity of 1.5 million TEUs on 291 acres of land, originally had 30 RMG cranes and six ship-to-shore cranes. The Portsmouth terminal was developed years earlier under the then-current 1996–2001 master contract between the USMX and ILA under its previous president John Bowers. That contract had no language about technology. Daggett said in his Monday statement that “under a different ILA administration, the employers introduced semi-automated RMGs at a greenfield terminal on the East Coast.” “They sold the ILA a vision that this new terminal would create thousands of jobs,” Daggett said. “It was a loophole that came at a cost to ILA members and their families.” Increasingly aware of the potential for job losses, the union’s 2004–2010 master contract was the first to contain terms addressing technology usage at container terminals. Those original contract terms did not outright bar marine terminals from implementing new technology but require management to notify the affected local and the international longshore union about the new technology and work with the unions to mitigate any job losses. The ILA has the right to contest any technology implementation through a grievance process before a three-member panel comprised of ILA and USMX representatives and an arbitrator. Canal expansion drove RMG growth on East Coast APM eventually sold Portsmouth in 2014 to Alinda Capital Partners and a UK-based pension fund, which renamed it the Virginia International Gateway (VIG). The buyers said at the time the acquisition of the VIG was due to its “ modern design and high levels of automation, which ensure that the facility will be a key component of the port’s infrastructure now and in the future .” In 2016, as the Panama Canal’s expansion opened up the East Coast to larger ships, the Virginia Port Authority, which operates the VIG, began installing another 26 RMGs and four new ship-to-shore cranes that increased its capacity by another 500,000 TEUs. About that time, Virginia also began to convert the south berth of the nearby Norfolk International Terminal into an RMG operation. In 2014, Global Container Terminals (GCT) debuted the installation of 20 RMGs as part of a $325 million expansion of its Bayonne container terminal that also added 70 acres to its 100-acre footprint. The expansion more than doubled Bayonne’s effective capacity from 435,000 container lifts to 1.1 million container lifts per year, making what Bayonne’s executives called the most “ technologically advanced terminal in the United States. ” The rollout at Bayonne was not entirely without controversy, though. The ILA and GCT had to enter arbitration over whether the union had jurisdiction over an RMG safety device that required truckers to press a button that they were in a safe area when a container was being loaded . The 2012–2018 master contract negotiated by ILA President Harold Daggett, Dennis’ father, did not contain an outright ban on any type of automation at marine terminals or the RMGs at Bayonne. However, the language around technology implementation became stricter, requiring that any automation project at a marine terminal go before a 10-member committee of ILA and USMX members that would study the workforce effects of automation. By the time of the 2018–2024 contract, the ILA negotiated a prohibition on full automation at ports but still left the question of semi-automation technology open to collective bargaining. “We had learned from these mistakes,” Dennis Daggett said. “Under new leadership, the ILA secured workforce protections and guarantees, ensuring that automation would no longer be implemented without consideration of its impact on jobs. These agreements set clear limits on how far technology could go in replacing human labor.” Ports ‘must evolve’ The USMX, however, has laid out an opposite stance, seeing the ability to implement new technology as critical for land-constrained US ports and their workers to remain competitive. It, too, noted that RMGs were allowed under previous agreements and allowed one unidentified terminal to double its container throughput. “Port operations must evolve, and embracing modern technology is critical to this evolution,” the USMX said in a statement Tuesday in response to the ILA’s statement. “Due to the lack of available new land in most ports, the only way for US East and Gulf coast ports to handle more volume is to densify terminals.” “USMX is not, nor has it ever been, seeking to eliminate jobs, but to simply implement and maintain the use of equipment and technology already allowed under the current contract agreement and already widely in use, including at some USMX ports,” it added. Daggett said that the densification argument is designed to deflect from the job losses stemming from RMGs, which still require longshore workers at either end to move containers from the ship or onto chassis. Daggett said there’s no evidence that terminals with RMG technology are more efficient, adding that RMGs face the risk of hacking attacks due to their reliance on communications networks rather than longshore workers inside an operator’s cab. His warning comes after the ports of Houston and Charleston experienced multi-day gate outages that have gone mostly unexplained. “This isn’t about safety or productivity, it’s about job elimination,” he said. “The ILA has proven through data and real-world operations that RMGs are not more productive than traditional equipment operated by human workers.” Since their rollout, the VIG now has 56 RMGs and can handle 2.2 million TEUs per year on approximately the same amount of land it had since 2007. Virginia’s NIT now has 96 RMGs that allow it to handle 3.6 million TEUs per year on some 378 acres of land. GCT Bayonne handles about 1 million TEUs per year with its 20 RMGs. A third berth that will open in 2025 also means additional RMGs at the site that will further increase its capacity. CMA CGM purchased GCT Bayonne last year, citing its efficiency . A New Jersey terminal management source who asked not to be identified said that it’s not a matter of RMG operations being more efficient, but rather that it allows them to make the best use of available land and keep up with other operators. Maher Terminals, the largest privately operated marine terminal on the East Coast, uses over 200 straddle carriers operated individually to move over 3 million TEUs per year. But it has 450 acres of land to do so. The Bayonne terminal only moves one-third of that volume, but it does so on one-third of the land mass. “If you look at man-hours per lift, there’s very little difference,” the source said. RMGs have also been implemented at the fully automated Long Beach Container Terminal on the US West Coast , which has been the target of longshore union criticisms over productivity. DP World has also rolled out RMG technology at its Centerm facility in Vancouver , following a similar rollout of RMGs at the nearby GCT Deltaport facility in 2020. Longshore foremen at the Port of Vancouver, however, have unsuccessfully tried to negotiate a new staffing agreement with DP World over the RMG introduction, resulting in a port-wide lockout that ended as both sides have been forced by Canada’s government into arbitration . Contact Michael Angell at michael.angell@spglobal.com .

Port infrastructure

ILA targets rail-mounted gantry cranes amid impasse in port labor talks

<div class="phx-topic abstract-wrapper">The Federal Maritime Commission said that it needs more information about the new grouping of ocean carriers known as the Premier Alliance before the vessel-sharing agreement can begin in February on US trades. </div>

The Federal Maritime Commission said that it needs more information about the new grouping of ocean carriers known as the Premier Alliance before the vessel-sharing agreement can begin in February on US trades.

<div class="phx-topic">The Federal Maritime Commission (FMC) on Friday has halted Premier Alliance from becoming effective next week as scheduled, citing insufficient information on the alliance set to sail in February. The FMC said the proposed agreement from Ocean Network Express, HMM and Yang Ming “lacks sufficient detail to allow for a complete analysis of potential competitive impacts and whether the agreement fully complies with all statutory requirements.” The Premier Alliance on Friday released details of its <a href="https://www.joc.com/article/north-america-trade-to-dominate-premier-alliances-network-launch-in-february-5877233">new network</a>. Premier members had been partners in the THE Alliance with Hapag-Lloyd. But with Hapag-Lloyd’s decision to bolt THE Alliance in favor of joining Maersk in the 2M Cooperation, the three carriers <a href="https://www.joc.com/article/msc-strikes-asia-europe-slot-share-with-former-thea-members-5723585">banded together</a> in September under a new name and with a slot-sharing agreement in the trans-Pacific trade with Mediterranean Shipping Co. The FMC has a 45-day window from when it collects the information to issue the formal go-ahead for the Premier Alliance, and any shippers wishing to weigh in will be able to do so during a 15-day window that starts next week. Such requests for additional information from the FMC are common, with the Gemini Cooperation <a href="https://www.joc.com/article/fmc-wants-maersk-hapag-lloyd-to-provide-more-details-on-gemini-alliance-5192298">itself having received</a> one in July. The agency later determined there were no competitive impacts to Gemini but vowed to keep <a href="https://www.joc.com/article/fmc-wont-block-gemini-alliance-but-vows-tight-monitoring-5724939">an eye</a> on the new alliance. Contact Michael Angell at <a href="mailto:michael.angell@spglobal.com ">michael.angell@spglobal.com</a>. </div>

The Federal Maritime Commission (FMC) on Friday has halted Premier Alliance from becoming effective next week as scheduled, citing insufficient information on the alliance set to sail in February. The FMC said the proposed agreement from Ocean Network Express, HMM and Yang Ming “lacks sufficient detail to allow for a complete analysis of potential competitive impacts and whether the agreement fully complies with all statutory requirements.” The Premier Alliance on Friday released details of its new network . Premier members had been partners in the THE Alliance with Hapag-Lloyd. But with Hapag-Lloyd’s decision to bolt THE Alliance in favor of joining Maersk in the 2M Cooperation, the three carriers banded together in September under a new name and with a slot-sharing agreement in the trans-Pacific trade with Mediterranean Shipping Co. The FMC has a 45-day window from when it collects the information to issue the formal go-ahead for the Premier Alliance, and any shippers wishing to weigh in will be able to do so during a 15-day window that starts next week. Such requests for additional information from the FMC are common, with the Gemini Cooperation itself having received one in July. The agency later determined there were no competitive impacts to Gemini but vowed to keep an eye on the new alliance. Contact Michael Angell at michael.angell@spglobal.com .

Asia-Europe

Trans-Pacific

FMC halts Premier Alliance start for more information

<div class="phx-topic abstract-wrapper">The extensive frontloading of imports that occurred this fall will keep cargo volumes modest this month, but the vagaries of labor negotiations and new tariffs threaten to disrupt the market in short order.</div>

The extensive frontloading of imports that occurred this fall will keep cargo volumes modest this month, but the vagaries of labor negotiations and new tariffs threaten to disrupt the market in short order.

<div class="phx-topic">The overheated trans–Pacific Ocean market is in the midst of a December respite after months of extensive frontloading, but can quickly become roiled again given the razor's-edge nature of longshore labor talks and the threats of new tariffs by the incoming Trump administration. “Once we get to January, whether it’s on the political front, the labor front, the alliance shake-up, everything is coming fast,” Sanjay Tejwani, CEO of consulting firm 365 Logistics, told the Journal of Commerce. Also in the background is an early Lunar New Year, which begins Jan. 29 and will likely mean imports from Asia perk up again from early January ahead of the holiday factory closures that take place in the region. The import pop will take place mostly at West Coast ports. “The East Coast will drop off. The West Coast will remain robust,” a carrier executive said. Meantime, with plentiful vessel capacity scheduled and reduced blanking, sources say they expect continued downward pressure on spot rates that have been in retreat since July. Rates from Asia to the US West Coast were at $2,400 per FEU as of Thursday, down 4% on the week and sharply off the July peak of over $8,000, according to Platts, a sister company of the Journal of Commerce within S&amp;P Global. Christian Sur, executive vice president of ocean freight contract logistics at the forwarder Unique Logistics International, said there are three levels of spot/freight-all-kinds rates in the current market — “window” rates as high as $5,000 per FEU to the West Coast that some importers are willing to pay to ensure loading of their freight; the more prevalent market rates listed on the indexes, such as the $2,400 per FEU rate listed by Platts; and special “bullet” rates offered by some carriers in specific trade lanes based on demand. “Those (bullet) rates are in the low $2,000s, but they’re not across the board,” Sur said. Still, the market knows full well those rates are now at the mercy of a looming Jan. 15 deadline for the International Longshoremen’s Association (ILA) and United States Maritime Alliance (USMX) to reach agreement on a new master contract and head off a second strike at ports along the US East and Gulf coasts. A multiday ILA strike in January would sustain the diversion of cargo to West Coast ports and add to the complexity that importers already face in planning their supply chains. “My assessment is we are more likely to see a strike than not see a strike, and if we do get a strike, it will last longer,” Lars Jensen, CEO and partner at Vespucci Maritime, told a Journal of Commerce webinar Thursday. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="e7a65aab-9aac-4f07-9b74-1793746c01ef"></dynamic-object></div><h3>Navigating tariff uncertainty</h3>On the political front, importers are facing an increasingly tangible tariff threat in 2025 after President-elect Donald Trump’s plan to implement tariffs on foreign goods has <a href="https://www.joc.com/article/us-importers-dabbling-in-frontloading-ahead-of-new-tariff-threat-5821448">pushed some shippers to move cargo early.</a>The major uncertainty that importers will face after Trump takes office in January is what level of tariffs he will impose on which countries and when those tariffs will go into effect. “It’s fair to say nobody knows for sure,” Jensen said. It is likely that many retailers are preparing to frontload shipments if they haven’t already done so, especially if they have space in their warehouses to store the product until needed. Inventory levels at warehouses across the United States were generally high before the Black Friday in-store sales and Cyber Monday online sales, said Scott Weiss, vice president of technical sales-warehouse and distribution service for North America at A.P. Moeller-Maersk. The <a href="https://www.joc.com/article/cargo-push-to-continue-amid-mounting-market-pressures-zim-5821532">US inventory-to-retail sales ratio in September</a>, the most recent reading from the US Census Bureau, was elevated to levels not seen since before the pandemic buying spree began. “The sales were strong, so the inventory was here,” Weiss said. “However, as the inventory goes down through the holidays, space will open up for the frontloading of spring merchandise, which is occurring somewhat earlier than usual,” he said. Nevertheless, a consultant and former logistics manager at two national retailers said importers must assess inventory carrying costs and all the uncertainties surrounding tariffs as they review their frontloading plans. “There’s only so much you can frontload,” the source said. Many importers diversified supply chains after Trump’s initial round of tariffs that were implemented during his first term in office. “We successfully [addressed previous tariffs] through a combination of vendor collaboration, product reengineering and assortment changes, (and) moving product sourcing to other countries...,” said Five Below CEO Ken Bull. “We expect to utilize these tools and tactics again." <h3>Growing supply and stable demand</h3>Meanwhile, the US West Coast is poised for significant capacity injections in December and January, forecasted by maritime intelligence firm eeSea to reach a record 1.5 million TEUs in January. The company also forecasts a December blanking rate of about 1% on the East Coast and 6.7% for the West Coast. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="953f7c86-635d-4cba-9cb7-ffe651937158"></dynamic-object></div>If blanks and capacity estimates come to fruition at eeSea’s projected rates, actual capacity into the East Coast for December will climb by 27.6%, while West Coast capacity will drop 1.1%. Contact Bill Mongelluzzo at <a href="mailto:bill.mongelluzzo@spglobal.com">bill.mongelluzzo@spglobal.com</a>. Contact Laura Robb at <a href="mailto:laura.robb@spglobal.com">laura.robb@spglobal.com</a>. </div>

The overheated trans–Pacific Ocean market is in the midst of a December respite after months of extensive frontloading, but can quickly become roiled again given the razor's-edge nature of longshore labor talks and the threats of new tariffs by the incoming Trump administration. “Once we get to January, whether it’s on the political front, the labor front, the alliance shake-up, everything is coming fast,” Sanjay Tejwani, CEO of consulting firm 365 Logistics, told the Journal of Commerce. Also in the background is an early Lunar New Year, which begins Jan. 29 and will likely mean imports from Asia perk up again from early January ahead of the holiday factory closures that take place in the region. The import pop will take place mostly at West Coast ports. “The East Coast will drop off. The West Coast will remain robust,” a carrier executive said. Meantime, with plentiful vessel capacity scheduled and reduced blanking, sources say they expect continued downward pressure on spot rates that have been in retreat since July. Rates from Asia to the US West Coast were at $2,400 per FEU as of Thursday, down 4% on the week and sharply off the July peak of over $8,000, according to Platts, a sister company of the Journal of Commerce within S&P Global. Christian Sur, executive vice president of ocean freight contract logistics at the forwarder Unique Logistics International, said there are three levels of spot/freight-all-kinds rates in the current market — “window” rates as high as $5,000 per FEU to the West Coast that some importers are willing to pay to ensure loading of their freight; the more prevalent market rates listed on the indexes, such as the $2,400 per FEU rate listed by Platts; and special “bullet” rates offered by some carriers in specific trade lanes based on demand. “Those (bullet) rates are in the low $2,000s, but they’re not across the board,” Sur said. Still, the market knows full well those rates are now at the mercy of a looming Jan. 15 deadline for the International Longshoremen’s Association (ILA) and United States Maritime Alliance (USMX) to reach agreement on a new master contract and head off a second strike at ports along the US East and Gulf coasts. A multiday ILA strike in January would sustain the diversion of cargo to West Coast ports and add to the complexity that importers already face in planning their supply chains. “My assessment is we are more likely to see a strike than not see a strike, and if we do get a strike, it will last longer,” Lars Jensen, CEO and partner at Vespucci Maritime, told a Journal of Commerce webinar Thursday. Navigating tariff uncertainty On the political front, importers are facing an increasingly tangible tariff threat in 2025 after President-elect Donald Trump’s plan to implement tariffs on foreign goods has pushed some shippers to move cargo early. The major uncertainty that importers will face after Trump takes office in January is what level of tariffs he will impose on which countries and when those tariffs will go into effect. “It’s fair to say nobody knows for sure,” Jensen said. It is likely that many retailers are preparing to frontload shipments if they haven’t already done so, especially if they have space in their warehouses to store the product until needed. Inventory levels at warehouses across the United States were generally high before the Black Friday in-store sales and Cyber Monday online sales, said Scott Weiss, vice president of technical sales-warehouse and distribution service for North America at A.P. Moeller-Maersk. The US inventory-to-retail sales ratio in September , the most recent reading from the US Census Bureau, was elevated to levels not seen since before the pandemic buying spree began. “The sales were strong, so the inventory was here,” Weiss said. “However, as the inventory goes down through the holidays, space will open up for the frontloading of spring merchandise, which is occurring somewhat earlier than usual,” he said. Nevertheless, a consultant and former logistics manager at two national retailers said importers must assess inventory carrying costs and all the uncertainties surrounding tariffs as they review their frontloading plans. “There’s only so much you can frontload,” the source said. Many importers diversified supply chains after Trump’s initial round of tariffs that were implemented during his first term in office. “We successfully [addressed previous tariffs] through a combination of vendor collaboration, product reengineering and assortment changes, (and) moving product sourcing to other countries...,” said Five Below CEO Ken Bull. “We expect to utilize these tools and tactics again." Growing supply and stable demand Meanwhile, the US West Coast is poised for significant capacity injections in December and January, forecasted by maritime intelligence firm eeSea to reach a record 1.5 million TEUs in January. The company also forecasts a December blanking rate of about 1% on the East Coast and 6.7% for the West Coast. If blanks and capacity estimates come to fruition at eeSea’s projected rates, actual capacity into the East Coast for December will climb by 27.6%, while West Coast capacity will drop 1.1%. Contact Bill Mongelluzzo at bill.mongelluzzo@spglobal.com . Contact Laura Robb at laura.robb@spglobal.com .

Port of Portland strikes deal with stevedore to operate container terminal

Featured Gateway Chart

Essential Reads

Schedule reliability remains key challenge for China-Europe rail

Hapag-Lloyd joins Maersk in Chinese methanol supply deal

NYSHEX keeps core vision while evolving in volatile container shipping market

Recent Commentary

New entrants have few paths into container shipping

Supply chains embrace the AI takeover to slash costs

Top 5 Most Read Stories