<div class="phx-topic abstract-wrapper">The higher cost of low-sulfur fuel remains one of the greatest threats to carrier profitability over the next year.</div>

The higher cost of low-sulfur fuel remains one of the greatest threats to carrier profitability over the next year.

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<div>Although Maersk marked rising tariffs as a key risk to the profitability of the container shipping industry, the impending low-sulfur fuel mandate poses the greatest threat as carriers struggle to achieve rate levels needed to compensate for the higher bunker prices.<div><img><a>Click to enlarge</a></div>Carrier financial results through 2018 repeatedly reflected the impact higher bunker prices have on profitability, eroding much of the gains made by higher freight rate levels and cost cutting measures. Heavy marine fuel oil is currently at $428 per ton, up 21 percent compared with the same week last year. Low-sulfur fuel is $525 per ton.When bunker prices...

Although Maersk marked rising tariffs as a key risk to the profitability of the container shipping industry, the impending low-sulfur fuel mandate poses the greatest threat as carriers struggle to achieve rate levels needed to compensate for the higher bunker prices. Click to enlarge Carrier financial results through 2018 repeatedly reflected the impact higher bunker prices have on profitability, eroding much of the gains made by higher freight rate levels and cost cutting measures. Heavy marine fuel oil is currently at $428 per ton, up 21 percent compared with the same week last year. Low-sulfur fuel is $525 per ton. When bunker prices began to take off in May 2018, several carriers imposed an emergency bunker surcharge (EBS) on top of the existing bunker adjustment factor (BAF) but were able to only partially offset the rising fuel price that pushed up carrier unit costs. For instance, CMA CGM’s unit costs rose by 7.7 percent ($77 per TEU) in the third quarter, while the average rate per TEU only increased by $55 in that period. Maersk Line on Thursday released its 2018 results, and compared with 2017, average freight rates for the year increased by $91 per FEU. But at the same time, average bunker pricing rose 32 percent, equivalent to an extra bunker cost of $1.2 billion ($92 per FEU). An improved fourth quarter helped Maersk post a 3.7 percent increase in container volume for the full year, but it was significantly weaker than the 5.6 percent growth recorded in 2017. Its pre-tax profit for 2018 was $238 million compared with $25 million in 2017. Most of the other major carriers have yet to release their full-year results, but so far Cosco has reported that its net profit declined 55 percent compared with 2017 to $179 million, and Ocean Network Express (ONE) reported a loss of $179 million in its fiscal third quarter, which ended Dec. 31. According to an analysis from Alphaliner, average operating margins of nine of the 10 largest carriers (second-largest Mediterranean Shipping Co. does not report its earnings) in the third quarter of 2018 stood at just 0.5 percent, well below the 5.3 percent level recorded in the same quarter last year. In the same period, the industry as a whole spent about $19 billion on bunker fuel, a 20 percent increase from third-quarter 2017. Carrying costs With bunker fuel prices often comprising more than half of a carrier’s operating costs, carrier profitability is going to be severely tested when the International Maritime Organization (IMO) low-sulfur fuel mandate becomes effective Jan. 1, 2020. The mandate will require marine fuel to contain a maximum of 0.5 percent sulfur content on a global basis, down from 3.5 percent today. Click to enlarge The price of the cleaner low-sulfur fuel oil (LSFO) is currently more than 30 percent higher than the heavy fuel oil used by the shipping industry, and as demand for LSFO increases and heavy bunker decreases from the second half of this year, that gap is likely to grow even wider. Carriers forecast the cleaner fuel will cost the container shipping industry $13-15.7 billion in additional annual fuel spend. Maersk has pegged the extra costs at $2 billion, as has MSC, Hapag-Lloyd at $1 billion, and CMA CGM at $160 per TEU ($3 billion). Several carriers have announced revised BAF formulas that they believe are better suited to recouping the additional costs of using low-sulfur fuel, but given carriers' past difficulties in setting and maintaining profitable pricing, questions remain as to whether shippers will be willing to pay the much higher post-BAF rates. Decoupling fuel from freight Vincent Clerc, Maersk Line’s chief operating officer, said the implications of the low-sulfur fuel mandate were also playing out in annual service contract talks between shippers and carriers on the major east-west trades. “Our rates ended 2018 up 7 percent year over year, so we finished the year in much better shape than at the end of 2017,” he said in a conference call with Wall Street analysts. “That means [it is] a better environment to negotiate contracts. We have finished with Asian and European customers, and the rates we have contracted are in line with this better climate. We still have the entire North American portfolio to go through where the contracts begin on May 1.” Given how the dialogue around the low-sulfur rule is unfolding early in this year’s trans-Pacific eastbound service contract negotiations, the risk of severe disruption in early 2020 should be on the minds of all beneficial cargo owners and forwarders. Carriers are already speaking openly about the risk of bunker fuel surcharges being rolled into base freight rates, which could be disastrous for both parties. “At the end of the day, our objective is to delink bunker fuel discussion from the freight discussion. The worst thing we can see is all-in rates,” George Goldman, US president of Zim Integrated Shipping Services, told the recent Georgia Foreign Trade Conference. Industry analyst Lars Jensen outlined the problem in a February blog. “If the carriers fail in getting the BAF through (which is a distinct risk), the shippers will be in a situation where contracts without BAF are exceedingly unlikely to be of value if the carriers suddenly face a $10 billion loss — and consequently the concept of having a contract rate will cease to have meaning, and instead it will be a de facto spot market.” But some carriers remain optimistic. “We have seen a very high percentage of contracts that either took our new formula or had a similar customer formula which in the end had more or less the same effect,” Hapag-Lloyd CEO Rolf Habben Jansen told JOC.com in January, referring to contracts already signed covering 2019. Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler .

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Container lines

Carrier earnings show scale of low-sulfur risk

<div class="phx-topic abstract-wrapper">The Los Angeles-Long Beach complex, which handles about half of all US imports from Asia, is so far due to experience 59 blanked sailings between May 1 and June 30.</div>

The Los Angeles-Long Beach complex, which handles about half of all US imports from Asia, is so far due to experience 59 blanked sailings between May 1 and June 30.

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<div class="phx-topic">Ports and marine terminals along the US West Coast are bracing for what could be a massive drop in imports moving across their docks in the coming weeks as the tangible impacts of blank sailings and half-empty container ships arriving from China become apparent. The effects of the US trade war with Beijing will be most visible in Southern California, where stakeholders at the ports of Los Angeles and Long Beach – the US’ busiest gateway – expect a huge cut in imports in May, with a 35% decline in Los Angeles and 38% in Long Beach compared to their normal monthly volumes. “Leading indicators forecast a significant dip in container ship arrivals in the next one to two weeks,” Kip Louttit, executive director of the Marine Exchange of Southern California, said. The Los Angeles-Long Beach complex, which handles about half of all US imports from Asia, is so far due to experience 59 blanked, or canceled, sailings between May 1 and June 30, according to both ports. That number, which could rise, means that about 65,000 to 71,000 TEUs of imports won’t be landing in Southern California each week for the next few weeks. A spokesperson for the Port of Los Angeles said 17 blank sailings are scheduled for May and 12 for June. Long Beach is scheduled to have 13 blanked sailings in May and 17 in June, according to Noel Hacegaba, the port’s chief operating officer. The impact of the blanked sailings will vary from terminal to terminal depending on the lines that call there and the origin of the imports, said Alan McCorkle, president and CEO of Yusen Terminals in Los Angeles. “We’re all experiencing it to some degree,” he said. “We expect a couple of blanks in May.” When cargo volumes drop precipitously, terminal operators generally reduce their gate hours, McCorkle said. “We’ll close two or three gates a week to right-size our operation.” <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="1c1d9578-c129-4d4e-a136-e220473bd136"></dynamic-object></div>While dockworkers won't face lower pay or job cuts given their contract protections, the International Longshore and Warehouse Union (ILWU) nonetheless savaged the Trump administration this week for implementing the tariffs and the trade war they ignited with China. “Tariffs are taxes. These and other reckless, shortsighted policies have begun to devastate American workers, harm critical sectors of the economy, and line the pockets of the ultra-wealthy at the expense of hardworking families,” the union said in a statement. “Hundreds of thousands of jobs are dependent on or connected to global trade,” the ILWU added. “Constricted trade between the world’s two largest economies could lead to devastating job losses for workers employed in the global supply chain.” <h3>Imports to drop in Oakland and NWSA </h3>Further up the West Coast, the Port of Oakland likewise anticipates a drop in vessel calls and import volumes over the next two months. “In recent weeks, vessel service reductions have increased,” a port spokesperson said. “Between April and June, 39 blank sailings have been announced across multiple shipping alliances calling Oakland. These reductions tighten available vessel capacity for both imports and exports.” The Northwest Seaport Alliance (NWSA) of Seattle and Tacoma does not have formal projections on volumes, a port spokesperson said. But while import volumes to date this year have been strong, that appears to be changing. “We are seeing some vessels coming in with less cargo than anticipated, and we are hearing from exporters and importers directly on cancelled orders, especially with China,” the spokesperson said. “These impacts are real and will likely be reflected in our data in the coming months.” China accounts for 51% of NWSA imports and 40% of the port complex’s total trade, the spokesperson noted. <h3>Vancouver unaffected </h3>The Port of Vancouver does not anticipate a drop in import volumes due to the US tariffs on imports from China, said Rosanna Lau, manager of trade development at the Vancouver-Fraser Port Authority. “Our forecasts for the coming weeks indicate that container volumes at the Port of Vancouver will remain consistent with seasonal norms,” Lau said. “It is worth noting that the overwhelming majority of container traffic moving through the port is Canadian trade and not directly affected by US tariffs.” The Port of Prince Rupert said 17 blank sailings are scheduled across May and June; that is five more blanks than the same period last year, a port spokesperson said. Contact Bill Mongelluzzo at <a href="mailto:bill.mongelluzzo@spglobal.com">bill.mongelluzzo@spglobal.com</a></div>

Ports and marine terminals along the US West Coast are bracing for what could be a massive drop in imports moving across their docks in the coming weeks as the tangible impacts of blank sailings and half-empty container ships arriving from China become apparent. The effects of the US trade war with Beijing will be most visible in Southern California, where stakeholders at the ports of Los Angeles and Long Beach – the US’ busiest gateway – expect a huge cut in imports in May, with a 35% decline in Los Angeles and 38% in Long Beach compared to their normal monthly volumes. “Leading indicators forecast a significant dip in container ship arrivals in the next one to two weeks,” Kip Louttit, executive director of the Marine Exchange of Southern California, said. The Los Angeles-Long Beach complex, which handles about half of all US imports from Asia, is so far due to experience 59 blanked, or canceled, sailings between May 1 and June 30, according to both ports. That number, which could rise, means that about 65,000 to 71,000 TEUs of imports won’t be landing in Southern California each week for the next few weeks. A spokesperson for the Port of Los Angeles said 17 blank sailings are scheduled for May and 12 for June. Long Beach is scheduled to have 13 blanked sailings in May and 17 in June, according to Noel Hacegaba, the port’s chief operating officer. The impact of the blanked sailings will vary from terminal to terminal depending on the lines that call there and the origin of the imports, said Alan McCorkle, president and CEO of Yusen Terminals in Los Angeles. “We’re all experiencing it to some degree,” he said. “We expect a couple of blanks in May.” When cargo volumes drop precipitously, terminal operators generally reduce their gate hours, McCorkle said. “We’ll close two or three gates a week to right-size our operation.” While dockworkers won't face lower pay or job cuts given their contract protections, the International Longshore and Warehouse Union (ILWU) nonetheless savaged the Trump administration this week for implementing the tariffs and the trade war they ignited with China. “Tariffs are taxes. These and other reckless, shortsighted policies have begun to devastate American workers, harm critical sectors of the economy, and line the pockets of the ultra-wealthy at the expense of hardworking families,” the union said in a statement. “Hundreds of thousands of jobs are dependent on or connected to global trade,” the ILWU added. “Constricted trade between the world’s two largest economies could lead to devastating job losses for workers employed in the global supply chain.” Imports to drop in Oakland and NWSA Further up the West Coast, the Port of Oakland likewise anticipates a drop in vessel calls and import volumes over the next two months. “In recent weeks, vessel service reductions have increased,” a port spokesperson said. “Between April and June, 39 blank sailings have been announced across multiple shipping alliances calling Oakland. These reductions tighten available vessel capacity for both imports and exports.” The Northwest Seaport Alliance (NWSA) of Seattle and Tacoma does not have formal projections on volumes, a port spokesperson said. But while import volumes to date this year have been strong, that appears to be changing. “We are seeing some vessels coming in with less cargo than anticipated, and we are hearing from exporters and importers directly on cancelled orders, especially with China,” the spokesperson said. “These impacts are real and will likely be reflected in our data in the coming months.” China accounts for 51% of NWSA imports and 40% of the port complex’s total trade, the spokesperson noted. Vancouver unaffected The Port of Vancouver does not anticipate a drop in import volumes due to the US tariffs on imports from China, said Rosanna Lau, manager of trade development at the Vancouver-Fraser Port Authority. “Our forecasts for the coming weeks indicate that container volumes at the Port of Vancouver will remain consistent with seasonal norms,” Lau said. “It is worth noting that the overwhelming majority of container traffic moving through the port is Canadian trade and not directly affected by US tariffs.” The Port of Prince Rupert said 17 blank sailings are scheduled across May and June; that is five more blanks than the same period last year, a port spokesperson said. Contact Bill Mongelluzzo at bill.mongelluzzo@spglobal.com

Container Shipping News

Port News

North American ports

Marine terminals

Maritime

Uneasy West Coast ports watch as first signs of trade war with China emerge

<div class="phx-topic abstract-wrapper">The country’s trade commission originally fined 11 foreign carriers and 12 domestic lines following a three-year investigation that showed the lines fixed rates 120 times over a 15-year period on South Korea-Southeast Asia services.</div>

The country’s trade commission originally fined 11 foreign carriers and 12 domestic lines following a three-year investigation that showed the lines fixed rates 120 times over a 15-year period on South Korea-Southeast Asia services.

<div class="phx-topic">South Korea's Supreme Court has backed the country's Fair Trade Commission in imposing hefty fines against 23 ocean carriers, including Evergreen Marine and Cosco Shipping, in a long-running anti-trust case over rate fixing on routes between South Korea and Southeast Asia. The fines totaled about $81 million when they were imposed in 2022, although currency fluctuations have reduced the dollar equivalent to $67 million. In a nine-page ruling, the five-member Supreme Court unanimously quashed rulings by Seoul’s high court to allow appeals by Evergreen and at least five other carriers that overturned the FTC’s fines against them. Evergreen and the other carriers, including HMM and Korea Marine Transport Company (KMTC), had appealed individually to the Seoul court. KMTC received the highest fine, equivalent to $21 million now. The Supreme Court judges said the Seoul court’s “judgment misunderstood the legal theory regarding the scope of application of the old Fair Trade Act" used by the FTC to penalize the carriers. That, in turn, affected the outcome of the judgment, the Supreme Court judges said. The case has now been sent back to Seoul high court for a new hearing and decision, a move that is likely to support the FTC’s decision to fine the carriers. The FTC originally fined the 11 foreign carriers and 12 domestic lines following a three-year investigation that showed container lines operating South Korea-Southeast Asia services fixed rates 120 times over a 15-year period between December 2003 and December 2018. While price collusion was not illegal under the previous Fair Trade Act, it could only be carried out in discussion with shippers and with the details reported to South Korea’s Oceans and Fisheries Ministry within 30 days. As carriers did not abide by those two rules, the FTC said the price fixing was “illegal.” Aside from Evergreen, the other foreign lines involved include OOCL, Taiwan carriers Yang Ming and Wan Hai, Maersk subsidiary Sealand Asia, and CNC, part of CMA CGM group. Contact Keith Wallis at <a href="mailto:keithwallis@hotmail.com">keithwallis@hotmail.com.</a></div>

South Korea's Supreme Court has backed the country's Fair Trade Commission in imposing hefty fines against 23 ocean carriers, including Evergreen Marine and Cosco Shipping, in a long-running anti-trust case over rate fixing on routes between South Korea and Southeast Asia. The fines totaled about $81 million when they were imposed in 2022, although currency fluctuations have reduced the dollar equivalent to $67 million. In a nine-page ruling, the five-member Supreme Court unanimously quashed rulings by Seoul’s high court to allow appeals by Evergreen and at least five other carriers that overturned the FTC’s fines against them. Evergreen and the other carriers, including HMM and Korea Marine Transport Company (KMTC), had appealed individually to the Seoul court. KMTC received the highest fine, equivalent to $21 million now. The Supreme Court judges said the Seoul court’s “judgment misunderstood the legal theory regarding the scope of application of the old Fair Trade Act" used by the FTC to penalize the carriers. That, in turn, affected the outcome of the judgment, the Supreme Court judges said. The case has now been sent back to Seoul high court for a new hearing and decision, a move that is likely to support the FTC’s decision to fine the carriers. The FTC originally fined the 11 foreign carriers and 12 domestic lines following a three-year investigation that showed container lines operating South Korea-Southeast Asia services fixed rates 120 times over a 15-year period between December 2003 and December 2018. While price collusion was not illegal under the previous Fair Trade Act, it could only be carried out in discussion with shippers and with the details reported to South Korea’s Oceans and Fisheries Ministry within 30 days. As carriers did not abide by those two rules, the FTC said the price fixing was “illegal.” Aside from Evergreen, the other foreign lines involved include OOCL, Taiwan carriers Yang Ming and Wan Hai, Maersk subsidiary Sealand Asia, and CNC, part of CMA CGM group. Contact Keith Wallis at keithwallis@hotmail.com.

South Korea's highest court orders new hearing in carrier rate-fixing saga

<div class="phx-topic abstract-wrapper">A range of factors including full yards, labor unrest and carrier network changes are making it difficult for the hubs to clear container bottlenecks.</div>

A range of factors including full yards, labor unrest and carrier network changes are making it difficult for the hubs to clear container bottlenecks.

<div class="phx-topic">North Europe’s largest port gateways are continuing to struggle with persistent congestion that has delayed vessels and hampered container operations at the hubs for months. Full container yards, labor unrest, staff shortages and changing carrier alliance networks are among the challenges being piled on top of a steady inbound volume from Asia. “This is systemic by nature and will resurface on a regular basis,” Scan Global Logistics said in a market update this week. The Denmark-based forwarder also noted that the launch of the Gemini Cooperation between Hapag-Lloyd and Maersk “complicates efforts to sustain operational efficiency while the new rotations are phased in.” Kuehne + Nagel’s SeaExplorer visibility platform warned that “heavily disrupted operations” were being experienced at Antwerp, Rotterdam, Hamburg and London Gateway. A national strike in Belgium on April 29, the fourth strike in the country within the past few months, shut down the Port of Antwerp for the day as workers from the private and public sectors protested recent budget cuts made by the federal government. There were 19 vessels waiting to depart from Antwerp on Thursday and 20 waiting to enter the port. SeaExplorer noted that already congested yards there have seen a seven-day average vessel waiting time of around 2.19 days; Scan Global put the seven-day waiting time in Antwerp as high as seven days. <h3>Low-water advisory hampers inland shipping </h3>Labor shortages at Rotterdam because of national holidays is impacting container operations at the port, according to SeaExplorer, with vessels waiting for more than a day to berth. Intermodal operator Contargo told customers in an advisory Wednesday that average waiting times for the handling of barges were 71 hours in Rotterdam and 101 hours in Antwerp. A low-water advisory is also in place on the Rhine River, limiting the volume that can be carried by barges on Europe’s largest inland waterway connecting the industrial heartland of southern Germany to Rotterdam and Antwerp. Container delivery restrictions were imposed by Hamburg’s main terminal operator HHLA in April to tackle yard congestion. Vessel waiting times at Hamburg are currently up to five days, according to Scan Global. On top of ships being delayed in Hamburg, rail shipments are taking up to 10 hours to process and disrupting all terminals in the port. Intermodal logistics operator Metrans said trains to the German ports of Bremerhaven and Wilhelmshaven were experiencing long delays due to unplanned line closures around Hannover following a landslide in the area. Detour routes were up to 200 kilometers long and battling with overcapacity that was stopping trains and blocking traffic to and from Rotterdam and the inland rail hub of Duisburg. The disrupted train circulation was also having a major impact on service to and from Hamburg. In France, the Port of Le Havre is struggling to catch up with container backlogs following several strikes held in April, while the UK ports of Felixstowe and Southampton are also experiencing lengthy vessel delays. Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com">greg.knowler@spglobal.com</a>. </div>

North Europe’s largest port gateways are continuing to struggle with persistent congestion that has delayed vessels and hampered container operations at the hubs for months. Full container yards, labor unrest, staff shortages and changing carrier alliance networks are among the challenges being piled on top of a steady inbound volume from Asia. “This is systemic by nature and will resurface on a regular basis,” Scan Global Logistics said in a market update this week. The Denmark-based forwarder also noted that the launch of the Gemini Cooperation between Hapag-Lloyd and Maersk “complicates efforts to sustain operational efficiency while the new rotations are phased in.” Kuehne + Nagel’s SeaExplorer visibility platform warned that “heavily disrupted operations” were being experienced at Antwerp, Rotterdam, Hamburg and London Gateway. A national strike in Belgium on April 29, the fourth strike in the country within the past few months, shut down the Port of Antwerp for the day as workers from the private and public sectors protested recent budget cuts made by the federal government. There were 19 vessels waiting to depart from Antwerp on Thursday and 20 waiting to enter the port. SeaExplorer noted that already congested yards there have seen a seven-day average vessel waiting time of around 2.19 days; Scan Global put the seven-day waiting time in Antwerp as high as seven days. Low-water advisory hampers inland shipping Labor shortages at Rotterdam because of national holidays is impacting container operations at the port, according to SeaExplorer, with vessels waiting for more than a day to berth. Intermodal operator Contargo told customers in an advisory Wednesday that average waiting times for the handling of barges were 71 hours in Rotterdam and 101 hours in Antwerp. A low-water advisory is also in place on the Rhine River, limiting the volume that can be carried by barges on Europe’s largest inland waterway connecting the industrial heartland of southern Germany to Rotterdam and Antwerp. Container delivery restrictions were imposed by Hamburg’s main terminal operator HHLA in April to tackle yard congestion. Vessel waiting times at Hamburg are currently up to five days, according to Scan Global. On top of ships being delayed in Hamburg, rail shipments are taking up to 10 hours to process and disrupting all terminals in the port. Intermodal logistics operator Metrans said trains to the German ports of Bremerhaven and Wilhelmshaven were experiencing long delays due to unplanned line closures around Hannover following a landslide in the area. Detour routes were up to 200 kilometers long and battling with overcapacity that was stopping trains and blocking traffic to and from Rotterdam and the inland rail hub of Duisburg. The disrupted train circulation was also having a major impact on service to and from Hamburg. In France, the Port of Le Havre is struggling to catch up with container backlogs following several strikes held in April, while the UK ports of Felixstowe and Southampton are also experiencing lengthy vessel delays. Contact Greg Knowler at greg.knowler@spglobal.com .

Trans-Atlantic

Asia-Europe

International ports

No end to the congestion choking gateway ports in North Europe

<div class="phx-topic abstract-wrapper">Lineage will acquire four existing warehouses in the US from Tyson and develop two other next-generation facilities where the food conglomerate will be the anchor tenant.</div>

Lineage will acquire four existing warehouses in the US from Tyson and develop two other next-generation facilities where the food conglomerate will be the anchor tenant.

<div class="phx-topic">Cold chain storage company Lineage will invest $1 billion in US warehousing “over the coming years” in a partnership with Tyson Foods. The multi-faceted deal, announced by Lineage on Wednesday, includes the acquisition of four existing warehouses from Tyson for $247 million and the development of two fully automated warehouses, with Tyson as an anchor tenant, at a cost of $740 million. The four existing warehouses, which offer about a combined 49 million cubic feet of storage space and 160,000 pallet positions, are in Pennsylvania, Kansas, Illinois and Arizona. Lineage will also be bringing on 1,000 Tyson employees as part of the acquisition. Under the deal, expected to close in the second quarter, Lineage and Tyson will also enter a multi-year agreement under which Lineage will design, build and operate two new fully automated cold storage warehouses for Tyson. The two warehouses will add more than 80 million cubic feet and almost 260,000 pallet positions to the Lineage network, which currently consists of 84.1 million square feet across 480 facilities in North America, Europe and Asia-Pacific. “This expansion signals what we see as the next evolution of cold chain operations and reflects the growing demand for smarter, more responsive supply chain networks,” Lineage CEO Greg Lehmkuhl said in a statement. “We’re creating more than cold storage infrastructure — we’re setting the foundation for agile, intelligent supply chains built for resilience and precision.” In Lineage’s first-quarter financials posted Wednesday, the company recorded a 2.7% year-over-year decline in revenue and a 7% decrease in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). Since Lineage’s <a href="https://www.joc.com/article/tpm25-lineage-using-big-2024-ipo-to-launch-companys-next-moves-5956592">initial public offering last July</a>, the stock’s value has fallen 42% to $46.76 per share Contact Laura Robb at <a href="mailto:Laura.Robb@spglobal.com">laura.robb@spglobal.com</a>.  </div>

Cold chain storage company Lineage will invest $1 billion in US warehousing “over the coming years” in a partnership with Tyson Foods. The multi-faceted deal, announced by Lineage on Wednesday, includes the acquisition of four existing warehouses from Tyson for $247 million and the development of two fully automated warehouses, with Tyson as an anchor tenant, at a cost of $740 million. The four existing warehouses, which offer about a combined 49 million cubic feet of storage space and 160,000 pallet positions, are in Pennsylvania, Kansas, Illinois and Arizona. Lineage will also be bringing on 1,000 Tyson employees as part of the acquisition. Under the deal, expected to close in the second quarter, Lineage and Tyson will also enter a multi-year agreement under which Lineage will design, build and operate two new fully automated cold storage warehouses for Tyson. The two warehouses will add more than 80 million cubic feet and almost 260,000 pallet positions to the Lineage network, which currently consists of 84.1 million square feet across 480 facilities in North America, Europe and Asia-Pacific. “This expansion signals what we see as the next evolution of cold chain operations and reflects the growing demand for smarter, more responsive supply chain networks,” Lineage CEO Greg Lehmkuhl said in a statement. “We’re creating more than cold storage infrastructure — we’re setting the foundation for agile, intelligent supply chains built for resilience and precision.” In Lineage’s first-quarter financials posted Wednesday, the company recorded a 2.7% year-over-year decline in revenue and a 7% decrease in adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). Since Lineage’s initial public offering last July , the stock’s value has fallen 42% to $46.76 per share Contact Laura Robb at laura.robb@spglobal.com . 

Surface

Last Mile News

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Cold chain warehouse major Lineage to invest $1 billion in Tyson storage deal

<div class="phx-topic abstract-wrapper">With demand expectations faltering, carriers have either jettisoned or substantially lowered the increases they were planning to implement beginning May 1, forwarder sources tell the Journal of Commerce.</div>

With demand expectations faltering, carriers have either jettisoned or substantially lowered the increases they were planning to implement beginning May 1, forwarder sources tell the Journal of Commerce.

<div class="phx-topic">The India-US East Coast (USEC) market continues to remain bumpy for container carriers to drive any sort of material rate gains, industry sources say. Major carriers on the trade lane last month announced a series of rate hike plans through May, ranging from $1,000 to $2,500 per container, seemingly to take advantage of a potential upturn in shipper bookings linked to a 90-day tariff reprieve in place for Indian exports to the US. But with those demand expectations faltering, carriers have now either jettisoned or substantially lowered the increases they were planning to implement beginning May 1, forwarder sources told the Journal of Commerce. “As of now, volumes are low and spot space on most May sailings, despite a few upcoming blankings, is open,” said a sales executive at a Mumbai-based forwarding house who did not want to be identified. “There’s a sense of nervousness among carriers about their pricing ability.” A second round of general rate increases (GRIs) or peak season surcharges (PSSs) around the middle of May has also been put on the back burner in most cases, forwarder sources confirmed. “We have fully waived the May 11 GRI [$1,500 per container] to the US East/Gulf coasts and North America West Coast,” Hapag-Lloyd (India) said in an email sent to customers that was seen by the Journal of Commerce. Additionally, Maersk is understood to have canceled a $1,250-per-container PSS it was to begin charging from May 5 on loads from West India to the US and Canada. Sources put spot quotes from Maersk at $2,129 per TEU and $2,419 per FEU for early-May sailings, arguably the lowest level among the lead India-USEC operators. “Maersk has become unusually aggressive in spot pricing to fill its enhanced West India-North America capacity, forcing others to readjust rates,” a second forwarder said. Platts, a sister company of the Journal of Commerce within S&amp;P Global, pegged India-US East Coast spot rates at $2,733 per FEU as of April 30. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="56199e2b-5df4-468f-a149-b18ae7c32e51"></dynamic-object></div>Maersk is also said to be using a new contract strategy of offering rates on a quarterly basis, generally with penalty clauses, as it aims to rebuild India-US market share lost to competitors over the last few years. Other major carriers have been somewhat tentative about pushing contract deals with customers due to the volatile market environment, sources say. “It’s likely that carrier rate plans will get pushed back again, until June 1, as a more moderate increase than what they have attempted now,” a non-vessel-operating common carrier source said. On the capacity front, CMA CGM has two West India void calls this month on its Indamex service, schedule data indicates. The carrier is also reportedly considering discontinuing an existing Indamex stop at Sri Lanka’s Colombo Port due to volume pressures. Contact Bency Mathew at <a href="mailto:bencyvmathew@gmail.com">bencyvmathew@gmail.com</a>.</div>

The India-US East Coast (USEC) market continues to remain bumpy for container carriers to drive any sort of material rate gains, industry sources say. Major carriers on the trade lane last month announced a series of rate hike plans through May, ranging from $1,000 to $2,500 per container, seemingly to take advantage of a potential upturn in shipper bookings linked to a 90-day tariff reprieve in place for Indian exports to the US. But with those demand expectations faltering, carriers have now either jettisoned or substantially lowered the increases they were planning to implement beginning May 1, forwarder sources told the Journal of Commerce. “As of now, volumes are low and spot space on most May sailings, despite a few upcoming blankings, is open,” said a sales executive at a Mumbai-based forwarding house who did not want to be identified. “There’s a sense of nervousness among carriers about their pricing ability.” A second round of general rate increases (GRIs) or peak season surcharges (PSSs) around the middle of May has also been put on the back burner in most cases, forwarder sources confirmed. “We have fully waived the May 11 GRI [$1,500 per container] to the US East/Gulf coasts and North America West Coast,” Hapag-Lloyd (India) said in an email sent to customers that was seen by the Journal of Commerce. Additionally, Maersk is understood to have canceled a $1,250-per-container PSS it was to begin charging from May 5 on loads from West India to the US and Canada. Sources put spot quotes from Maersk at $2,129 per TEU and $2,419 per FEU for early-May sailings, arguably the lowest level among the lead India-USEC operators. “Maersk has become unusually aggressive in spot pricing to fill its enhanced West India-North America capacity, forcing others to readjust rates,” a second forwarder said. Platts, a sister company of the Journal of Commerce within S&P Global, pegged India-US East Coast spot rates at $2,733 per FEU as of April 30. Maersk is also said to be using a new contract strategy of offering rates on a quarterly basis, generally with penalty clauses, as it aims to rebuild India-US market share lost to competitors over the last few years. Other major carriers have been somewhat tentative about pushing contract deals with customers due to the volatile market environment, sources say. “It’s likely that carrier rate plans will get pushed back again, until June 1, as a more moderate increase than what they have attempted now,” a non-vessel-operating common carrier source said. On the capacity front, CMA CGM has two West India void calls this month on its Indamex service, schedule data indicates. The carrier is also reportedly considering discontinuing an existing Indamex stop at Sri Lanka’s Colombo Port due to volume pressures. Contact Bency Mathew at bencyvmathew@gmail.com .

India-US liners pull early-May rate hikes as capacity stays ahead of demand

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

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Shippers save money, time with automated transportation bidding tools

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

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