<div class="phx-topic abstract-wrapper">Higher-than-usual fuel prices and tit-for-tat tariffs have exacerbated the chaos on the eastbound trans-Pacific this peak season, but the problem started earlier this year, and there is one causal factor as the source of the problem. </div>

Higher-than-usual fuel prices and tit-for-tat tariffs have exacerbated the chaos on the eastbound trans-Pacific this peak season, but the problem started earlier this year, and there is one causal factor as the source of the problem.

<div><div><img></div>Higher than usual fuel prices and tit-for-tat tariffs have exacerbated the chaos on the eastbound trans-Pacific this peak season, but the problem started earlier this year, and there is one causal factor as the source of the problem. (Above: A container ship approaches the Port of Los Angeles.) Photo credit: Shutterstock.com.This isn’t working. Higher-than-usual fuel prices and tit-for-tat tariffs have exacerbated the chaos on the eastbound trans-Pacific this peak season, but the real blame falls at the feet of the container shipping industry.Capacity is so scarce <a>on the eastbound trans-Pacific</a> that US importers from Asia, both large and small, have...

Higher than usual fuel prices and tit-for-tat tariffs have exacerbated the chaos on the eastbound trans-Pacific this peak season, but the problem started earlier this year, and there is one causal factor as the source of the problem. (Above: A container ship approaches the Port of Los Angeles.) Photo credit: Shutterstock.com. This isn’t working. Higher-than-usual fuel prices and tit-for-tat tariffs have exacerbated the chaos on the eastbound trans-Pacific this peak season, but the real blame falls at the feet of the container shipping industry. Capacity is so scarce on the eastbound trans-Pacific that US importers from Asia, both large and small, have to pay in some cases $400 to $600 above already higher-than-usual rates to get space on ships. Thousands of containers are being rolled, as ocean carriers prioritize higher paying spot cargo — more than $2,000 per FEU to the US West Coast and $3,000 to the East Coast — in favor of lower-priced contracted cargo. And some shippers complain that their minimum quantity commitments, or MQCs, aren’t being honored. Things aren’t much better on the landside. Trans-Pacific reliability is hitting as low as 35 percent and, coupled with rail delays and chassis accessibility issues, it’s virtually impossible for beneficial cargo owners (BCOs) and trucking companies to plan their pickup and delivery schedules with any degree of accuracy. This is the price the industry pays for its inability to reach a level of stability where container lines can make enough money from rates to cover their operating costs, much less turn a profit. In return, BCOs would theoretically receive the level of service they need to ensure their store shelves are stocked and manufacturing inputs delivered so they don’t have to carry unneeded inventory. Peak-season woes were sown in the spring The seeds of peak-season woes were sown in the spring when carriers entered the contracting season with hopes for meaningful price increases in annual service contracts. Instead, they left negotiating tables with contracts running from May 2018 through April 2019 generally in the range of $1,100 to $1,200 per FEU to the West Coast and $2,100 to $2,200 per FEU to the East Coast, a $100 decrease on both routes compared with how contracts ended the year prior. Then bunker prices started to climb in April, with the August 2018 average price per metric ton of IFO 380 up 19 percent from April, 44 percent higher than in August 2017. The rise in fuel prices caught carriers unaware, with some working to recoup additional costs not captured through the bunker fuel adjustment via emergency fuel surcharges. With their largest operating cost up even higher, a reluctance to pay even more to speed up ships, and concerns about a tariff impact, carriers reworked their trans-Pacific networks, resulting in a reduction of capacity to the West Coast by close to 7 percent and 1.6 percent to the East Coast. At the same time, US importers concerned about the next round of potential tariffs began rushing their peak-season shipments earlier only to meet the reality of having fewer slots available. Carriers’ sympathy of their plight goes so far. Carriers’ frustration with how contracting ended lingered, and they are still eating higher bunker fuel prices, which, coupled with lower than usual rates, pulled several carriers to a loss in the second quarter. Those losses sting even more after the container shipping industry was showing signs of a recovery, having made a profit ($7 billion) in 2017, for the first time in six years. Carriers — now managing capacity ‘in a disruptive way’? “Current capacity and demand are being manipulated by carriers to force price increases they were unable to get commercially,” said Mark Laufer, president and CEO of Laufer Group International. “Given the likely downturn in economic activity from [the fourth quarter] due to the negative effects of tariffs, it is hard to see how rates will be sustainable over the long run.” Laufer added that amid the threat of an economic slowdown, the only option for carriers is to manage capacity “in a disruptive way to achieve any kind of compensatory rates,” and that holds particularly true as they face higher trucking and bunker fuel costs. “Sometimes no space means no space,” said Allen Clifford, executive vice president of Mediterranean Shipping Co. Although some shipments are shut out of some voyages at Asian ports, this is not by intention. “We take no pleasure in turning away any client’s cargo. We are in the service business, and we are here to serve our partners,” Clifford said. Amid these glaring signs of industry dysfunction, there is a creeping realization that shippers will have to pay more beyond just higher bunker adjustment factors. Encouragingly, there are real signs in the market of carriers delivering better service for higher prices and of shippers and carriers agreeing to enforceable contracts. In the inaugural sailing of its expedited trans-Pacific service guaranteeing chassis availability, APL said 70 percent of the local cargo discharged at the Eagle Marine Service terminal in Los Angeles was available for pickup within four hours of unloading and the rest of the cargo was available by day-end. The chaos endured by US importers this peak season will also encourage more of them to check out the New York Shipping Exchange (NYSHEX) to guarantee that their cargo will ship for the sailing they booked — with the carrier facing a penalty if it fails to do so. Conversely, shippers face a fine if they fail to deliver the cargo they booked via the platform. To meet that demand, Maersk Line for the first time is offering slots on NYSHEX for eastbound trans-Pacific sailings. These are small but positive steps. Contact Mark Szakonyi at mark.szakonyi@ihsmarkit.com and follow him on Twitter: @szakonyi_joc . ** RELATED STORIES/ANALYSIS: Minor trans-Pacific capacity relief arrives amid peak season Peak-season scramble for US-Asia slots intensifies

Container lines

Container shipping dysfunction delivers US peak season chaos

<div class="phx-topic abstract-wrapper">Market participants yearning for a market where adverse events never lead to major supply chain hiccups are essentially asking for a reality that has never existed, writes Lars Jensen.</div>

Market participants yearning for a market where adverse events never lead to major supply chain hiccups are essentially asking for a reality that has never existed, writes Lars Jensen.

Feature image

<div class="phx-topic">It could be said that global shipping dodged a bullet with the brief, three-day strike on the US East and Gulf coasts. However, it should be noted that the operational ripple effects will be felt until mid-November, <a href="https://www.joc.com/article/despite-tentative-wage-deal-usmx-and-ila-have-bumpy-road-ahead-on-other-key-issues-5743997">and the possibility of a new strike on Jan. 15</a>could create a market impact from mid-November until the end of the year. And it also raises questions as to whether we should be concerned about the resilience of the supply chain linking the US to the rest of the world. <div class="wrapper-narrow float-right-element"><img src="/images/phoenix/5745031_0.1.jpg"></img></div>First, the ripple effects from the short strike. Around 60 vessels had to drop anchor and await a port reopening during the strike. Those vessels will suffer a delay of at least three days. More vessels will suffer delays as the ports are unable to handle the backlog instantaneously. Consequently, those vessels will arrive back at origin in Europe, Asia and Latin America with a delay – in turn causing a drop in export capacity in those regions with a time delay equal to the usual transit time for cargo coming from the US. The shortest impact will be in Europe and the northern reaches of Latin America where this will be felt within the next two weeks, and the time delay will be longest to Asia where the effect will not be felt until mid-November. The next issue would be a possible strike in mid-January. Chinese New Year is on Jan. 29. Usual seasonality would see significant volumes loaded from China to the US from the end of December and during January. If shippers are concerned about a new strike, we might expect to see a shift of some cargo away from the East Coast and over to the West Coast during this seasonal peak, as well as potentially an earlier shipment of cargo than usual. This could place some pressure on the trans-Pacific trade from early December, and on Asia-USWC during January especially. This issue can be avoided, of course, if the International Longshoremen’s Association (ILA) and United States Maritime Alliance (USMX) reach final agreement on a new master contract within the next month and a half. <h3>What does a resilient supply chain mean? </h3>But the broader question then arises: Is the supply chain to and from the US sufficiently resilient? Not only did we have to manage the pandemic ripple effects, but 2024 alone have had its own share of issues with the Red Sea crisis, a strong early peak season causing a surge in spot rates, <a href="https://www.joc.com/article/canadas-labour-minister-orders-end-to-rail-work-stoppage-via-binding-arbitration-5709672">the last-minute cancellation of a rail strike in Canada</a> and now the three-day strike at US East and Gulf coast ports. If by resilience we mean that the supply chain always has ample capacity no matter which problems arise, then the supply chain is not 100% resilient. And it would be unrealistic to expect this to ever be the case. A practical example being the Red Sea crisis. Global supply chain stakeholders were lucky that the crisis erupted at a point in time when the carriers had created a substantial overcapacity of vessels. This allowed for vessels to divert around southern Africa without major issues. But had the carriers not over-ordered on vessels, 2024 would have looked very different as it would have been physically impossible to handle the full global trade volumes while having to divert around Africa. How about resilience in the face of potential strike actions? We have seen this issue multiple times in the past as well. We had the go-slow actions on the US West Coast in 2015 that led to an unprecedented pileup of vessels outside Los Angeles and Long Beach – only later superseded by the pandemic problems. We had the 10-day closure of West Coast ports in 2002. Strike action in different countries around the world is basically part of the normal way the market operates. This year has also seen port strikes in various places in Europe, as well as Australia. If resilience means never having to risk a bottleneck due to labor action, that has clearly never been the case – and highly likely never will be the case. Market participants yearning for a market where adverse events never lead to major supply chain hiccups are essentially asking for a reality that has never existed. <h3>‘Disruptive events’ loom </h3>It is clear that carriers over-ordered vessels based on their profits in 2021-22, leading to significant overcapacity in 2023-24 that caused freight rates to drop to loss-making levels for carriers in late 2023. This was a clear illustration that there is not a willingness to pay for having resilience in the form of having excess capacity in case of a major disruption. In turn, this means that when such capacity is needed, it is expensive to tap into. The baseline expectation for the market in the future should be that the major swings we have seen since 2020 are not necessarily unusual events. We might very well be looking at a future where we will see more of these large swings between overcapacity and loss-making carriers interspersed with capacity crunches and very high freight rates whenever the market is hit by external disruptive events. But will we get such disruptive events? The list of potential events is, unfortunately, quite extensive and includes: a spread of the Middle East crisis to the Strait of Hormuz, challenges with China in the South China Sea and Taiwan Strait, a rapidly escalating trade war if a new Trump administration places triple-digit tariffs on multiple countries, natural disasters destroying vital container terminals, and highly destructive cyberattacks. And this is before the “black swan” events which are completely unexpected, such as the sudden de facto closure of the southern Red Sea and Suez Canal. Contact Lars Jensen at lars.jensen@vespucci-maritime.com.  </div>

It could be said that global shipping dodged a bullet with the brief, three-day strike on the US East and Gulf coasts. However, it should be noted that the operational ripple effects will be felt until mid-November, and the possibility of a new strike on Jan. 15 could create a market impact from mid-November until the end of the year. And it also raises questions as to whether we should be concerned about the resilience of the supply chain linking the US to the rest of the world. First, the ripple effects from the short strike. Around 60 vessels had to drop anchor and await a port reopening during the strike. Those vessels will suffer a delay of at least three days. More vessels will suffer delays as the ports are unable to handle the backlog instantaneously. Consequently, those vessels will arrive back at origin in Europe, Asia and Latin America with a delay – in turn causing a drop in export capacity in those regions with a time delay equal to the usual transit time for cargo coming from the US. The shortest impact will be in Europe and the northern reaches of Latin America where this will be felt within the next two weeks, and the time delay will be longest to Asia where the effect will not be felt until mid-November. The next issue would be a possible strike in mid-January. Chinese New Year is on Jan. 29. Usual seasonality would see significant volumes loaded from China to the US from the end of December and during January. If shippers are concerned about a new strike, we might expect to see a shift of some cargo away from the East Coast and over to the West Coast during this seasonal peak, as well as potentially an earlier shipment of cargo than usual. This could place some pressure on the trans-Pacific trade from early December, and on Asia-USWC during January especially. This issue can be avoided, of course, if the International Longshoremen’s Association (ILA) and United States Maritime Alliance (USMX) reach final agreement on a new master contract within the next month and a half. What does a resilient supply chain mean? But the broader question then arises: Is the supply chain to and from the US sufficiently resilient? Not only did we have to manage the pandemic ripple effects, but 2024 alone have had its own share of issues with the Red Sea crisis, a strong early peak season causing a surge in spot rates, the last-minute cancellation of a rail strike in Canada and now the three-day strike at US East and Gulf coast ports. If by resilience we mean that the supply chain always has ample capacity no matter which problems arise, then the supply chain is not 100% resilient. And it would be unrealistic to expect this to ever be the case. A practical example being the Red Sea crisis. Global supply chain stakeholders were lucky that the crisis erupted at a point in time when the carriers had created a substantial overcapacity of vessels. This allowed for vessels to divert around southern Africa without major issues. But had the carriers not over-ordered on vessels, 2024 would have looked very different as it would have been physically impossible to handle the full global trade volumes while having to divert around Africa. How about resilience in the face of potential strike actions? We have seen this issue multiple times in the past as well. We had the go-slow actions on the US West Coast in 2015 that led to an unprecedented pileup of vessels outside Los Angeles and Long Beach – only later superseded by the pandemic problems. We had the 10-day closure of West Coast ports in 2002. Strike action in different countries around the world is basically part of the normal way the market operates. This year has also seen port strikes in various places in Europe, as well as Australia. If resilience means never having to risk a bottleneck due to labor action, that has clearly never been the case – and highly likely never will be the case. Market participants yearning for a market where adverse events never lead to major supply chain hiccups are essentially asking for a reality that has never existed. ‘Disruptive events’ loom It is clear that carriers over-ordered vessels based on their profits in 2021-22, leading to significant overcapacity in 2023-24 that caused freight rates to drop to loss-making levels for carriers in late 2023. This was a clear illustration that there is not a willingness to pay for having resilience in the form of having excess capacity in case of a major disruption. In turn, this means that when such capacity is needed, it is expensive to tap into. The baseline expectation for the market in the future should be that the major swings we have seen since 2020 are not necessarily unusual events. We might very well be looking at a future where we will see more of these large swings between overcapacity and loss-making carriers interspersed with capacity crunches and very high freight rates whenever the market is hit by external disruptive events. But will we get such disruptive events? The list of potential events is, unfortunately, quite extensive and includes: a spread of the Middle East crisis to the Strait of Hormuz, challenges with China in the South China Sea and Taiwan Strait, a rapidly escalating trade war if a new Trump administration places triple-digit tariffs on multiple countries, natural disasters destroying vital container terminals, and highly destructive cyberattacks. And this is before the “black swan” events which are completely unexpected, such as the sudden de facto closure of the southern Red Sea and Suez Canal. Contact Lars Jensen at lars.jensen@vespucci-maritime.com. 

Supply chain

Maritime

Strike bullet dodged for now, but raises questions of market resilience: analyst

<div class="phx-topic abstract-wrapper">With the 62% wage increase being an unprecedented offer to the union, the USMX will be hard-pressed to give in on other key demands the ILA is making, sources tell the Journal of Commerce. </div>

With the 62% wage increase being an unprecedented offer to the union, the USMX will be hard-pressed to give in on other key demands the ILA is making, sources tell the Journal of Commerce.

<div class="phx-topic">The 90-day clock has started for the International Longshoremen’s Association (ILA) and US East and Gulf coast longshore employers, who haven’t been at the contract negotiating table since June, to restart the talks and hash out details on a range of complex issues including automation, royalties, work rules and job jurisdiction. Salary increases — <a href="https://www.joc.com/article/ila-usmx-agree-on-new-wage-offer-and-contract-extension-that-reopens-ports-5741882">as were agreed to in a tentative deal to end the three-day strike last week</a> — seem pedestrian compared with the scale of challenge facing both sides. The deal on wages that ended the strike was merely “provisional,” according to one management source, just one element of those several others that still need to be negotiated between now and the new deadline of Jan. 15. Yet several factors suggest agreement on those points in upcoming negotiations, which are expected to resume within weeks, will be difficult to achieve, according to sources. The issues are detailed and complex. Still, the United States Maritime Alliance (USMX) and the ILA have not sat down face to face since the union suspended negotiations last June, despite over 10 failed attempts by the USMX to restart negotiations. The union’s lack of response <a href="https://www.joc.com/article/usmx-tries-to-force-ila-back-to-contract-talks-with-nlrb-complaint-5736646">led the USMX on Sept. 26 to file an unfair labor practices case with the National Labor Relations Board</a> seeking to force the union back to the table. The inability of the USMX to get formal negotiations restarted continued throughout the intensive two-week stretch leading up to the strike and over the course of the three-day work stoppage, where what was described as multiple efforts by employers to discuss the wage issue directly with the union, rather than through Biden administration intermediaries, never resulted in face-to-face dialogue with the union. With the 62% wage increase being an unprecedented offer to the union, the USMX will be hard-pressed to give in on other key demands the ILA is making, sources say, especially as the offer merely reinforces the longstanding disconnect in the view of ocean carriers between high US port costs primarily driven by longshore labor and low productivity. That is why, sources say, the USMX will do its best to resist the union’s demand for a rolling back of employers’ automation rights as enshrined in prior contracts. The ILA is seeking <a href="http://go.microsoft.com/fwlink/p/?LinkId=255141">“absolute, airtight language</a> that there be no automation or semi-automation,” according to ILA President Harold Daggett, a longtime vocal opponent of automation. If that language is agreed to in a final contract, it would disallow future implementation of semi-automation installed at ports in Virginia and at Global Container Terminal in Bayonne, NJ. <h3>Preserving growth opportunities </h3>The reason why the USMX will resist that demand is to preserve growth opportunities in the US market. Carriers want to be able to grow, but with hardly any new terminals being built — the Hugh K. Leatherman facility that opened in Charleston in 2021 was the first new US terminal opened since 2009 – a key means of facilitating container TEU growth is by densifying terminals, and the only way to do that is through automation. That is not to say that every port aspires to automate – most do not given the cost – but carriers do not want to forestall the possibility because if they give in now, they may never get back the right to automate at a later date. “It is critical that terminals have the capability to densify as American consumer demand and exports continue to rise,” the USMX confidentially told the Biden administration last week, according to documents shared with the Journal of Commerce. “There is not enough land or berth capacity in US ports to handle future trade growth without implementing new technology.” Finally, the USMX appears in no mood to concede on key points such as automation after what was described as a demoralizing experience over the last week, when they were prevented at every turn from returning to direct bargaining with the union — a practice that was standard procedure for decades in negotiating prior contracts — and ultimately saw their unified position on wages and the need to negotiate in person disintegrate on Thursday on orders from some carrier headquarters. <h3>Pressure from the White House </h3>The USMX board members — both carriers and marine terminal operators — displayed unity in holding firm on their approximately 50% wage increase offer despite intense pressure during multiple virtual and in-person meetings with the Biden administration over the past two weeks. They were then overruled on Oct. 3 by carrier head offices following a group CEO-only virtual meeting held early in the early morning hours of Oct. 3 EST, according to one source. That White House pressure manifested itself in what management sources said was a two-week, gradually intensifying campaign by Biden administration officials, including Transportation Secretary Pete Buttigieg, Acting Labor Secretary Julie Su and White House Chief of Staff Jeff Zients. What started as what executives described as a polite phone call from Su to the USMX a few weeks before the strike led to a series of more senior-level meetings with industry officials and ultimately to a group CEO-only conference call, after which the tentative deal was swiftly concluded. It included USMX senior staff and board members being summoned to Washington on short notice as well as separate conference calls with US-based carrier CEOs and marine terminal operator CEOs. Throughout the series of meetings, according to sources, Biden administration officials consistently voiced the same or similar messages as that of the union: basically, that because carriers earned record profits during the pandemic, it is their duty pay up to avoid further disruption at the ports. Ever-present, officials said, was the upcoming presidential election and what appeared to be a determination by the administration to avoid a politically damaging distraction in the final weeks of the campaign, which is what they feared from a protracted strike. Now, USMX will have to regroup, as negotiations with the union will likely resume in the coming weeks after what had been a cordial, even cooperative working relationship that led to several contracts and labor peace since 1977 shattered over the course of the last several months, culminating in the strike last week. Contact Peter Tirschwell at <a href="mailto:peter.tirschwell@spglobal.com">peter.tirschwell@spglobal.com</a>. </div>

The 90-day clock has started for the International Longshoremen’s Association (ILA) and US East and Gulf coast longshore employers, who haven’t been at the contract negotiating table since June, to restart the talks and hash out details on a range of complex issues including automation, royalties, work rules and job jurisdiction. Salary increases — as were agreed to in a tentative deal to end the three-day strike last week — seem pedestrian compared with the scale of challenge facing both sides. The deal on wages that ended the strike was merely “provisional,” according to one management source, just one element of those several others that still need to be negotiated between now and the new deadline of Jan. 15. Yet several factors suggest agreement on those points in upcoming negotiations, which are expected to resume within weeks, will be difficult to achieve, according to sources. The issues are detailed and complex. Still, the United States Maritime Alliance (USMX) and the ILA have not sat down face to face since the union suspended negotiations last June, despite over 10 failed attempts by the USMX to restart negotiations. The union’s lack of response led the USMX on Sept. 26 to file an unfair labor practices case with the National Labor Relations Board seeking to force the union back to the table. The inability of the USMX to get formal negotiations restarted continued throughout the intensive two-week stretch leading up to the strike and over the course of the three-day work stoppage, where what was described as multiple efforts by employers to discuss the wage issue directly with the union, rather than through Biden administration intermediaries, never resulted in face-to-face dialogue with the union. With the 62% wage increase being an unprecedented offer to the union, the USMX will be hard-pressed to give in on other key demands the ILA is making, sources say, especially as the offer merely reinforces the longstanding disconnect in the view of ocean carriers between high US port costs primarily driven by longshore labor and low productivity. That is why, sources say, the USMX will do its best to resist the union’s demand for a rolling back of employers’ automation rights as enshrined in prior contracts. The ILA is seeking “absolute, airtight language that there be no automation or semi-automation,” according to ILA President Harold Daggett, a longtime vocal opponent of automation. If that language is agreed to in a final contract, it would disallow future implementation of semi-automation installed at ports in Virginia and at Global Container Terminal in Bayonne, NJ. Preserving growth opportunities The reason why the USMX will resist that demand is to preserve growth opportunities in the US market. Carriers want to be able to grow, but with hardly any new terminals being built — the Hugh K. Leatherman facility that opened in Charleston in 2021 was the first new US terminal opened since 2009 – a key means of facilitating container TEU growth is by densifying terminals, and the only way to do that is through automation. That is not to say that every port aspires to automate – most do not given the cost – but carriers do not want to forestall the possibility because if they give in now, they may never get back the right to automate at a later date. “It is critical that terminals have the capability to densify as American consumer demand and exports continue to rise,” the USMX confidentially told the Biden administration last week, according to documents shared with the Journal of Commerce. “There is not enough land or berth capacity in US ports to handle future trade growth without implementing new technology.” Finally, the USMX appears in no mood to concede on key points such as automation after what was described as a demoralizing experience over the last week, when they were prevented at every turn from returning to direct bargaining with the union — a practice that was standard procedure for decades in negotiating prior contracts — and ultimately saw their unified position on wages and the need to negotiate in person disintegrate on Thursday on orders from some carrier headquarters. Pressure from the White House The USMX board members — both carriers and marine terminal operators — displayed unity in holding firm on their approximately 50% wage increase offer despite intense pressure during multiple virtual and in-person meetings with the Biden administration over the past two weeks. They were then overruled on Oct. 3 by carrier head offices following a group CEO-only virtual meeting held early in the early morning hours of Oct. 3 EST, according to one source. That White House pressure manifested itself in what management sources said was a two-week, gradually intensifying campaign by Biden administration officials, including Transportation Secretary Pete Buttigieg, Acting Labor Secretary Julie Su and White House Chief of Staff Jeff Zients. What started as what executives described as a polite phone call from Su to the USMX a few weeks before the strike led to a series of more senior-level meetings with industry officials and ultimately to a group CEO-only conference call, after which the tentative deal was swiftly concluded. It included USMX senior staff and board members being summoned to Washington on short notice as well as separate conference calls with US-based carrier CEOs and marine terminal operator CEOs. Throughout the series of meetings, according to sources, Biden administration officials consistently voiced the same or similar messages as that of the union: basically, that because carriers earned record profits during the pandemic, it is their duty pay up to avoid further disruption at the ports. Ever-present, officials said, was the upcoming presidential election and what appeared to be a determination by the administration to avoid a politically damaging distraction in the final weeks of the campaign, which is what they feared from a protracted strike. Now, USMX will have to regroup, as negotiations with the union will likely resume in the coming weeks after what had been a cordial, even cooperative working relationship that led to several contracts and labor peace since 1977 shattered over the course of the last several months, culminating in the strike last week. Contact Peter Tirschwell at peter.tirschwell@spglobal.com .

Container Shipping News

Port News

North American ports

Marine terminals

Longshore labor

Despite tentative wage deal, USMX and ILA have bumpy road ahead on other key issues

<div class="phx-topic abstract-wrapper">Strong demand on the trans-Pacific and Asia-Europe trade lanes through a volatile third quarter has left the Chinese carrier on course for another highly profitable year.</div>

Strong demand on the trans-Pacific and Asia-Europe trade lanes through a volatile third quarter has left the Chinese carrier on course for another highly profitable year.

<div class="phx-topic">Cosco Shipping expects to report a net profit of $6.17 billion for the first nine months of 2024, a 67% increase year over year, with its performance lifted by strong third-quarter peak season demand on the trans-Pacific and Asia-Europe trade lanes, the China state-owned carrier said Monday. In a preliminary filing to the Hong Kong and Shanghai exchanges, Cosco revealed its earnings before interest and taxes (EBIT) for the nine-month period is expected to increase 63% year over year to almost $8 billion. The estimated earnings were released as Cosco Shipping subsidiary OOCL reported its third-quarter operational update in which a 73% increase in revenue and elevated freight rates drove up the top line result despite a moderate 3.6% rise in volumes. Profit and loss figures were not provided. OOCL reported overall third-quarter revenue of $3 billion and volume of 1.9 million TEUs as average revenue per TEU increased 67.6% year over year. The trans-Pacific dominated OOCL’s Q3 result, with revenue of $1.2 billion — double the same period last year — and volume on the trade lane up 15.6% at 551,896 TEUs. Asia-Europe revenue also doubled in the third quarter despite volume falling 12% to 347,135 TEUs as shippers moved cargo early to mitigate Red Sea-related delays. OOCL’s largest trade lane by volume — intra-Asia combined with Asia-Australasia — reported a 5.3% drop in Q3 volume at 922,219 TEUs, although revenue was up 48% at $880 million. Trans-Atlantic volume was down 5.5% at 111,591 TEUs with revenue falling 10.4% to $144 million. The nine-month performance kept OOCL firmly on course for another strong annual result, with total revenue up 23.4% at $7.3 billion. January to September volume rose 2.6% to 5.6 million TEUs and the average revenue per TEU was up 20.3% compared with the same period last year. The trans-Pacific and intra-Asia/Australasia trades did the heavy lifting in the nine-month period. OOCL’s trans-Pacific volume rose 8.3% to 1.5 million TEUs and revenue increased 51% to $2.9 billion, while intra-Asia/Australasia volume of 2.7 million TEUs was up 7.7% and revenue increased 9.2% to $2.1 billion. OOCL’s Asia-Europe volume through September dropped 12.4% to just over 1 million TEUs with revenue rising 36.4% to $1.8 billion, while trans-Atlantic volume fell 4% to 359,784 TEUs and revenue slumped 36% to $452 million. Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com. ">greg.knowler@spglobal.com.</a></div>

Cosco Shipping expects to report a net profit of $6.17 billion for the first nine months of 2024, a 67% increase year over year, with its performance lifted by strong third-quarter peak season demand on the trans-Pacific and Asia-Europe trade lanes, the China state-owned carrier said Monday. In a preliminary filing to the Hong Kong and Shanghai exchanges, Cosco revealed its earnings before interest and taxes (EBIT) for the nine-month period is expected to increase 63% year over year to almost $8 billion. The estimated earnings were released as Cosco Shipping subsidiary OOCL reported its third-quarter operational update in which a 73% increase in revenue and elevated freight rates drove up the top line result despite a moderate 3.6% rise in volumes. Profit and loss figures were not provided. OOCL reported overall third-quarter revenue of $3 billion and volume of 1.9 million TEUs as average revenue per TEU increased 67.6% year over year. The trans-Pacific dominated OOCL’s Q3 result, with revenue of $1.2 billion — double the same period last year — and volume on the trade lane up 15.6% at 551,896 TEUs. Asia-Europe revenue also doubled in the third quarter despite volume falling 12% to 347,135 TEUs as shippers moved cargo early to mitigate Red Sea-related delays. OOCL’s largest trade lane by volume — intra-Asia combined with Asia-Australasia — reported a 5.3% drop in Q3 volume at 922,219 TEUs, although revenue was up 48% at $880 million. Trans-Atlantic volume was down 5.5% at 111,591 TEUs with revenue falling 10.4% to $144 million. The nine-month performance kept OOCL firmly on course for another strong annual result, with total revenue up 23.4% at $7.3 billion. January to September volume rose 2.6% to 5.6 million TEUs and the average revenue per TEU was up 20.3% compared with the same period last year. The trans-Pacific and intra-Asia/Australasia trades did the heavy lifting in the nine-month period. OOCL’s trans-Pacific volume rose 8.3% to 1.5 million TEUs and revenue increased 51% to $2.9 billion, while intra-Asia/Australasia volume of 2.7 million TEUs was up 7.7% and revenue increased 9.2% to $2.1 billion. OOCL’s Asia-Europe volume through September dropped 12.4% to just over 1 million TEUs with revenue rising 36.4% to $1.8 billion, while trans-Atlantic volume fell 4% to 359,784 TEUs and revenue slumped 36% to $452 million. Contact Greg Knowler at greg.knowler@spglobal.com.

Peak season surge drives up Cosco’s estimated nine-month earnings

<div class="phx-topic abstract-wrapper">Shippers on the trans-Atlantic will find space in short supply by the end of October with bottlenecks on both ends of the trade lane reducing capacity.</div>

Shippers on the trans-Atlantic will find space in short supply by the end of October with bottlenecks on both ends of the trade lane reducing capacity.

<div class="phx-topic">Ship delays resulting from the three-day strike at ports along the US East and Gulf coasts last week will come on top of port congestion across several European hubs, significantly reducing the available trans-Atlantic capacity this month. Sea-Intelligence Maritime Analysis noted that capacity from Mediterranean and North European routes was already heading for a 10% to 14% reduction by the end of October, but additional post-strike delays in clearing waiting ships would dramatically increase the capacity cuts. “We can see that North European shippers should prepare for a capacity reduction of up to 14% in week 44,” the analyst noted in its Sunday Spotlight newsletter. “If clearing the USEC congestion adds another four days, this could potentially reach a temporary capacity reduction of up to 30%.” The three-day strike will reduce Mediterranean-US East Coast capacity by 10% in week 43 starting Oct. 21, with a full-week effect from worsening congestion resulting in a short-term 24% reduction in capacity, Sea-Intelligence noted. Maritime employers and the International Longshoremen’s Association (ILA) <a href="https://www.joc.com/article/ila-usmx-agree-on-new-wage-offer-and-contract-extension-that-reopens-ports-5741882">reached a tentative deal</a> to reopen container terminals at East and Gulf coast ports on Oct. 3 following a strike that began at midnight Oct. 1. Ports up and down the US East and Gulf coasts <a href="https://www.joc.com/article/us-east-gulf-coast-ports-confident-of-smooth-post-strike-reopening-5742607">expect a generally smooth resumption of cargo flows</a>, noting that they have spare capacity and expect minimal disruptions in processing a <a href="https://www.joc.com/article/ships-backing-up-outside-of-strike-shut-us-east-gulf-ports-5741090">backlog of more than 60 ships</a>. Reduced volumes through the ports due to frontloading and diversions ahead of the strike threat — and the relatively short duration of the stoppage — will make the return to pre-disruption fluidity a matter of days, rather than weeks. <h3>Domino effect </h3>But the domino effect on the trans-Atlantic trade lane will be exacerbated by port congestion in North Europe. Kuehne + Nagel’s digital ocean shipping platform SeaExplorer indicates “heavily disrupted operations” at Hamburg. “The yard utilization is at 112% with back-to-back vessel arrivals until mid-October,” a SeaExplorer advisory noted, with rail waiting times at Container Terminal Burchardkai (CTB), Hamburg’s largest terminal, nearly 14 hours. Operations at Southampton in the UK are also classed as “heavily disrupted” by the K+N platform as high import volumes are creating bottlenecks in clearing containers, with disruption also reported at London Gateway. Several ports in the Mediterranean are experiencing “slightly disrupted operations,” including Barcelona and transshipment hub Algeciras. The inland transport of containers in Europe is also being affected by severe flooding that last month impacted transportation networks and container terminal depots in central Europe. Seasonal low water levels on the Rhine River are also affecting container movement. Inland barge operator Contargo last week reported handling delays of 73 hours at Rotterdam and 33 hours at Antwerp. Rate levels on the trans-Atlantic took off last week, with North Europe to the US East Coast prices rising $600 to $2,700 per FEU, up 157% year over year, according to Platts, a sister company of the Journal of Commerce within S&amp;P Global. Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com">greg.knowler@spglobal.com</a>. </div>

Ship delays resulting from the three-day strike at ports along the US East and Gulf coasts last week will come on top of port congestion across several European hubs, significantly reducing the available trans-Atlantic capacity this month. Sea-Intelligence Maritime Analysis noted that capacity from Mediterranean and North European routes was already heading for a 10% to 14% reduction by the end of October, but additional post-strike delays in clearing waiting ships would dramatically increase the capacity cuts. “We can see that North European shippers should prepare for a capacity reduction of up to 14% in week 44,” the analyst noted in its Sunday Spotlight newsletter. “If clearing the USEC congestion adds another four days, this could potentially reach a temporary capacity reduction of up to 30%.” The three-day strike will reduce Mediterranean-US East Coast capacity by 10% in week 43 starting Oct. 21, with a full-week effect from worsening congestion resulting in a short-term 24% reduction in capacity, Sea-Intelligence noted. Maritime employers and the International Longshoremen’s Association (ILA) reached a tentative deal to reopen container terminals at East and Gulf coast ports on Oct. 3 following a strike that began at midnight Oct. 1. Ports up and down the US East and Gulf coasts expect a generally smooth resumption of cargo flows , noting that they have spare capacity and expect minimal disruptions in processing a backlog of more than 60 ships . Reduced volumes through the ports due to frontloading and diversions ahead of the strike threat — and the relatively short duration of the stoppage — will make the return to pre-disruption fluidity a matter of days, rather than weeks. Domino effect But the domino effect on the trans-Atlantic trade lane will be exacerbated by port congestion in North Europe. Kuehne + Nagel’s digital ocean shipping platform SeaExplorer indicates “heavily disrupted operations” at Hamburg. “The yard utilization is at 112% with back-to-back vessel arrivals until mid-October,” a SeaExplorer advisory noted, with rail waiting times at Container Terminal Burchardkai (CTB), Hamburg’s largest terminal, nearly 14 hours. Operations at Southampton in the UK are also classed as “heavily disrupted” by the K+N platform as high import volumes are creating bottlenecks in clearing containers, with disruption also reported at London Gateway. Several ports in the Mediterranean are experiencing “slightly disrupted operations,” including Barcelona and transshipment hub Algeciras. The inland transport of containers in Europe is also being affected by severe flooding that last month impacted transportation networks and container terminal depots in central Europe. Seasonal low water levels on the Rhine River are also affecting container movement. Inland barge operator Contargo last week reported handling delays of 73 hours at Rotterdam and 33 hours at Antwerp. Rate levels on the trans-Atlantic took off last week, with North Europe to the US East Coast prices rising $600 to $2,700 per FEU, up 157% year over year, according to Platts, a sister company of the Journal of Commerce within S&P Global. Contact Greg Knowler at greg.knowler@spglobal.com .

Trans-Atlantic

US port strike, Europe congestion heralds trans-Atlantic capacity crunch

<div class="phx-topic abstract-wrapper">Figuring out why growth in intermodal volumes between Mexico and the US is significantly lagging that of trucking demand will be crucial to unlocking one of intermodal’s biggest growth opportunities, writes Journal of Commerce analyst Larry Gross.</div>

Figuring out why growth in intermodal volumes between Mexico and the US is significantly lagging that of trucking demand will be crucial to unlocking one of intermodal’s biggest growth opportunities, writes Journal of Commerce analyst Larry Gross.

<div class="phx-topic">Tracking intermodal rail volumes in the major North American geographies, one thing that catches the eye is the relatively poor performance of intermodal in the US-Mexico cross border market. <div class="wrapper-narrow float-right-element"><img src="/images/phoenix/5743859_0.1.jpg"></img></div>Cross-border steel-wheel revenue moves fell 8.5% year over year in the first eight months of 2024 and have run behind 2023 levels every month so far in 2024 except for April, according to data from the Intermodal Association of North America’s (IANA’s) European Technical Standard Order (ETSO) database. This seems at odds with news coverage speaking of a “boom” in the volume of freight crossing the border, driven by near-shoring and “tariff washing” of Chinese goods moving to the US via Mexico. What does the data say? <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="0c651159-75ec-4432-8bdb-1de275383c98"></dynamic-object></div>According to the US Bureau of Transportation Statistics (BTS), the number of “loaded truck containers” — a data set that includes dry vans, refrigerated trucks, flatbeds, etc., both straight trucks and semis — entering the US from Mexico grew 93% year over year in the first half, a clear signal that the market is indeed booming. But again, this compares with an 8.5% decline in cross-border intermodal volumes, which begs the question: why is there such a large disparity in demand for trucking and intermodal? One theory is that there is a reporting issue in the IANA numbers. It is possible that volume is being trucked across the border and then put on the rails to travel farther inland. But if that were the case, revenue moves out of the US South Central region would be rising quickly, and they aren’t. In fact, year-to-date through August, outbound South Central revenue moves have ticked up 1.2%, a substandard performance compared with the 2.9% year-over-year gain in total domestic volumes for the same period. It could be an issue of capacity — i.e., a lack of containers being made available in Mexico to load — due to the heavy imbalance between northbound and southbound traffic. Or it could be a lack of demand in a market where the current intermodal value proposition of service consistency, speed and savings versus truck is simply missing the target. Either way, answering this question will be important for railroads and intermodal providers, as the cross-border market represents one of the major growth opportunities currently available to intermodal. Contact Larry Gross at <a href="mailto:lgross@intermodalindepth.com">lgross@intermodalindepth.com</a>. </div>

Tracking intermodal rail volumes in the major North American geographies, one thing that catches the eye is the relatively poor performance of intermodal in the US-Mexico cross border market. Cross-border steel-wheel revenue moves fell 8.5% year over year in the first eight months of 2024 and have run behind 2023 levels every month so far in 2024 except for April, according to data from the Intermodal Association of North America’s (IANA’s) European Technical Standard Order (ETSO) database. This seems at odds with news coverage speaking of a “boom” in the volume of freight crossing the border, driven by near-shoring and “tariff washing” of Chinese goods moving to the US via Mexico. What does the data say? According to the US Bureau of Transportation Statistics (BTS), the number of “loaded truck containers” — a data set that includes dry vans, refrigerated trucks, flatbeds, etc., both straight trucks and semis — entering the US from Mexico grew 93% year over year in the first half, a clear signal that the market is indeed booming. But again, this compares with an 8.5% decline in cross-border intermodal volumes, which begs the question: why is there such a large disparity in demand for trucking and intermodal? One theory is that there is a reporting issue in the IANA numbers. It is possible that volume is being trucked across the border and then put on the rails to travel farther inland. But if that were the case, revenue moves out of the US South Central region would be rising quickly, and they aren’t. In fact, year-to-date through August, outbound South Central revenue moves have ticked up 1.2%, a substandard performance compared with the 2.9% year-over-year gain in total domestic volumes for the same period. It could be an issue of capacity — i.e., a lack of containers being made available in Mexico to load — due to the heavy imbalance between northbound and southbound traffic. Or it could be a lack of demand in a market where the current intermodal value proposition of service consistency, speed and savings versus truck is simply missing the target. Either way, answering this question will be important for railroads and intermodal providers, as the cross-border market represents one of the major growth opportunities currently available to intermodal. Contact Larry Gross at lgross@intermodalindepth.com .

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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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