Freight Forward: Breakbulk in the Spotlight

Welcome to Freight Forward, where each Monday, I’ll recap what happened in supply chains the previous week through JOC.com articles and additional sources and also what to expect for the week ahead.

I’m Cathy Roberson, a supply chain writer and researcher. For this weekly series, I serve as a research analyst for the Journal of Commerce (JOC), for whom I identify trends, provide thoughts and input into stories and assist with parcel last-mile queries.

This week is the Journal of Commerce’s Breakbulk & Project Cargo conference in New Orleans. The theme is A Brave New World, an apt description of the market as it revisits and reconfigures supply chains and long-held assumptions after two years of pandemic-driven economic swings and historic supply chain disruptions, according to the conference chair Janet Nodar.

In this week’s news update, Journal of Commerce Special Correspondent Autumn Cafiero Giusti writes on Port Houston’s decline in breakbulk cargo for the first two months of 2023 after strong shipments in 2022. This year’s breakbulk volumes suggest stabilization from an “anomaly of a year” in 2022, Dominic Sun, director of trade development for Port Houston, told the Journal of Commerce.?Although the 2023 breakbulk volumes are markedly lower than last year, Sun noted they are still much higher than before the spillover market hit. The 2023 year-to-date breakbulk volumes represent an increase of 89% over 2021, 127% from 2020, and 14% from 2019.??

While Port Houston observes year-over-year breakbulk volume declines, labor remains an issue at the Los Angeles-Long Beach port complex. Bill Mongelluzzo writes that members of the International Longshore and Warehouse Union (ILWU) Local 13 have been “red-tagging” cargo-handling equipment at Los Angeles–Long Beach’s three automated terminals, which designates the equipment as unsafe and forces an inspection, five sources who asked not to be identified told the Journal of Commerce. Although the equipment was fine, the time-consuming tactics have forced the terminals to halt operations for a time ranging from an eight-hour work shift to an entire day, the sources said.

• Meanwhile, there is good news at the Halifax port, where employers and unionized longshore workers jointly announced they reached a tentative labor agreement that will carry through the end of 2025, according to Bill Mongelluzzo.

Ocean Carriers

Ocean carriers that expanded container services into the US Gulf Coast in 2022 benefited from shippers diverting their cargo from West Coast ports due to labor concerns, writes Michael Angell. Mediterranean Shipping Co. and Maersk took the No. 1 and No. 2 spots, respectively, of the Journal of Commerce’s Top 10 Gulf Coast import carriers for 2022. MSC’s import volumes into the region grew 17.7%, while Maersk saw 10.4% growth last year, according to data from PIERS, a Journal of Commerce sister product within S&P Global.?

Mediterranean Shipping Co.’s US chief says the ocean carrier is preparing itself for a rebound in US import demand during the second half of 2023 by adding more vessels and other equipment, according to Michael Angell. Likewise, a major US-based forwarder said the return to overseas ordering he is seeing could push ocean freight rates higher.?MSC Executive Vice President Allen Clifford, speaking this week at the Coalition of New England Companies for Trade (CONECT) spring conference in Newport, Rhode Island, said that despite a slow start to 2023, a return to seasonal shipping patterns in August and September could follow a mid-summer lull in import demand.?“I see, as many of my colleagues see, in the second half of the year, there will be an uptick in cargo,” Clifford told the conference. “The uptick in cargo will not equal what it was in 2021 and 2022. Conversely, it’s not going to be what it is right now.”?

Indeed, Michael Angell writes that trans-Pacific container lines implemented a general rate increase (GRI) on April 15. A recent uptick in vessel utilization has raised carrier hopes that they’ll be able to get some traction on this round due to a presumptive return of shipping patterns, with carriers canceling nearly 50 sailings this month. Utilization rates on Asia to US West Coast routing have ticked up in recent weeks to over 85%, outpacing a similar spike seen ahead of the April 15 GRI two years ago, but tracking below the high 80s seen in the same period in 2022, according to maritime analyst Linerlytica.??

Inland Distribution

Trucking

According to the Journal of Commerce’s annual Top 50 US Trucking Companies rankings, prepared by SJ Consulting Group, Bill Cassidy writes that all but nine of the 50 largest trucking providers operating in the US reported double-digit percentage revenue growth in 2022, and 18 saw increases of at least 20%, following similar double-digit topline growth in 2021. Many shippers spent more on contractual transportation last year, even as spot transactional truckload rates fell as much as 30%. Pricing trends in the spot market distort what’s happening in the market at large, said Satish Jindel, president of SJ Consulting.?“People think a drop in spot prices affects the whole industry, and that’s not true,” Jindel said in an interview. Many truckload carriers are limiting their spot-market exposure, he pointed out, and LTL carriers are even more removed from spot shockwaves. Contract rates typically lag changes in spot pricing by six months.

Bill Cassidy also writes that as of March, the number of carriers entering or reentering trucking on a monthly basis is almost as high as the number of fleets, according to Dean Croke, the principal analyst at DAT Freight & Analytics. The number of companies leaving the market hit 12,758 last month, but the number of new entries and returning carriers was 11,851 companies, data from the Federal Motor Carrier Safety Administration (FMCSA) shows. In the first quarter this year, “the rate of decline slowed, bottomed out, and is now starting to turn back up,” Croke said.?Croke’s analysis of FMCSA data helps explain why the exit of so many small carriers has not tightened truckload capacity enough to stop the long slide in spot rates, which have dropped more than 30% from the highs they hit in early 2022.?

Parcels and Last Mile

• According to Amazon CEO’s annual letter to shareowners, Amazon is shifting from a national fulfillment network to a regionalized network model. “We also continue to improve our advanced machine learning algorithms to better predict what customers in various parts of the country will need so that we have the right inventory in the right regions at the right time… Shorter travel distances mean lower costs to serve, less impact on the environment, and customers getting their orders faster,” Amazon CEO Andy Jassy wrote. “We’re excited about seeing more next-day and same-day deliveries, and we’re on track to have our fastest Prime delivery speeds ever in 2023.”
• FedEx Express Pilots and FedEx have been negotiating a contract since 2021. The Airlines Pilots Association International (ALPA) and FedEx have been in mediated talks under the Railway Labor Act (RLA) since October 2022 but have not come to an agreement. As such, last Friday, the pilots’ group announced a strike authorization ballot which will open Tuesday, April 18 – ALPA announcement and FedEx comment.

Economic Outlook

• Monday, April 17 - Home builder confidence index
• Tuesday, April 18 – Building permits and housing starts
• Thursday, April 20 – Existing home sales
• Friday, April 21 – S&P Flash PMI Manufacturing

That’s it for this week. Please be sure to hit the subscribe button to receive the latest updates.

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What did I miss? Have a question? Let me know in the comments. I’ll be checking back throughout the week to answer questions, address comments and share additional insights.

In the meantime, here’s wishing everyone a good freight week ahead!

-Cathy