Freight Forward: Diversifying and Preparing

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.

Containerized imports were up 5.9% from September and up 12.4% from October 2022 as the peak shipping season in the eastbound trans-Pacific. Imports from Asia last month totaled 1.57 million TEUs, the highest yet for the year, according to PIERS, a sister product of the Journal of Commerce within S&P Global. Still, year-to-date imports were down 16.6% compared with the first ten months of 2022 due to softer import volumes for much of the year as inflation and high-interest rates muted consumer spending. Last month’s imports from Asia were up 1.1% from pre-COVID October 2019, writes Bill Mongelluzzo.

A declining spread between ocean freight rates from China to the US West and East coasts reflects the return of import volumes to West Coast ports, as well as the switch in US import sourcing that favors ocean services from Southeast Asia through the Suez Canal, market experts say writes Greg Knowler.

The Georgia Ports Authority (GPA) is investing $262 million to expand the Port of Brunswick into a larger gateway for roll-on/roll-off (ro/ro) cargo as carrier Wallenius Wilhelmsen deepens its own investment in the Southeast market with an auto-processing facility at the port’s Colonel Island Terminal writes Teri Errico Griffis.

Earnings

• CMA CGM group revenue for the third quarter was down 42.6% at $11.4 billion, and earnings before EBITDA were down 78.2% at just below $2 billion, writes Greg Knowler. Inventory drawdowns and inflation pressure are weighing down performance across the transport and logistics sector as it returns to pre-pandemic market conditions, Rodolphe Saadé, chairman and CEO of CMA CGM Group, said in an earnings statement.
• Zim Integrated Shipping Services (ZIM) reported a Q3 net loss of $2.2 billion compared with net profits of $1.1 billion in the third quarter of 2022, writes Greg Knowler. Zim CEO Eli Glickman told the Journal of Commerce the carrier was expecting 2024 to be a year dominated by low demand, high vessel supply, and low freight rates, but “we will reach profitability in 2025, and that will be a turning point for the company.”
• Taiwan's Big 3 container lines, Evergreen, Yang Ming, and Wan Hai, saw net profits and revenues plunge in the first nine months of 2023 compared with the same period last year amid the sharp slump in freight rates and cargo demand, writes Keith Wallis. “A significant gap between supply and demand growth rates will remain in 2024, presenting an operational challenge that international shipping companies will need to address as the issue of supply-demand imbalance persists,” Yang Ming said in a statement announcing its quarterly results.?

International

• The US International Development Finance Corporation (DFC) announced $553 million in funding for the Colombo West International Terminal (CWIT) in Sri Lanka, a 35-year concession contract Indian port leader Adani Group set up in early 2021. While there is no official word, the capital provided by DFC is said to have been secured in return for a 30% equity offer in CWIT, to be contributed by the original partners. “This is the first time that the US government, through one of its agencies, is funding an Adani project,” Adani Ports and Special Economic Zone (APSEZ) noted. Bency Mathew writes that the US seems to be rallying behind Indian companies taking the lead to counterbalance China’s maritime influence in the Indo-Pacific region.
• Hamburg reported a 2.4% year-over-year increase in container throughput in the third quarter as Europe’s third-largest container port handled just over 2 million TEUs in the period, writes Greg Knowler. “With a view to the north range ports, we shall be the only one showing a positive result for container handling in the third quarter,” Port of Hamburg Marketing CEO Axel Mattern said. “This shows that we are able to increase our market share.”

Chart of the Week

Panama Canal

• Carriers and shippers may not see relief to the Panama Canal’s low-water crisis until the end of this decade when new facilities, including reservoirs and water supply pipelines, could be constructed and brought into operation, writes Keith Wallis. Development of the new infrastructure, estimated to cost about $2 billion, is hampered because it falls outside the Panama Canal Authority’s existing land area, so approval of the Panamanian government is needed to either expand that area or scrap the land restrictions on new facilities.
• With delays on the Panama Canal already standing at ten days for vessels that have not pre-booked a transit, there are growing concerns over the impact that drought-linked restrictions will have on the trade in perishable products from the West Coast of South America to the US East Coast and continental Europe writes Richard Bright who cites spot banana business out of Ecuador and the specialized reefer-centric Chilean grape season as especially vulnerable.

Technology

CMA CGM Group and ex-Google CEO Eric Schmidt are developing a lab for “open research in artificial intelligence” based in Paris, writes Eric Johnson. The lab, called Kyutai, is co-founded by the CMA CGM Group, Schmidt’s investment arm called Schmidt Ventures, and Xavier Niel, head of the French telecom provider iliad Group. “Kyutai will be operated as a non-profit with an objective to tackle the main challenges of modern AI, particularly by developing large multimodal models and by inventing new algorithms to enhance their capacities, reliability, and efficiency,” CMA CGM said in a statement.

Inland

Intermodal

• J. B. Hunt Transport Services is dropping Canadian Pacific Kansas City (CPKC) as its partner on Mexican intermodal business destined for the US Midwest and West Coast in favor of Mexican railroad Ferromex, saying the move will cut transit times to Chicago by a day, writes Ari Ashe. Beginning Jan. 1, Ferromex trains will carry J. B. Hunt cross-border loads to Eagle Pass, TX, where they’ll interchange onto BNSF Railway for onward service to the Midwest and West Coast.
• Intermodal shippers in the US saved almost 26% under annual contracts in the third quarter, according to the latest Journal of Commerce Intermodal Savings Index (ISI), down from savings of more than 29% in Q3 2022. In the spot market, an average shipper saved about 16.7% using intermodal in the third quarter. Rates for intermodal rail and trucking rose in the third quarter because of diesel fuel costs. The core pricing in both modes was largely unchanged in the quarter, but the average price of a gallon of diesel went from $3.80 in July to a peak of $4.56 in September, causing an increase in fuel surcharges, writes Ari Ashe.

Trucking

• Data from the Federal Motor Carrier Safety Administration (FMCSA) shows the number of active US motor carrier operating authorities dropped by 16,521 from last December through September, a 4.5% decline. However, with more than 352,300 operating authorities still active, the number of available motor carriers is still higher than at the end of 2021, the last boom year for trucking, despite ongoing attrition, writes Bill Cassidy. “We’re way above where we used to be before the pandemic,” Mazen Danaf, senior economist at Uber Freight, said in an interview. “Will we lose all of them? No.?
• US less-than-truckload (LTL) carriers are publishing general rate increases (GRIs) for 2024. But after a peaky start, writes Bill Cassidy, those GRIs are settling in the mid-single-digit percentage range, a sign that the excitement caused by a surge in pricing after the collapse of LTL provider Yellow is abating. Saia led the LTL pack in October with a 7.5% average GRI effective Dec. 4. FedEx Freight will increase its non-contract LTL rates by 5.9% on average on Jan. 1, although some tariffs will see rates rise 6.9% on average. ArcBest, the parent company of ABF Freight System, said its LTL rates will rise 5.9% on average, and on Monday, Old Dominion Freight Line (ODFL) announced a 4.9% average GRI.

Parcel/Express

In my latest column for Air Cargo Next, I write that despite declining revenue and volume growth for the 12 months ending Sept. 30, the U.S. Postal Service reported progress under its Delivering for America plan announced in 2021. Among the progress was USPS reducing its transportation costs year over year by 1.7% and air transportation costs by 16.3%. USPS has been reducing the use of airfreight due to “inefficiencies of the airline industry for transporting mail long distances to meet our service standards,” according to its strategy plan.? Its highway transportation costs increased by 7.1% for the reporting year.

That’s it for now. 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 and, for US readers, a Happy Thanksgiving!

(Note, credit for top photo - Photo 88421749 | Supply Chain ? Wayback12 | Dreamstime.com)

-Cathy