Freight Forward: Finding Alternative Solutions

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 express and parcel last-mile queries.

“This is the biggest challenge to freedom of the seas in decades. This is a very serious situation, and we want to make sure that everybody — the people who are asking questions but also the people who aren’t sure where to ask questions — has a forum where we can deal with those things in a public context.” - FMC Chairman Daniel Maffei

• Indeed, The US Federal Maritime Commission (FMC) will hold a public hearing on Feb. 7 to explain why it allowed ocean carriers to immediately implement surcharges meant to offset rising costs linked to ship diversions amid the deteriorating security situation in the Red Sea writes Teri Errico Griffis.
• Maersk plans to eliminate Panama Canal vessel transits on a north-south service between Oceania and the US East Coast, citing the ongoing drought that has reduced ship transits and container carrying capacity through the waterway. Instead, Maersk’s OC1 service will instead use a 50-mile rail service across the Isthmus of Panama to handle cargo between the Atlantic and Pacific writes Michael Angell.
• Long-term deals will not be offered “until the Red Sea situation settles,” a spokesperson for Hapag-Lloyd told the Journal of Commerce, citing a lack of clarity on how long diversions will be required, the unknown effect on equipment availability and the impact ships arriving out of windows will have on port utilization writes Greg Knowler.

• There is currently a combined total of 152 methanol-capable container ships in operation and on the order book, most of which will only be delivered over the next two years, while 71 LNG-powered vessels are in operation and 201 are on order, according to a DNV report. The “green” vessels will join a bloated order book that shipping association BIMCO estimates will reach 30 million TEUs in capacity for the first time by the end of the year, writes Greg Knowler.

Technology

• Zim Integrated Shipping Services signed a deal with technology provider Hoopo Systems. The agreement will see Hoopo deploy its hoopoSense Solar devices on the carrier’s more than 500,000 containers, writes Eric Johnson. Zim joins Hapag-Lloyd and Ocean Network Express (ONE) in committing to deploy sensor hardware across its entire fleet of dry boxes.

Air

Air freight rates out of Asia are expected to surge in the coming weeks as European shippers seek an alternative to avoid growing ocean equipment shortages and schedule disruptions brought on by the Red Sea shipping crisis, forwarders say, writes Greg Knowler. “The window for bookings ahead of Chinese New Year is closing, and over the next couple of weeks, airlines have told us to expect air cargo rates to increase out of China,” Thomas Elmelund, director of air freight at DSV, told the Journal of Commerce.?

M&A

In the midst of global supply chain risks, customs brokerage, freight forwarding, and trade compliance provider, Alba Wheels Up acquired John A. Steer Co., a provider of customs brokerage and logistics services across end markets such as food, beverage and chemicals and other highly regulated, multi-government agency-oriented verticals.

Inland

Intermodal

• According to a Journal of Commerce survey of shippers and intermodal marketing companies (IMCs), BNSF Railway, CSX Transportation, and J. B. Hunt Transport Services were the top-performing domestic intermodal providers in the second half of 2023, writes Ari Ashe. (The Journal of Commerce Intermodal Service Scorecard is conducted biannually and is open to domestic intermodal shippers and IMCs. Survey results are available to Gold-Tier subscribers and survey respondents.)

• In this story, Ari Ashe writes about cross-border reliability as a topic of concern in intermodal contract talks. UP and J. B. Hunt are telling shippers that border closures such as what occurred the last couple of months are not likely to reoccur because of the US government’s sensitivity to the business impact of such a move. Still, they are promoting trucking workarounds that are available should it happen again. BNSF, J. B. Hunt, and Union Pacific are also lowering rates, hoping prices can make shippers overlook potentially unreliable transit times.? ?

Trucking

• The US Labor Department released a final rule that takes effect March 11 and revises the guidelines used to determine whether workers are classified as independent contractors or employees. The rulemaking could lead to a costly rethinking of how trucking and drayage companies use contractors, including many independent drayage drivers, writes Bill Cassidy.

Annual Review & Outlook

(The following stories are from the Journal of Commerce’s Annual Review and Outlook issue published on Jan. 1, 2024)

• Destocking freeing up US warehousing space, but costs remain elevated – Bill Cassidy - Warehousing is more widely available across the US, thanks primarily to inventory destocking and the completion of multiple major construction projects. But with vacancy rates still below pre-pandemic averages, capacity will likely remain tight enough to keep pressure on rents and leases in 2024.
• Northeast US ports forecast return to growth after down 2023 - Michael Angell -Ports in the US Northeast expect containerized cargo volumes to follow historical growth patterns as consumer spending on imported goods returns to normal seasonal trends. The Port Authority of New York and New Jersey (PANYNJ) is adding capacity in anticipation of a resumption of growth at approximately the same rate seen prior to the COVID-19 pandemic. Other US East Coast ports are also working on capacity increases expected to come online during the next decade.
• Still-swollen US truckload capacity tamping down rate hikes - Bill Cassidy - The US truckload sector enters 2024 oversupplied, with truck capacity still abundant despite months of attrition among smaller trucking companies and soft freight demand. With the market still replete with carriers and trucks — both new and used — shippers can expect to keep pricing power in their hands for most of 2024.
• Minimal capacity growth to keep MPV/HL rates above pre-pandemic levels - Susan Oatway - Multipurpose rates will continue to fall in the first quarter of 2024 as excess capacity in the bulk and container sectors gives breakbulk shippers more options, ultimately easing capacity in the roll-on/roll-off (ro/ro) sector and limiting demand for multipurpose and heavy-lift (MPV/HL) vessels. However, long-term demand growth, a lack of new tonnage and supply chain bottlenecks will keep MPV/HL pricing above pre-pandemic levels for the foreseeable future.
• International intermodal volumes to rebound slightly in 2024 - Ari Ashe -International containerized freight moving through North America by rail demand is expected to rebound in 2024, albeit only slightly. But growth could accelerate, however, if external events such as longshore contract negotiations on the East and Gulf coasts or further restrictions on vessels transiting the Panama Canal prompt a significant shift in import volumes to the West Coast.

That’s it for now. Please be sure to hit the subscribe button to receive the latest updates. For readers interested in reading more Journal of Commerce stories, click here to subscribe. Enter code FFNL20 at checkout to receive a 20% discount on any subscription option. (Note that this is only for first time subscribers or upgrading a current subscription). 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