Freight Forward: Government Eyes the Ocean Shipping and Rail Markets

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.

Before I jump in, the Freight Forward is celebrating its first year anniversary ??.

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It’s looking like there may not be a significant recovery in US retail imports in the second half of 2023.?JOC’s Mark Szakonyi writes that the weakening US housing construction market; slipping retail sales; and still far too much apparel, household appliances, and furniture clogging warehouses, bode poorly for expectations of a significant restocking to take place for back-to-school season and the winter holidays. While US retail inventories are coming down, they are still elevated.

As a result, ocean carriers plan to cancel almost 50 voyages that were scheduled to depart from Chinese ports now through the end of April, amounting to as much as 443,000 TEU in trans-Pacific capacity that will be blanked, according to data from container shipping analysts writes JOC’s Michael Angell.??Those blanked sailings signal that US ports will continue to see weaker year-over-year volumes, at least to the beginning of summer.

The decline in imports is also having an impact on some ports. Marine terminal operators on the US West Coast are canceling at least one work shift per week because of declining cargo volumes that are linked directly to the impasse in contract negotiations between employers, and the?International Longshore and Warehouse Union (ILWU) writes JOC’s Bill Mongelluzzo.?“Almost every terminal is canceling at least one shift per week,” a terminal operator who spoke on the condition of anonymity told the?Journal of Commerce.?However, even though marine?terminals are cutting back on hours due to declining imports, it is exporters, particularly agricultural shippers in the western US, that are hurt more than importers because they are dependent on the ports efficiently handling their low-margin cargo being shipped to markets in Asia. Ag exporters face delays and higher transportation costs due to the reduction in terminal work shifts.

Mediterranean Shipping Co. (MSC) joined a growing list of ocean carriers?that will cease charging container detention and demurrage fees to consignees on days a US marine terminal is closed, writes JOC’s Eric Johnson.?The change in billing policy comes a week after?MSC initially declined to comment?to the?Journal of Commerce?when queried about whether it would follow an early March move by Maersk to stop collecting such fees from April 1.?Last Monday,?HMM made a similar commitment?to stop charging demurrage fees on days when container pickup facilities are shut.?Additionally, liner carrier OOCL confirmed to the?Journal of Commerce?last Wednesday that it has long refrained from billing customers demurrage and detention fees for days in which the customer is unable to pick up or drop off a container.?

Changes in detention and demurrage fees come as the US government potentially introduces changes to the ocean shipping market.

JOC’s Teri Errico Griffis has stayed on top of a number of these changes. For example, Teri writes that a bill that would repeal limited anti-trust immunity for foreign ocean carriers has been introduced in the US House of Representatives, but ?the World Shipping Council (WSC) said that repealing antitrust laws that allow ocean carriers to share space on ships and provide more efficient service to more ports would “undermine competitiveness.”?“Nobody has offered a reason why we should throw away such a useful tool as vessel-sharing arrangements [VSAs], and I think some of the rhetoric comes from a misunderstanding about how VSAs help the supply chain work better,” John Butler, president and CEO of the WSC, said in a statement last Monday.?

Meanwhile, US shipping interests, including the National Milk Producers Federation, the?Agriculture Transportation Coalition,?the National Customs Brokers and Forwarders Association of America,?the Consumer Brands Association, and the National Industrial Transportation League, are supporting a bill introduced in the House of Representatives that seeks to enhance shipping reform enacted just last year while cracking down on China’s influence on the US supply chain according to Teri.?The legislation aims for faster development of uniform data-sharing standards between ports and stakeholders. In addition to authorizing the Department of Transportation to create new?data standards, the bill also aims to bring balance and fairer trade practices to US shipping and hold ocean carriers more accountable for trade flow.?

Teri also writes that the National Shipping Advisory Committee (NSAC)?is targeting rail storage fees and wants the FMC to regulate the penalties using the same standards used for demurrage inside US ports. Its request last Thursday for FMC intervention applies only to rail-assessed demurrage on “through bills of lading,” or carrier haulage, in which the ocean carrier is responsible for the door-to-door transportation of the cargo.?NSAC laid out three possible recommendations for the next steps: asking the US Congress to increase the FMC’s?jurisdiction to include more authority over how rail-related fees are billed, requesting a rule that?railroads can only invoice ocean carriers for storage fees, and asking the US Department of Transportation’s?intervention to direct the US Surface Transportation Board investigate the issue.?

Rail

Trealmont Transport and Kaptan US will develop a new transloading facility on land in Calgary acquired from Canadian National Railway, the latest in recent efforts to transfer more international cargo into domestic containers for the inland flow of goods through Canada and into the US writes JOC’s Ari Ashe. The facility is scheduled to open near the end of 2024 to handle ocean cargo moving through the Western Canadian ports of Vancouver and Prince Rupert. The transload facility would be bi-directional, transferring imports into 53-foot domestic containers and shifting export cargo from 53-foot containers into ocean boxes.??

3PLs

A ranking of top 3PLs by SJ Consulting Group found that 3PLs increased their combined revenue by 13.8% to a record $612 billion for 2022. Only six of the world’s 50 largest 3PLs saw their revenue recede in 2022, and nearly two-thirds of the companies on the list grew their revenue by double-digit percentages, including each of the top five providers — Amazon, Kuehne + Nagel (K+N), DHL, DSV, and DB Schenker. That’s despite global freight demand and spot rates tumbling from their historic highs to end the year at or near pre-pandemic levels.?Some companies, such as Maersk and Uber Freight, grew their topline revenue on the back of acquisitions made in 2021 and 2022, while others, including K+N and Bolloré, did so via significantly improved revenue per shipment, writes Eric Johnson.?

Parcels & Last Mile

• ?Regional small parcel carriers, Lasership and Ontrac, rebranded under the OnTrac name and plan a network expansion to include Austin, Dallas-Fort Worth, Houston, and San Antonio this year. Once the expansion is complete, OnTrac will be able to reach about 80% of the US population, according to an announcement. ?
• FedEx will provide an update to its DRIVE initiative on April 5.?The initiative supports its strategy to utilize its data/digital assets & optimize its network. FedEx expects the program to reduce its costs by more than $4 billion by the fiscal year 2025. A reminder that while FedEx is undergoing this strategy change, it’s still in negotiations (since 2021) with its pilots for a new contract. Stay tuned on all of this I’ll be writing an ACN column and probably a Substack post on FedEx’s updates.

Europe

• The lack of progress in shifting cargo from road to rail in Europe — outlined in a critical report by the European Court of Auditors (ECA) elicited a strong response from the rail freight industry that labeled the EU’s modal shift objectives as not feasible writes JOC’s Greg Knowler. “While we called for a significant increase of the rail freight modal share in May 2020, this modal share is stagnating,” European Parliament’s Transport and Tourism Committee chair Karima Delli said in a statement. “We stress the urgent need to support rail freight across Europe in order to achieve the desired modal share target of 30% by 2030.” The joint declaration noted there has been no increase in the modal share of rail freight which has been stuck at 16.8% since 2020, and called for a new approach. The ECA report said the European Commission did not set quantitative targets for the share of intermodal freight and set unrealistic EU targets for 2030 and 2050 for the increased use of rail and inland waterways for the transport of freight.
• APM Terminals and the Port of Rotterdam announced they are investing over $1 billion to nearly double the handling capacity?of the Maasvlakte II container terminal at the Rotterdam port by?adding more berth and yard space to the fully automated facility, according to Michael.?The project involves developing a new site of approximately 47.5 hectares (116 acres) with 1,000 meters (3,280 feet) of additional berth space. Maasvlakte II currently encompasses about 212 acres and 3,200 feet of berth space. The expansion will increase the terminal's capacity by approximately 2 million TEU from its current capacity of 2.7 million TEU. The new capacity is expected to be operational in the second half of 2026, APM said in the statement.??

Economic Outlook

• Monday, April 3 – S&P final US manufacturing PMI – Little, to no change expected from the previous month. (Flash PMI)
• Monday, April 3 – Construction Spending
• Tuesday, April 4 – Factory Orders
• Friday, April 7 – US Unemployment Report

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