Freight Forward: Rates on the Rise

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.

Ocean

• Growing US import volumes from India, a rising share of inbound containers coming from the country andcoupled with a surge of investment from major big box retailers and manufacturers, suggest India is finally becoming a manufacturing power and sourcing alternative to China writes Mark Szakonyi and Bency Mathew. However, India’s ability to deliver reliably and consistently to containerized supply chains remains a “work in progress” for it to catch up with the speed and efficiency offered by its Southeast Asian counterparts and China.
• The rate reversal seen on the India-US trade lane over the last two months has continued into April writes Bency Mathew. “Ocean rates [for India-US cargo] have dropped between 10% to 15% over the past month, on average,” a Mumbai-based forwarder who asked not to be identified told the Journal of Commerce. “But we don’t expect a sudden rate collapse.”?

• The South Korean government is aiming to spend $4 billion to double the capacity of the national container shipping fleet to 2 million TEUs by 2030. The move would bolster carriers including HMM, Korea Marine Transport Company (KMTC) and Sinokor Merchant Marine writes Keith Wallis. The expansion of the national fleet is part of a South Korean government plan to grow its maritime footprint, including further container terminal development at Busan that would cost approximately $32 billion according to Wallis.
• The southern China ports of Yantian, Nansha and Xiamen will be the winners at the expense of Hong Kong when Gemini Cooperation — the Maersk and Hapag-Lloyd alliance — and THE Alliance restructure their services come next February, an analysis of schedules shows writes Keith Wallis.
• The National Retail Federation (NRF), in its monthly Global Port Tracker (GPT) compiled with Hackett Associates, said it now expects US imports for the first six months of the year to increase 11% over the same period last year. That’s up from the forecast of a 7.8% increase made in the March GPT.? Retailers increased their year-over-year import projection for each month from April through July writes Bill Mongelluzzo.

Several of the largest US retailers have recently signed 2024-25 service contracts for the eastbound trans-Pacific at rates that are approximately 12% to 17% higher – ranging from $1,400 to $1,450 per FEU to the West Coast for the very largest retailers. New East Coast contract rates are about $800 to $1,000 higher writes Bill Mongelluzzo. Kevin Krause, vice president of operations and marketing at Hustler Freight Logistics, expects contract rates for midtier importers will range from $1,500 to $1,600 per FEU, and with vessel space “readily available” right now, most midsized importers should be able to get the vessel space will need for the upcoming contract year.

Maersk saw a 37% jump in the number of ocean containers transported on its low-emission biofuel product in 2023, but the total 660,000 TEUs that were shipped amounted to just 3% of the carrier’s annual volume writes Greg Knowler. Maersk says almost 60% of its top 200 customers have committed to or set science-based targets for their journey to net-zero, with some customers shipping more than 50,000 TEUs per year on its biofuel product.

• US demand for European exports rose 10% year-on-year in the first quarter, taking trans-Atlantic westbound volume back to pre-pandemic levels and allowing rates to hold on to recent gains writes Greg Knowler. The 928,232 TEUs imported into the US in the first three months of the year closely matched Q1 2019 and were just 5% shy of the record 979,878 TEUs hit in the 2021 first quarter, according to PIERS, a sister product of the Journal of Commerce within S&P Global.

• The Northwest Seaport Alliance (NWSA) of Seattle and Tacoma is launching an $11 million incentive program designed to foster improvement in vessel schedule reliability, international rail volumes and truck turn times at marine terminals writes Bill Mongelluzzo. “By incentivizing increased rail cargo, on-time vessel performance and marine terminal gate consistency, we can better serve our import and export customers and local trucking community that utilizes our gateway,” Kristin Ang, Port of Tacoma Commission president and NWSA co-chair said in a statement.

Breakbulk & Heavy Lift

Ongoing disruptions in the Red Sea and Panama Canal continue to force multipurpose and heavy-lift (MPV/HL) carriers to sail longer routes to maintain their service schedules, modestly boosting rate-based MPV indices in April writes Janet Nodar. Toepfer’s Multipurpose Index (TMI) is expected to tick up 1.93% to $12,259 per day this month from March’s $12,027 per day. The TMI is down 16% year over year, from April 2023’s average of $14,595.

FYI – JOC’s Breakbulk? & Project Logistics conference is April 24-26 in New Orleans. If interested, check out the agenda and more here.

Columns

• US import surge comes amid restocking, but puts port fluidity in the crosshairs, Peter Tirschwell
• ?Spectacle of shipping disruptions overshadows manageable impact to cargo, Mark Szakonyi

Air

Strong demand for e-commerce from the US and Europe that drove global air cargo volume growth in the first quarter is expected to lead into a “heavy” peak season later this year, air freight forwarders say writes Greg Knowler.? However, the air freight market is heading for a longer-term shortage of capacity and will struggle to accommodate the growing volume, according to Atlas Air CEO Michael Steen.

Inland

Trucking

• Roadrunner is opening a 75-door terminal in Atlanta, rebuilding a facility once leased by bankrupt carrier Yellow from the ground up to meet its own needs writes Bill Cassidy. “We’ve been scouring the Earth for two years trying to find a facility in Atlanta,” Chris Jamroz, executive chairman and CEO of Roadrunner said. “This building is textbook perfect for LTL. We have room for growth, but we’re not overwhelmed by emptiness. And it’s not designed to be a storage facility.”
• The Journal of Commerce For-Hire Trucking Employment Index moved from 100.1 in February to a preliminary reading of 100.5 in March, as trucking firms made headway in hiring. That indicates trucking employment in March was 0.5% higher than the fourth quarter of 2018, the base period for the Journal of Commerce index and a high point for trucking employment prior to the COVID-19 pandemic writes Bill Cassidy. Trucking’s hiring gains follow three months of US manufacturing expansion. The S&P Global US Manufacturing Purchasing Managers Index (PMI) dropped from 52.2 in February to 51.9 in March but stayed above the 50 “no-change” mark for the third straight month.

• Lineage Logistics is launching a cross-border transportation service linking warehouses and markets in the US and Canada, expanding its end-to-end distribution network and services in both countries writes Bill Cassidy. The program will move both full truckload and less-than-truckload (LTL) shipments.
• In the truckload sector, the exodus of small trucking companies is slowing and the number of companies entering the business is rising as freight demand slowly improves, according to Dean Croke, principal analyst at DAT Freight & Analytics. Meanwhile, the LTL market is “normalizing” at a more elevated pricing level because “the biggest spoiler” -- Yellow -- “went out of business,” Kevin Day, president of AFS Logistics, said during a recent JOC webcast moderated by Bill Cassidy.

Intermodal/Rail

• Norfolk Southern Railway (NS) reached a $600 million settlement with those living or owning a business near the site of the February 2023 derailment in East Palestine, Ohio writes Ari Ashe. The settlement came as NS announced preliminary first-quarter earnings, saying revenue declined 4% year over year. Full earnings will be released April 24.?
• The Port of Virginia is expanding its operating hours to handle the increased cargo volumes now bypassing the Port of Baltimore following the collapse of the Francis Scott Key Bridge on March 26 writes Ari Ashe. The Virginia Port Authority (VPA) said the Virginia International Gateway (VIG) terminal and Norfolk International Terminals (NIT) will extend their gates by one hour during the week, with new hours being 3 a.m. to 5 p.m. Additionally, VIG will be open on Saturdays from 8 am to 5 pm.?

Technology

Eric Johnson writes a switch to electronic bills of lading (eBLs) from paper-based alternatives would result in an annual reduction of 440,802 metric tons of carbon emissions according to a study commissioned by the Global Shipping Business Network (GSBN). The study comes more than a year after nine of the top 10 global ocean carriers committed to move to 100% eBLs by 2030.

The study can be found here.

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 for 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