Freight Forward - Shifting focus to the Atlantic

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.

Happy Monday! Shifts in ocean freight, falling rates, reduced capacity, no peak season for some, and blockchain and other logistics technologies in question, here's the latest Freight Forward starting with Peter Tirschwell's latest JOC column...

JOC’s Peter Tirschwell's latest column points out that the pandemic exposed problems that were already lurking at ports.

“Too many containers dwelling on the terminal slows the pace of loading and unloading at the berth due to acreage being unavailable to store offloaded boxes and stage outbound boxes for loading, and boxes having to be moved multiple times within the terminal. As liftings on and off the ship slow, ships remain at berth for longer, forcing others to wait offshore. It’s that simple.”

Only by systemically improving flow through marine terminals, shipping executives believe, can the system be protected from the vessel backups that became an unsightly symbol of dysfunction at several major seaports throughout the pandemic, and the profound impact on supply chains that resulted according to Peter.?

Indeed, the market is experiencing the aftermath of pandemic-driven demand. As global demand for Asian exports weakens, container carrier members of the Ocean Alliance are shifting post-Panamax ships from the trans-Pacific and Asia–Europe trades to the trans-Atlantic as trade between the US and Europe increases. Ocean Alliance’s “Liberty Bridge” service from Europe to the US has gone from a Panamax-size service of 8,500 TEU to a post-Panamax service of about 12,000 TEU with new ships being rotated into the service. In December, CMA CGM will replace two Panamax ships with two 11,388 TEU ships.?

Two new container services from Europe will also start calling US East Coast ports. Genoa-based Kalypso Navigation Co.’s Cristoforo Colombo service from the western Mediterranean will make its first US call to the GCT New York marine terminal with the Nov. 30 arrival of the?Hammonia Lipsia, CEO Gianfranco Gazzolo told JOC.com. While the first ship is a 3,000 TEU vessel, the service will run fortnightly with ships averaging 1,800 TEU in capacity. London-based Ellerman City Liners will make the first US call for its northern Europe service with the SC Maria that will also call GCT NY, along with the ports of Wilmington, N.C., and Jacksonville, Florida. “We are not giants of the sea,” Gazzolo said. “But this service comes from what we experienced since one and a half years ago: the lack of equipment, lack of vessels, lack of schedules, lack of reliability.”??

With vessel-operating expenses much higher due to inflation, carriers are at breakeven or losses on most trades from Asia now as rates fall below pre-pandemic levels, Lars Jensen, CEO of consultancy Vespucci Maritime and a JOC analyst, said during a Journal of Commerce webcast . Jensen said the trans-Atlantic is still relatively tight due to delays at US East Coast ports caused in part by an influx of cargo being diverted from West Coast ports. But as those issues ease, Jensen said it would be “only a matter of time” before trans-Atlantic rates follow suit. “As long as we have challenges [on the US East Coast], that tends to hold a floor under what’s going to happen on the trans-Atlantic,” Jensen said. “But at some point, the trans-Atlantic is going to follow exactly the same path as you see in Asia–Europe or the trans-Pacific. That is only a matter of time, we’re talking weeks.”?

A growing number of shippers on the eastbound trans-Pacific have renegotiated rates in existing service contracts to reflect a market that has softened markedly over the past three months. The contract rate reductions are mostly running through the April 30 expiry of current deals. Importers are locking in rates that are far below the $6,000 to $8,000 per FEU, or higher, that they negotiated last spring. Shippers say some carriers who earlier this year refused to increase their space allotments are coming back to them with offers of more space at rates which, although higher than the current spot rate of about $2,000 per FEU to the West Coast, are steeply discounted from the rates they signed for last May.?

Meanwhile, Carriers have announced blank sailings on Asia-North Europe and both the Asia-US West Coast and East Coast trade lanes in January , traditionally a peak shipping period ahead of factory closures for the Chinese New Year that falls on Jan. 22 next year. But the amount of capacity to be withdrawn compared with the total capacity is down significantly from previous months, Sea-Intelligence data shows.

While carriers are withdrawing significant amounts of capacity through a vigorous blank sailings program, they have not been able to match the rapid drop in demand on the Asia-Europe and Asia-US trade lanes. “Carriers can't control volume, but they are obviously accepting rates that are at 2019 levels,” a source told JOC.com. “With utilization continuing to slide, carriers with the lowest unit costs will sit it out for as long as they can, and that may as well be called a rate war.” He added that while spot rates were declining rapidly, long-term contract rates on both the trans-Pacific and Asia-North Europe remained significantly above the short-term market.?

The US Federal Maritime Commission (FMC) approved the formation of a chassis pool in the Southeast US covering three ports in Florida, Georgia, and North Carolina, a move port officials say will expand the fleet and improve the quality and reliability of the equipment necessary to move containerized cargo. The South Atlantic Chassis Pool 3.0 (SACP 3.0) agreement will run until 2030 . SACP 3.0 comprises port authorities in Jacksonville, Savannah, and Wilmington, North Carolina, a coalition of 10 ocean carriers, and chassis pool administrator Consolidated Chassis Management (CCM).?The South Carolina Ports Authority, which will exit the pool in 2023, had long complained about the poor quality of the marine chassis and their propensity to breakdown, although it is now facing other potential roadblocks in launching its own pool as an alternative to SACP 3.0.?

Last week, the Senate voted overwhelmingly to force all US rail unions to accept terms of a tentative contract agreement brokered by the Biden administration in September. The measure, approved by a vote of 80-15, ends the threat of a country-wide rail strike that could have begun Dec. 9. Senate action came one day after the House of Representatives approved a similar resolution. The bill now goes to President Joe Biden for his signature, which is expected to happen quickly. In a separate vote, the Senate failed to grant seven paid sick days to rail workers, which the House approved on Wednesday.

There has been no noticeable peak season for trucking. Through Nov. 29, rates fell month over month in 39 states and rose in only five, according to the JOC Shipper Truckload Spot Rate Index, which is comprised by analyzing prices from Cargo Chief, DAT Freight and Analytics, and digital broker Loadsmart, and surveying brokers and shippers. Shipper-paid spot rates also dropped out of all major US port cities in November, according to the index. Jon Payne, director of pricing and strategy for Loadsmart, said the normal escalation of rates between September and December isn’t going to happen this year. “The excess capacity is going to absorb typical peak-season disruption,” Payne told JOC.com. “I don't think anyone predicted that the market would keep going down in terms of rates this deep into peak season.”?

No peak for air freight either. “Global air cargo tonnages have continued to slide downwards in November, normally a buoyant month in the air freight calendar, with a further steep decline in the last full week led by falling volumes to and from North America,” Netherlands-based analyst WorldACD wrote in a market update Friday. WorldACD data shows air cargo volume from Asia, measured in chargeable weight, was down 29% in November year over year, outstripping a capacity decline of 11%. With demand weakening and belly cargo capacity returning with the steady recovery of passenger flight schedules in and out of Asia, the oversupplied market environment is dragging down rates.?

UPS announced it would maintain its guarantee for Next Day Air packages throughout the peak season. “If a customer ships a package expecting Next Day service, they’ll receive Next Day service,” the shipping carrier stated. However, FedEx Corp. noted it will suspend money-back guarantees for select peak-season deliveries of domestic and export air express shipments, effective Dec. 13. The suspension will run until Jan. 2.

Last-mile technology vendor OneRail landed a $33 million round of funding from venture firms to capitalize on increased demand for final-mile coordination across the retail, health care, construction, and third-party logistics sectors. The funding will be used primarily to grow OneRail’s sales, marketing, customer support, and business development teams, CEO Bill Catania told JOC.com, with headcount likely to swell to more than 200 in 2023 from the current 130 employees.?

A.P. M?ller – Maersk and IBM are closing the TradeLens technology platform they jointly built, citing a lack of “commercial viability” just over four years after its launch. TradeLens will wind down operations by the end of the first quarter of 2023, the partners said in a statement.

“TradeLens was founded on the bold vision to make a leap in global supply chain digitization as an open and neutral industry platform,” Rotem Hershko, head of business platforms at A.P. M?ller – Maersk, said in the statement. “Unfortunately, while we successfully developed a viable platform, the need for full global industry collaboration has not been achieved.”?

Lars Jensen, CEO & Partner, Vespucci Maritime, and JOC Analyst writes in his latest JOC column, ?The market is rapidly losing momentum as demand has collapsed, capacity has become plentiful, and freight rates are fast going below pre-pandemic levels on some trades.

The pressure is therefore mounting on the technology providers. It has become time to show actual, tangible, business value in dollars and cents. Not merely projected earnings and value a certain number of years down the line but in the short term. Not merely attractive visions of business transformation, but actual tools used by actual customers as part of their actual business processes.?

Economic Outlook

• Friday, Dec 9 - PPI for November – MarketWatch forecast is for no change from October .

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 hoping everyone has a good freight week ahead!

-Cathy