Freight Forward: Ships Pause as Attacks Increase

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.

Panama and Suez Troubles

• US Secretary of Defense Lloyd Austin will outline an expanded force -- Operation Propensity Guardian -- today in Israel. CMA CGM, Hapag-Lloyd, Maersk, and Mediterranean Shipping Co. has stopped transiting the Suez Canal after Friday’s attacks against MSC’s Palatium III and Hapag-Lloyd's Al Jasrah writes Mark Szakonyi.
• The scale of the challenges and risks facing the container shipping industry in the aftermath of the pandemic is the greatest it’s been in decades, thanks to dramatic changes in geopolitics, climate, and labor dynamics, writes Mark Szakonyi.
• The Panama Canal is essentially closed to MPV shipping until at least May, Ulrich Ulrichs, CEO of BBC Chartering, told the Journal of Commerce. The carrier is now planning voyages via the Cape of Good Hope and the Strait of Magellan. Although MPV/HL vessels are covered by protection and indemnity (P&I) insurance, war risk premiums are likely to go up significantly, Yorck Niclas Prehm, Hamburg-based Toepfer’s head of research, told the Journal of Commerce writes Janet Nodar.
• A Maersk-operated container ship was targeted in a missile attack from Houthi-controlled territory in Yemen, although the projectile missed the vessel and the crew and ship are safe, the carrier Keith Wallis writes. British military authorities said there have been more than 15 attacks and incidents targeting vessels, including container ships, tankers, and bulk carriers, in the Bab el-Mandeb area of the Red Sea in the last two weeks.
• A 15,000-TEU Hapag-Lloyd vessel was hit by a missile a day after a projectile narrowly missed a Maersk container ship, writes Greg Knowler. The incident prompted Maersk to instruct all its ships scheduled to pass through the narrow Bab al-Mandab Strait off Yemen, where the attacks are being launched, to stop their journeys and await instructions.

The US West Coast market share of imports from Asia is regaining market share, writes Bill Mongelluzzo. “The Panama Canal situation is going to continue to drive cargo to the West Coast, and now carriers are going to leave the Suez,” said Christian Sur, executive vice president of ocean freight contract logistics at Unique Logistics International. Sur believes the trans-Pacific trade has yet to experience the full impact of the developments at the Panama Canal and the Suez Canal.

In 2023, rates, carrier profits and port congestion all normalized. “Vessels and cargo arriving, departing and shifting around the ports of [Los Angeles and Long Beach] continue to move normally with no labor delays,” Kip Louttit, executive director of the Marine Exchange of Southern California, said on Dec. 9. But, service reliability remains an outlier, not having reverted to pre-COVID levels. And because of overcapacity and carriers’ aggressive response, it will likely not return to normal levels in 2024, writes Peter Tirschwell.

December US imports are expected to jump 11.5% over December 2022, an upgrade from Global Port Tracker’s (GPT's) initial forecast of a 6.6% increase made last month, writes Bill Bill Mongelluzzo. GPT, compiled by Hackett Associates on behalf of the National Retail Federation (NRF), also projects that January imports will climb 6.6% year over year, up from the 3.7% increase forecasted last month. “We originally thought peak season would come in August, but imports kept growing in September and again in October,” Jonathan Gold, vice president for supply chain and customs policy at the NRF, said in the December GPT.

The multipurpose and heavy-lift (MPV/HL) sector remains confident that wind will be a key element of the cargo mix for many years despite disappointing wind energy freight volumes, writes Janet Nodar. “We are seeing much less wind cargo in 2023, and it does not look good for 2024. It may increase in 2025,” Capt. Ruslan Mosolov, head of sales with Hamburg-based MPV/HL carrier dship told the Journal of Commerce. “The main change is simply that the wind farm [activity] is down, so opportunities for transport are down.”

MSC, CMA CGM, Hapag-Lloyd, and Maersk have announced a $500-per-container general rate increase (GRI) on Indian loads to North America beginning in early January, writes Bency Mathew. A customer advisory from MSC Agency (India) noted that the increase is necessary “to maintain the high level of reliability and efficiency of services to meet the needs of customers.”

Lewis Nursery and Farms and its American Blueberries, LLC, subsidiary opened a certified cold treatment facility at North Carolina’s Port of Wilmington capable of handling and clearing foreign-grown produce such as grapes, blueberries and citrus fruit primarily from Peru and Chile for entry into US markets writes Teri Errico Griffis.

A proposal by the International Longshore and Warehouse Union (ILWU) with waterfront employers represented by the Pacific Maritime Association (PMA) to require truck drivers working the ports of Los Angeles and Long Beach to provide proof of ownership or lease for all private chassis, or else be sent for a safety inspection prior to picking up cargo would increase the gateway’s already high truck turn times, according to trucking companies writes Ari Ashe.

Chart of the Day

Air

Air cargo rates from Asia to North America continue to rise to levels not seen in more than a year as e-commerce volume fills much of the available capacity, writes Greg Knowler. “For one thing, we believe some of the cyber activity, at least in the US, was a product of attractive door-buster deals,” Bruce Chan, an analyst at investment bank Stifel, said. “Moreover, broader retail sales performance was much more muted and, net of inflation, were likely even slightly more negative year over year.”

Inland

In several earnings calls, retailers discussed scaling back distribution networks next year as overstocked inventories continue to shrink. It’s a sign that shippers are returning to more “normal” supply chain and inventory strategies, without the need for extra space and resources that was driven by transportation volatility and unreliability, writes Bill Cassidy.

Trucking

US truckload pricing is expected to climb in 2024, but its unknown by how much and when, writes Ari Ashe and Bill Cassidy. Chris Pickett, chief strategy officer for Flock Freight, expects both spot and contract rates to rise in 2024, with spot rates turning inflationary year over year as early as the first quarter. Other industry analysts question whether enough truck capacity will exit the market in this economic cycle to create much of a surge in truckload rates in 2024. Dean Croke, principal analyst at DAT Freight & Analytics, said, “I think we’re losing interstate long-haul capacity, but we’re gaining capacity in regional truckload, intermodal drayage, and final-mile sectors.” Many of the new carriers that entered the market in 2020-2022, nearly all of them small fleets, likely have already exited the dry van spot market, said Jason Miller, associate professor of logistics at Michigan State University.

The court approval of the sale of 128 terminals by bankrupt trucking company Yellow means that shippers will face a more constrained, higher-priced LTL market in 2024, writes Bill Cassidy. “We’re going to have an LTL industry that is increasingly consolidated,” Mike Regan, chief relationship officer of TranzAct Technologies, said during a webinar. The fact that several LTL carriers, national and regional, accounted for 88% of the bids for Yellow terminals will affect how consolidation plays out.

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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.

-Cathy