Freight Forward - Still Waiting

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.

The wait continues for union contracts to be approved by port and rail workers.

West Coast port workers’ contract expired on July 1 and what was once hoped for a ratified contract by now appears we may have to wait until 2023 for an agreement.

Until then, frustrations will likely mean disruptions which we're seeing...

Members of the International Longshore and Warehouse Union (ILWU) shut down vessel operations at the Oakland International Container Terminal (OICT).

A source with knowledge of Oakland’s operations who asked not to be identified said ILWU workers “red-tagged” equipment inside OICT, meaning none of the equipment could be used until inspected by a mechanic. The source called the move a “gimmick” that forced the loading and unloading of all vessels at the terminal to come to a halt. The terminal reopened the next day.?

OICT is the busiest marine terminal at the Port of Oakland, handling about 70% of its container volume.

The latest disruption at Oakland comes after three of the port’s four terminals were shut down for a morning shift after ILWU marine clerks?picketed over a travel pay issue.

Meanwhile, all eyes continue to be on the rail unions. Members of the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers & Helpers (IBB) voted down a tentative collective bargaining agreement with US railroads, becoming the third rail union to reject the deal.

Negotiators representing the IBB and US rail management will now return to the table to hammer out their differences, with both sides having agreed to a “cooling off” period until Dec. 9.

The Brotherhood of Maintenance of Way Employees (BMWED) and Brotherhood of Railway Signalmen (BRS), which also voted down the tentative deal, have agreed to cooling off periods that end Dec. 4 but could seek a five-day extension to align with the IBB.

According to JOC senior editor, Ari Ashe, the date of a potential strike is key because if one union stops working, the other unions are unlikely to cross the picket lines, even if its cooling-off period has not expired.

Seven other unions?have ratified the agreement, while the final two — the Brotherhood of Locomotive Engineers (BLET) and Sheet Metal Air, Rail, and Transportation Workers (SMART-TD) — announce their results on Nov. 21. BLET and SMART-TD represent nearly half of all union employees covered by the 12 rail unions.

Cleaning up

Under the threat of penalty fees, ocean carriers are accelerating the removal of empty containers from the Port of New York and New Jersey, easing the ship backlogs and chassis shortages seen through much of 2022. That, in turn, is enabling the port to handle more of the growing freight volumes diverted from the West Coast.

Since the number of empty boxes hit a peak in the summer, ocean carriers have swept 30,000 empties from the port, according to the latest data from the Port Authority of New York and New Jersey (PANYNJ). That brings empties dwelling on and off the dock at the port down 15% from the estimated high of approximately 200,000 in July.

With congestion and equipment shortages easing, New York-New Jersey is still handling more containers than ever. For October, total volumes coming through the port were 792,548 TEU, marking the third consecutive month that New York-New Jersey topped the Port of Los Angeles in volumes.?

• US imports from Asia in October plunged to their lowest level in 20 months, with the rate of decline accelerating rapidly from September as demand in the eastbound trans-Pacific tumbles from the record highs set earlier this year. Asian imports in October totaled 1.44 million TEU, down 11% from October 2021 and the lowest monthly volume since February 2021, according to data from PIERS, a JOC.com sister company within S&P Global. October’s double-digit percentage year-over-year drop followed a 6.5% decline in September.
• Project logistics service providers report?strong demand?for their services into 2023 and beyond. Market optimism is bolstered by several factors, including an oil and gas project cargo pipeline filled with pent-up cargo as project owners and their contractors look to catch up after two years of pandemic-related delays. Owners “have to get a lot of projects back on track,” William Cunningham, research analyst with IHS Markit’s upstream costs and technology team, told JOC.com. IHS Markit, now part of S&P Global, is the parent company of JOC.com. “You have to continue and maintain existing assets and build spare capacity,” Cunningham said. These activities normally take place annually, but because of the pandemic, “there’s a lot of catching up to do,” he said.

Airfreight demand's potential shifts

Much like ocean freight, airfreight demand also is facing declines in the trans-Pacific. Fixed-rate air cargo contracts for periods longer than six months have almost vanished in Q4 as demand out of Asia slows, capacity returns to the market, and spot rates slide through the traditional peak season.

Data from the rate benchmarking platform Xeneta show that longer air cargo contracts comprised just 1% of the global market at the end of October, down from 17% in Q3.

Airlines typically extend the availability of block space agreements, often up to 12 months, to forwarders when rate levels weaken. But growing uncertainty over demand, and no sign yet of any rate floor, has caused the disappearance of contracts longer than six months.

But there appears to be demand elsewhere.

• Air Cargo World reported that MSC Air Cargo, the new cargo airline of Switzerland-based ocean shipping line Mediterranean Shipping Company (MSC), is set to launch its first intercontinental air cargo service in December. “Our first of four 777-200F is fresh off the line and ready to operate our inaugural round-the-world service,” MSC said in a schedule notice. “Beginning in early December, we will operate weekly services from Mexico City (MEX) stopping in Indianapolis (IND) and centrally located Frankfurt Hahn (HHN) on the way to Hong Kong (HKG).”
• In addition, Amazon Air partners with Brazil’s Azul Linhas Aereas Brasileira to increase package delivery in northern Brazil. Azul will transport packages to Amazon’s fulfillment center in Cajamr, allowing Amazon to provide two-day e-commerce service to consumers in Manaus and Belem and three-day delivery to consumers in Macapa. Amazon is looking to capitalize on e-commerce growth in the Brazilian market by delivering in the “shortest time and cost possible,” according to a Nov. 17 release from Azul. The e-commerce giant will invest in its own logistics network, including warehouses, trucks, logistics transport, vans, motorcycles, and employees.

US truck freight volumes in October declined 1.4% from the previous month but remained 2.9% above year-ago levels, according to the latest Cass Freight Index.?Cass attributed the year-over-year gains in freight volume to repositioning of inventory, consumers buying in advance of rising interest rates, and easing manufacturing supply constraints. The shipment index could turn negative year over year in December, according to Cass.?

• Venture fund Tiger Global led a $5 million investment into predictive spot truckload pricing vendor Greenscreens.ai, the software provider said Tuesday, a signal that demand from logistics providers for accurate pricing data has increased due to volatile freight market conditions. Greenscreens.ai’s customer list has grown to 70 brokers, including Yellow Logistics (the brokerage division of less-than-truckload carrier Yellow), Gampac (a broker acquired in 2018 by shipper US Foods), Primo Logistics, Giltner Logistics, and R2 Logistics. Greenscreens.ai said in a statement it focuses on giving brokers “real-time data tailored specifically to an organization's individual buying power rather than data that’s based on market averages with outliers.” It said it will use the new funding to expand its product and technology development teams in the US and Lithuania.

Economic Outlook

The US industrial freight market remains resilient according to Jason Miller, associate professor of logistics, at Michigan State University, and JOC analyst. Data for wholesaling machinery, equipment, and supplies and wholesaling of chemicals and allied products suggest that we are not yet seeing a pronounced slowdown of industrial activity, a finding supported by continued year-over-year growth of manufacturing output.?

• Wednesday, Nov 23 - S&P US Manufacturing PMI (Flash) - November PMI is likely to dip to 50 from October's 50.4.

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