Freight Forward - Volume declines, and still no contract
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.
US imports through the first half of 2023 will fall almost 20% from the same period last year as “worried” consumers dial back their purchasing in a slowing economy, according to the latest Global Port Tracker (GPT).?
Kevin Saville writes that softening of freight demand will keep downward pressure on trans-Pacific spot rates that have?tumbled more than 80% since last February?and should result in?continued improvements in vessel schedule reliability?for shippers. But for carriers, it will likely?lead to much lower profit levels in 2023.
The latest GPT report, produced by the NRF and Hackett Associates, further downgraded monthly import expectations through June.?January imports are now expected to fall 17.6% from January 2021;?last month, GPT forecast the year-over-year drop at 11.5%. February imports are now projected to be 25.5% lower than a year ago, a downgrade from last month’s projection of a 23% drop.?
February’s projected import number of 1.57 million TEU would be the lowest for the US since May 2020, when the global supply chain essentially ground to a halt in the early weeks of the COVID-19 pandemic.?
The GPT now forecasts that March imports will be down 24.8% year on year, mostly flat with last month’s projection of a 25.5% decline.
“Cargo volumes are down, and the economy is in a contradiction of rising employment and wages that promise prosperity at the same time high inflation and rising interest rates threaten a recession,” Hackett said in the statement. “The economy is far from shut down, but the degree of uncertainty is very similar,”?said Jonathan Gold, vice president for supply chain and customs policy at the National Retail Federation (NRF).?
As year-over-year imports fall, a reminder that it’s been over seven months since the ILWU contract expired, and still no contract. According to Bill Mongelluzzo , West Coast dockworkers and marine terminal employers resumed negotiations after agreeing to set aside, for now, a controversial jurisdictional issue involving Terminal 5 in Seattle that has kept talks at a standstill.
Mongelluzo notes that the ILWU and PMA may be feeling pressured with the possibility of Secretary of Labor Marty Walsh stepping in to oversee the talks and pressure from port and terminal stakeholders who are growing increasingly concerned at shippers diverting more imports elsewhere in the US to avoid potential disruption linked to the contract talks. One mid-size retailer said he will ship through Los Angeles-Long Beach, the largest US port complex, only on an “as-needed” basis until there is a new labor contract.?
Shifting away from the west coast
Meanwhile, Zim Integrated Shipping’s expedited ocean service from Southeast Asia to US East Coast will make its first US call at Baltimore next month Michael Angell writes. Maryland Gov. Wes Moore said in a statement Thursday that Zim’s eCommerce Baltimore Express (ZXB) will see a capacity boost of “nearly 50 %” with the addition of 6,000 TEU ships into the service, with plans to eventually use 8,000 TEU ships. Along with the larger ships, the ZXB will switch from a fortnightly service to a weekly service by the end of February.??
Angell also writes that Cosco Shipping has added capacity to one of its Asia-US Gulf Coast services by replacing Panamax ships with post-Panamax vessels that once served the US West Coast.?
Inland
FMC’s latest ruling that ocean carriers violate the US Shipping Act by mandating which chassis company must be used for merchant haulage business raises a number of questions, according to Ari Ashe, including what does the ruling mean for BCO costs and what will happen in various geographic regions such as Memphis, NY-NJ and Houston and Southern California?
Ashe writes that it’s unlikely?the ruling?will go into effect in the short?term.??The Ocean Carriers Equipment Management Association (OCEMA) and its 11 ocean carrier members can appeal the ruling to FMC commissioners within 22 days.?The Intermodal Carriers Conference (IMCC), while scoring a victory?on the merchant haulage issue,?can?appeal the judge’s decision not to?issue a cease-and-desist order on?a?secondary claim related to?chassis in Memphis.?FMC commissioners may also voluntarily review the?entire?decision.
Bill Cassidy writes that outbound spot truckload rates?from US East Coast ports rose in January while rates from West Coast gateways dropped on average in what may be a sign of a continuing freight shift by US importers.?However, all outbound rates from US ports are well below year-ago levels, the?Journal of Commerce?analysis shows.
Analysts from DAT and Loadsmart have told the?Journal of Commerce?they expect spot market pricing to bottom out and remain flat for some time before rising again, most likely at a slow pace.?
“The market should hit its floor, be stable for some time, and then have room only to go up,” Jon Payne, director of pricing strategy and analytics at Loadsmart, said in a recent interview.?
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Technology
Flexport launched an app on Shopify’s marketplace that is designed to help small online retailers gain access to instant quotes, booking, tracking, and customs clearance services as it aims to deepen its reach with the long tail of US importers.?Eric Johnson writes that the app is the first tangible partnership to emerge between Flexport and Shopify since the latter participated in Flexport’s latest funding round in February 2022. Flexport senior vice president of small and mid-sized business (SMB) product and technology, Parisa Sadrzadeh, said the goal is to give small businesses that use Shopify as their digital storefront a self-serve way to tap into Flexport’s ocean freight and customs services.?
“These businesses lack the resources to manage international shipment, so they’re more prone to be crushed by any volume of freight,” Sadrzadeh told the Journal of Commerce. “Most [logistics services providers] don’t tailor things for their needs. Flexport’s uniquely capable of serving this customer segment.”?
Air
According to Air Cargo Next , despite a subdued outlook for the air cargo market, Air Transport Services Group (ATSG) remains fairly upbeat as it issued outlook guidance for changes in its operating fleet of cargo aircraft.?
The lessor?plans to deliver at least six Airbus A321-200 cargo aircraft in 2023 to fulfill lease orders from customers based in Europe and Asia, and its subsidiary, Cargo Aircraft Management, plans to begin leasing A330 freighters in 2024 through 2028. It already has received customer commitments to lease more than two-thirds of the A330 freighters.?
However, in its outlook, it noted that it plans to operate on a reduced schedule and fewer block hours per aircraft for?its customers?Amazon and DHL during the first half of 2023 compared to the corresponding period in 2022.?ATSG further warned that Amazon may not extend leases on five Boeing 767-200 freighters that are due to expire between May and September.?
The express market is an important one for ATSG. The company noted during its third-quarter earnings call in November that “the express network is powered by e-commerce, and that’s the growth engine for that business.”?
While e-commerce sales are higher than before the pandemic period, they have slowed as consumers worry about the economy and retailers continue to carry high levels of inventory.?
Last-Mile
French postal operator La Poste Group and the CMA CGM Group signed a memorandum of understanding to establish a closer relationship between the?La Poste subsidiary GeoPost and CEVA Logistics, a subsidiary of the CMA CGM Group. The agreement will also include looking to develop new circular economy and urban logistics services in France and Europe.
In addition, the relationship will likely provide CEVA Logistics deeper access to GeoPost’s cross-border e-commerce capabilities via Asendia, GeoPost’s joint venture with Swiss Post, and GeoPost’s express capabilities via its joint venture with Air France Cargo.
Economic Outlook
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