Freight Forward: Weak 2024 Outlook

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.

• Peter Tirschwell writes that the International Longshoremen’s Association President Harold Daggett told member dockworkers on the US East and Gulf coasts on Saturday to be prepared for a "coast-wide strike in October 2024", raising the possibility of what would be the first major labor disruption on the coasts since 1977.
• A new container terminal at the Port of Baltimore could be ready to receive ships by 2028, according to one of the project’s backers. Michael Angell writes that the $1 billion project will arrive just as its other sponsor, Mediterranean Shipping Co., receives a batch of new ships that will likely help fill the terminal.

• Mark Szakonyi writes that Matson Navigation Co. expects to reap some benefit from cargo diversions from the US East and Gulf coasts to the West Coast amid labor contract talks and persistent draft restrictions along the Panama Canal, while a recent correction from the overhang in retail inventories should also boost the carrier, it said. “There is a contract renewal for the [ILA] which will occur in 2024 and some of the de-risking that our customers did with the ILWU renewal in 2023, we think are likely to play and be a factor on the margin again,” CEO Matt Cox said.
• Greg Knowler writes that DNV and the Global Shipping Business Network (GSBN) have formed a partnership aimed at improving the sharing of verifiable emissions data across the shipping supply chain and accelerating the use of alternative fuels. “To achieve shipping decarbonization at scale, it needs to have a robust data foundation of verified data to enable trusted data sharing across the fragmented and complex supply chain,” Bertrand Chen, CEO of the not-for-profit GSBN consortium, said in a joint statement announcing the partnership with DNV.
• The Port of Tanger Med will likely need to expand terminal capacity to keep up with strong demand for both gateway and transshipment cargoes, as well as growing industrial and agricultural exports, with annual volumes projected to eclipse the Moroccan hub’s nominal handling capacity within the next three years writes Peter Shaw-Smith.
• Ocean Network Express (ONE) seems to have embarked on a frenzied expansion of its connections out of India as the emerging economy sees some early signs of a rebound in export trade writes Bency Mathew.

Earnings

• Sharp declines were reported in all ONE’s metrics for its fiscal first half covering April 1 through Sept. 30 writes Greg Knowler. Revenue was down 60% year over year at $7.3 billion, earnings before interest, taxes, depreciation and amortization (EBITDA) fell 89% to $1.2 billion, EBIT dropped 96% to $443 million, and net profit of $700 million was down 94%.? “The oversupply of tonnage, caused by the delivery of a large number of newly built vessels in this fiscal year, is expected to continue through the second half,” ONE said in an earnings statement. “The freight market will remain weak in the second half due to the supply and demand gap.”

• Greg Knowler writes that Maersk CEO Vincent Clerc delivered a grim outlook for the container shipping industry during the carrier’s third-quarter results presentation Friday, warning of a “dire situation” if rate levels did not improve before the end of the year. The company also announced it would cut another 3,500 jobs on top of the 6,500 positions already eliminated this year.? “If Q4 does not deliver some kind of improvement [in profitability], we are looking at a pretty dire situation in 2024,” Clerc told investors on an earnings call, warning that there was little sign of any short-term improvement. “We expect the market conditions in ocean to worsen further, due to the additional capacity coming into the market and due to the fact that mitigating measures such as idling and ship recycling have not been effective,” he added.

Chart of the Week

Air

• In my ACN column, I write that FedEx is expanding flights from Vietnam to the Middle East, Europe, and intra-Asia. “We continue to transform our air network to offer differentiated service for our customers, including building capacity and creating faster connections to meet demand,” said Kawal Preet, president of Asia Pacific, Middle East, and Africa region, at FedEx Express.? “The Tiger economies of Southeast Asia continue to grow at an accelerated pace, with a forecast of 4.9% growth in 2024," he said. In 2022, FedEx opened a $2 million operations facility in Hanoi, Vietnam. A FedEx Express managing director at the time, told Vietnamese publication VN Express that Vietnam would be one of the top 10 countries for FedEx in terms of trade volume growth over the next five years.?

Inland

• A new chassis pool launched in Memphis which The North American Chassis Pool Cooperative (NACPC) and Milestone Equipment Holdings hope will provide a better experience for truckers and cargo owners frustrated with restrictions over which chassis can be used to haul ocean containers writes Ari Ashe.
• US less-than-truckload (LTL) trucking companies are adding terminals and doors to their networks across the country to not just to fulfill immediate requirements in a post-Yellow LTL market, but also the long-term needs of shipper customers writes Bill Cassidy. The expansion comes as more than 160 facilities owned by bankrupt Yellow will be put up for auction next month. Property broker Morprop Advisors, part of the Industrial Transportation Property Network (ITPN), in October released a list of more than 600 transportation properties available for sale or lease. The list includes more than 65 sites with more than 100 LTL doors.

• Omni Logistics is suing Forward Air in an attempt to force the expedited less-than-truckload (LTL) provider to complete a proposed merger between the two companies writes Bill Cassidy. “Omni believes Forward Air’s threat to terminate the transaction is unenforceable under our binding contractual agreement — and we are confident that no impediment exists to closing the transaction immediately,” Omni CEO Schickel said. Forward Air recently said it might terminate the merger plan, claiming that Omni has not complied with the terms of the deal.
• Bill Cassidy writes that the US truck brokerage market remains extremely competitive despite signs that more freight brokers, as well as truckers, are exiting the business, C.H. Robinson Worldwide executives said. “It appears that brokers generally are being more aggressive than they’ve been in the past,” using low rates to attract shippers in a very weak spot market, Dave Bozeman, president and CEO of C.H. Robinson, told Wall Street analysts Wednesday during the company’s third-quarter earnings conference call. “And I think with this kind of environment, I would expect to see more brokers struggling and going out of business, given where we’re at,” said Bozeman.
• Flexport acquired the technology platform of shuttered freight broker Convoy because the forwarder saw an opportunity to provide its importer customers with integrated truckload service, CEO Ryan Petersen told the Journal of Commerce. Eric Johnson writes that for Petersen, the lure of the deal was in being able to add an established set of tools for drivers and shippers to satisfy demand from Flexport customers for US truckload service. The forwarder had avoided building its own freight brokerage, he said, because the market was already overcrowded. Flexport had been integrated with Convoy since the two companies agreed to a partnership in 2021 — one that was primarily focused on giving Flexport’s international forwarding customers a built-in pipeline to truckload capacity through Convoy’s driver app, Petersen said.

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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