Freight Forward: Ocean Carriers Take Flight

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 April Global Port Tracker (GPT) survey from the NRF and Hackett Associates said import volumes should climb through summer as shippers return to more seasonal ordering patterns, writes JOC's Michael Angell. Yet at least through August, overall US imports will remain below the year-ago comparison.  “Last spring and summer were the busiest ever as consumers spent freely and retailers brought in merchandise to meet demand,” Jonathan Gold, NRF’s vice president for Supply Chain and Customs Policy, said in the GPT survey. “This year won’t repeat that, but the numbers we’re expecting would have been considered normal before the pandemic.” 

As demand continues to be lackluster, spot rates may have bottomed out on some lanes. JOC's Greg Knowler writes that blank sailings by ocean carriers on Asia-Europe managed to lift spot rates on the trade at the end of March. Data from Platts, a sister company of the Journal of Commerce within S&P Global, shows spot rates rose 8%, but the bounce does not signal an improvement in demand, say forwarders, as they expect that a sustained increase in rates will only come with a restocking drive by European importers. “Spot levels went up but only slightly, which was mainly driven by blank sailing and removing of entire loops.” Andreas Braun, regional director of ocean freight for Europe, Middle East, and Africa at Crane Worldwide Logistics, told the Journal of Commerce. 

However, labor concerns continue on the US West Coast. All international container terminals at the ports of Los Angeles and Long Beach were shut for last Thursday’s night shift and remained closed on Friday’s day shift in the latest job action taken by members of the International Longshore and Warehouse Union (ILWU) as coastwide contract talks hit their 11th month with no resolution in sight writes JOC's Bill Mongelluzzo. Sources close to the situation in Southern California noted that Thursday was the final day of Ramon Ponce de Leon’s term as president of ILWU Local 13, and suggested the job action that began Thursday night was linked to his departure. 

The union issued the following statement:

In addition, Mongelluzzo writes that the US National Labor Relations Board (NLRB) ruled that machinist jobs at a Seattle marine terminal do not belong to the US International Longshore and Warehouse Union (ILWU), further clouding the status of coastwide longshore contract negotiations that are nearing a year. The ILWU said Friday it will appeal the ruling. The controversial jurisdictional issue involving Terminal 5 in Seattle had reportedly kept talks between the ILWU and Pacific Maritime Association (PMA) at a standstill for months. In early February, sources said talks between the sides resumed when they agreed to set aside the T-5 matter, although they appear no closer to reaching a new contract.  

As ports wait for trade and labor improvements, several are investing in expansion projects to improve intermodal connections. Angell writes that the Port of New York and New Jersey, for example, received money for the construction of new crossover tracks for the Port Authority of New York and New Jersey’s (PANYNJ's) ExpressRail facility at Elizabeth. Those crossover tracks would allow trains originating from the port’s two largest container terminals to connect directly with southbound tracks adjacent to the facilities. Tyrone Harrison, manager for the PANYNJ’s intermodal rail development, told the Journal of Commerce that the Southbound Connector could be completed by the end of 2025. The easier access from the port as a whole could mean up to six more daily intermodal train departures, he said.  “It’s a big step in the right direction,” Harrison said. “With this increase, that would help out significantly through the gateway.” 

Meanwhile, the Port of Virginia is investing more than $18 million to expand capacity at two inland facilities ahead of the completion of a dredging project that will make Norfolk Harbor the deepest on the East Coast, according to JOC's Teri Errico Griffis.  The investment is part of the port’s $1.4 billion Gateway Investment Program and will allocate $15 million to nearly double the capacity at the Virginia Inland Port (VIP), an intermodal container transfer facility in Front Royal. The work would expand VIP’s rail operations and its container stack yard. The remaining $3 million will fund updates to the Richmond Marine Terminal’s (RMT) main gate and the development of a drop lot for motor carriers.  The project is scheduled to be completed in 2024. 

Griffis writes that the FMC has until mid-June to issue final rules on detention and demurrage billing. But many ocean carriers have already announced they will cease charging detention and demurrage on containers that cannot be picked up or dropped off when a terminal is closed for business.  Matt Leech, CEO of Ports America, said marine terminal operators (MTOs) will find a way to make up the D&D revenue shortfall, whether by increasing weekday charges or charging weekly.  “It doesn’t make sense not to allow a terminal to charge for storage when a container is sitting on a terminal occupying space,” Leech said. Jon Gold, vice president for supply chain and customs policy at the National Retail Federation (NRF), told the Journal of Commerce that shippers also want a finite definition of “available cargo” tied within the final FMC rulemaking. “That’s kind of the root of all this, when is cargo available,” Gold said. “It’s not necessarily when cargo comes off the ship but when it’s ready for somebody to pick it up rather than when it’s behind a closed section or buried under something else.” Robert Murray, president of the National Association of Waterfront Employers, told the Journal of Commerce, “We’re trying to protect terminal demurrage, and the last thing our members want is to become a warehouse."

Air

A joint venture between CMA CGM and Air France-KLM took flight last week following the completion of regulatory approvals, according to JOC's Greg Knowler. The strategic partnership will last 10 years, combining the cargo networks and full freighter capacity of Air France-KLM Martinair Cargo, part of Air France-KLM Group, and CMA CGM Air Cargo, part of the CMA CGM Group. The air freight partnership will provide CMA CGM customers with access to Air France-KLM’s air cargo franchise, including the handling of specialized cargo such as pharmaceuticals and perishables. For its part, CMA CGM will bring its commercial network and global logistics platform to the partnership. The current scope of the cooperation excludes North America, Russia, Turkey, and Mauritius.

Meanwhile, in another JOC story, Knowler writes that Maersk launched two new scheduled freighter flights between China and the US.  The China-US services will make use of three Boeing 767-300 freighters and will be operated by Miami-headquartered cargo airline Amerijet International.  Initially, Maersk will provide two weekly flights between Greenville-Spartanburg International Airport (GSP) in South Carolina and Shenyang Taoxian International Airport (SHE) in north China, and two weekly flights between Chicago Rockford International Airport (RFD) in Illinois and Hangzhou Xiaoshan International Airport (HGH) near Shanghai. Both services will be increased to three weekly flights from May. Maersk has also been expanding its presence on the ground in the US air cargo market, opening a new Chicago air freight gateway facility in October last year to add services for customers using Chicago O’Hare International and Rockford. 

Inland Distribution

Intermodal

JOC's Ari Ashe's analysis finds that domestic intermodal service was better in the first quarter compared with last year, but Union Pacific Railroad is lagging its competitors in several metrics, according to the Journal of Commerce Intermodal Service Scorecard and an analysis of publicly reported service data. Most respondents to the Journal of Commerce scorecard also said intermodal service across all railroads was better in Q1 than in the fourth quarter of 2022. As of April 4, 39 shippers and 28 intermodal marketing companies (IMCs) had responded to the survey. According to the Journal of Commerce survey, 58% of respondents said CSX was the best-performing railroad in the first quarter, while 59% said Union Pacific was the worst-performing.  The Intermodal Service Scorecard survey is open to all intermodal providers and domestic intermodal shippers who wish to participate through the end of April - Reach out to Ari if you're interested in participating.

Parcels/Last Mile

FedEx announced a significant reorganization in which it will combine FedEx Express and FedEx Ground and take steps to consolidate and optimize utilization in both its air and ground networks by June 2024, writes JOC's, Bill Cassidy. The move includes moving more freight now in ground trucks and tractor-trailers by intermodal rail and moving more express freight by linehaul truck that is now traveling within the US in airplanes.  FedEx says the changes will result in lower costs and greater efficiency, while potentially lowering supply chain costs for shippers. FedEx Freight will become a standalone subsidiary within a new Federal Express Corporation, alongside FedEx Custom Critical and FedEx Office. There are no plans for FedEx to sell or spin off the largest US trucking company. 

This move is a long time coming for FedEx, but in a column, I wrote for Air Cargo Next, a number of questions were left unanswered from last week’s announcement. Among them:

• It is undertaking this mighty change as it negotiates with pilots on a new contract that expired in 2021.
• The reorganization may renew questions on how employees are classified at FedEx, the Railway Labor Act, and UPS employees, the National Labor Relations Act. 
• For home deliveries, how does one reconcile the pay and other benefits differences between a FedEx Express employee and a Ground employee who technically is not even an employee of FedEx? 

Economic Outlook

• Wednesday, April 12 - March CPI - February CPI rose 0.4%.
• Thursday, April 13 - March PPI - February PPI noted that final demand for goods declined 0.1% while goods fell 0.2% and services fell 0.1%. We could see no change or perhaps a slight increase.
• Friday, April 14 - US Retail Sales for March - A decline in February may bring a slight pick-up in March as consumers benefit from retail promotions and also newer/seasonal inventories.
• Friday, April 14 - March Industrial Production - According to the Board of Governors of the Federal Reserve System, industrial production was unchanged in February, and manufacturing output edged up 0.1%.
• Friday, April 14 - February Business Inventories - In its latest Economic Indicators, the US Census reported that advanced February end-of-month wholesale inventories increased 0.2% from January. December 2022 to January 2023 percentage change was revised from down 0.3% to down 0.5%. February retail inventories increased by 0.8% from January. December 2022 to January 2023 percentage change was revised from up 0.2% to up 0.1%.

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