Freight Forward - No Congestion. Zero. Zip.

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 US’ two largest container gateways, Los Angeles-Long Beach and New York-New Jersey are returning to pre-pandemic efficiency levels, although it will take some time for ports along the South Atlantic and Gulf Coast to achieve more normal cargo flow, according to APM Terminals (APMT).

The ports of Los Angeles and Long Beach are congestion-free and can handle more cargo when it materializes. “There is no congestion. Zero. Zip. This gateway is fluid,” Leo Huisman,  APMT’s managing director/Americas region told JOC in an interview.

“The health of a terminal is driven by dwell times,” said Huisman.

Indeed, JOC’s Peter Tirschwell takes a look at the historic buildup in his latest column. According to Tirschwell, the core reason for the vessel backlogs is inadequate flow through marine terminals. The reason ships spend more time at berth is that it takes longer to load and unload them - too many containers dwelling on the terminal slows vessel operations. The results of that core phenomenon directly led to the supply chain upheaval that continues to impact flow to this day in the form of long delays in US supply chains, loss of sales, extended lead times challenging the accuracy of demand forecasting, and over-ordering to “prime the pump” of inventory.

No congestion means little trade, to some extent, and, as a result, container spot rates from Asia to North America are falling below post-pandemic levels. In addition, new tonnage is set to push the container shipping industry into overcapacity. As such, the most profitable days for ocean carriers are behind them and the trade lane is ripe for a rate war according to JOC’s Mark Szakonyi.

Container lines are in for a “bumpy ride,” but the industry will not return to the scale of losses seen in 2016, and long-term rates will not dip below costs, Hapag-Lloyd CEO Rolf Habben Jansen said in a Nov 10 briefing.  

Some normalcy is popping up in inland rail terminals. Union Pacific Railroad (UP) will remove the caps on demurrage fees at seven inland terminals effective Nov. 28, the result of fewer containers piling up in Southern California amid a sharp decline in port volumes, the western US railroad told JOC.com.

The caps on rail demurrage will be lifted in Council Bluffs (Iowa), Dallas, Denver, Houston, Memphis, Salt Lake City, and St. Louis. The caps were put in place because shippers were incurring penalties of more than $10,000 on containers that were rendered inaccessible because they were buried deep in stacks.

But, fees will remain in place in Chicago, El Paso (Santa Teresa), and Kansas City, at least for now.

Status quo for rails until Dec 9

While there continue to be improving conditions across supply chains, there are issues yet to be resolved such as the West Coast ILWU contract, which expired on July 1, and rail contracts. The International Association of Sheet Metal Workers Air, Rail, and Transportation (SMART-TD) is the latest to reject its contract. Four rail unions have now turned down the deal, while eight have approved it. 

Meanwhile, water levels on the Mississippi River remain at historic lows, causing delays and restricting how much cargo can be loaded per barge, according to carriers moving project and breakbulk cargo on the US inland waterway system.

The Mississippi’s navigational channel is about 30% narrower than normal, Mike Little, managing director of Float Freight estimates, while low water levels are forcing barges to load light. The major problems are on the lower Mississippi below Cairo, Illinois, where there are no locks to help control water flow. “The upper Mississippi and Ohio are not as bad, although still very low,” Little said.

Because of the drought-related delays, shippers need to plan ahead and allow more time, especially if they need to use hopper, or covered, barges, as there is a shortage “because so many are tied up waiting. They can’t move,” Little said, adding shipments have been taking from 30% to 50% longer than normal.

Maersk is extending its green logistics solutions inland. According to Maersk, the bulk of emissions from ocean freight shippers are generated from onshore activities, and Maersk believes rolling out land-based green logistics solutions is the crucial next step in meeting net-zero targets.

“Our costumers' emissions in logistics are mostly land-based,” Clerc said. “For many of them, shipping is a relatively small part of their emissions, so customers are looking to Maersk for end-to-end solutions that can allow them to plan a green product from production to shelf.”

The carrier plans to extend its ECO Delivery product to its warehouse, terminal, and trucking operations with the goal to reach net-zero transport across all its global operations. Currently, 3% of Maersk’s total volume is shipped via the ECO Delivery product and Clerc is expecting the percentage to grow “significantly” through 2023.

Kuehne Nagel has expanded its controlled air cargo network with the launch of its first branded freighter aircraft, but the new capacity will be entering a weakening market that is in the middle of a non-existent peak season.

The Boeing 747-8F is the first of two such freighters on long-term charter from Atlas Air, with the second freighter carrying the livery of subsidiary Apex Logistics to be delivered in the first quarter of next year. T

Both planes will be deployed on trans-Pacific routings and linked with Kuehne Nagel’s intra-Asia network.

“This is a strategic initiative of Kuehne Nagel based on long-term customer demand, and it will be fully utilized,” a spokesperson for K N told JOC.com. 

Retailers are bringing management of last-mile transportation legs in-house in an attempt to improve on-time delivery rates, customer experience levels, and costs.

•  We now have 100% of our appliance delivery volume managed through our market delivery operations. This has significantly improved the customer experience. On-time and complete deliveries have increased meaningfully, and customer satisfaction metrics have increased by approximately 6% compared to the third quarter of last year,” Jeff Kinnaird, executive vice president of merchandising at The Home Depot, said on a Q3 earnings call in mid-November.
• “We deployed new delivery software to leverage the gig economy, as well as our extensive vehicle fleet,” Advanced Auto Parts President and CEO Tom Greco, said on a Nov. 15 third-quarter earnings call. “This enables us to improve delivery speed and consistency on the weekend when our [professional] customers are relying on us while reducing fixed costs over time.”
• “We continue to get smarter about where demand is and how best to service that demand,” Macy’s CFO Adrian Mitchell said during a Q3 earnings call Nov. 17, adding that delivery expense amounted to 4.3 percent of net sales in the quarter.

• Tuesday, Nov 29 – Consumer Confidence for November – MarketWatch expects a decline from October’s 102.5
• Wednesday, Nov 30 – 2nd revision of Q3 GDP – Expectation of a slight upward revision from 2.6% to 2.7%.
• Thursday, Dec 1 – S&P PMI for November – Flash PMI noted a decline.
• Thursday, Dec 1 - S&P Caixin China General Manufacturing PMI for November - Expectations are for a decline from October.

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