Freight Forward: Rates heading up

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 express and parcel last-mile queries.

Ocean:

• The Port of Baltimore plans to handle the return of cargo at the end of May writes Mark Szakonyi. Container lines have told the port authority they have begun accepting bookings for shipments to the port, Jonathan Daniels, CEO of the Maryland Port Authority, told Mark.

• Spot rates sought by carriers are set to increase more than $1,000 per FEU based on May 1 GRIs filed last month by most of the liners in the eastbound trans-Pacific. Carriers and NVOs expect the rate hikes to stick in the short term as vessels leaving Asia are forecast to be full well into May writes Bill Mongelluzzo.

• #Breakbulk24 - Investments in clean energy technology are projected to capture all the growth in global energy spending by the end of the decade, overtaking oil and gas exploration and production to become the dominant spending segment, according to Amy Groeschel, research and analysis associate director for S&P Global. However, even as energy priorities shift, oil and gas will continue to provide 55% of the world’s energy, Groeschel told attendees at the Journal of Commerce’s Breakbulk and Project Cargo Conference in New Orleans writes Autumn Giusti.

• Strong demand on the Asia-Europe trade is filling all available ocean capacity out of Asia as space constraints join the list of challenges facing the market that includes longer transit times, rising rate levels and Red Sea surcharges writes Greg Knowler. “All our named accounts are fully booked right now through May into June, and we hear from our customers that they expect the volumes to stay at high levels,” Marc Meier, managing director for air and sea for Europe, Middle East and Africa at Dachser, told a Journal of Commerce webinar.

• According to local freight forwarder sources, Hapag-Lloyd has begun offering guaranteed space on its India-US connections for clients willing to pay a premium writes Bency Mathew.

• Cosco Shipping and OOCL will launch an express service between Asia and Mexico in early May. MSC meanwhile, will launch a similar China-Mexico shuttle starting from Qingdao on May 15 writes Keith Wallis. The Loadstar reported that CMA CGM will also introduce an express service beginning May 11.

•  Hapag-Lloyd launched Live Position which provides door-to-door visibility using sensors that have been deployed in two-thirds of Hapag-Lloyd’s fleet of approximately 1.6 million dry boxes thus far writes Eric Johnson.

Columns & Commentaries

• Ship attacks, seizures highlight perilous reality for commercial shipping - Lars Jensen, CEO & Partner, Vespucci Maritime

• Can PSR span the chasm between two differing visions of railroad’s future? – Ted Prince, founder and CEO, Tri-Cities Intermodal LLC

Earnings

• Forced diversions around southern Africa to avoid attacks against shipping in the Red Sea helped reverse downward pressure on ocean rates in early 2024 and allowed Ocean Network Express (ONE) to report net profit just shy of $1 billion for its financial year ending March 31 writes Greg Knowler. Meanwhile, Cosco Shipping Group, meanwhile, reported a 1.2% decline in Q1 revenue in its container shipping business while net profit fell 20%.

• Maersk said Q1 demand on the Asia-Europe trade was up 9% year over year, but jumped even higher in other regions, with Asia-North America volume up almost 28%, West Africa rising 18% and Latin America volumes jumping 22%. The first quarter is a historically weak period for container shipping. The carrier reported Q1 revenue down 13% year over year and net profit fell 91% compared with Q1 2023 writes Greg Knowler.

Air

IATA reported March air cargo statistics last week - total demand, measured in cargo tonne-kilometers (CTKs), rose by 10.3% compared to March 2023 levels (11.4% for international operations). This is the fourth consecutive month of double-digit y/y growth. Capacity, measured in available cargo tonne-kilometers (ACTKs), increased by 7.3% compared to March 2023.

By region: The strongest of the regions came from Middle Eastern carriers which saw 19.9% y/y growth for air cargo in March. The Middle East–Europe market was the strongest performing with 38.3% growth. Middle East-Asia grew by 19.6% year-on-year. March capacity increased 10.6% year-on-year.

The weakest region was from North American carriers which saw only 0.9% y/y demand growth for air cargo in March. Demand on the North America–Europe trade lane grew by 2.9% y/y while Asia–North America grew by 4.7% y/y.  March capacity decreased by -1.9% y/y. (10.5% for international operations).

Inland

Intermodal

• Unions representing conductors and engineers with CN and CPKC have authorized a strike as soon as May 22 after 98% of the Teamsters Canada Rail Conference (TCRC) voted to walk off the job unless a new labor contract is hammered out writes Ari Ashe. Ashe also noted that the ports of Vancouver and Prince Rupert would be most negatively impacted by a potential strike, given their dependence on rail. CN singly serves Prince Rupert with the vast majority of cargo transported to the small port town via rail, and at least half of Vancouver's volumes move via rail.

• UP CEO Jim Vena, speaking at the North American Rail Shippers Conference in Chicago said strong margins are the result of an efficient railroad, not the product of picking and choosing which freight to haul.  Vena supports the concept of precision scheduled railroading (PSR), but said it would be a mistake for any railroad to shun intermodal business because it generates lower margins than other types of freight, or to cut spending so much that the railroad is not flexible enough to absorb unforeseen disruptions writes Ari Ashe.

Trucking

• Bill Cassidy writes that Saia has proved to be one of the biggest beneficiaries of the collapse of Yellow last July, increasing its average daily shipment count nearly 16% year over year in Q1 to approximately 33,000 shipments per day. In April, daily shipments are up 17%. Saia also acquired 28 terminals from Yellow through auctions late last year, and the company is preparing to open them. 

• Ryder opened a 50,000-square-foot multi-client logistics facility in El Paso, the third-largest US border crossing point in terms of northbound truck volume, according to US Bureau of Transportation Statistics data. Bill Cassidy writes that Ryder’s freight volumes are rising along the US-Mexico border, with the company handling more than 250,000 cross-border shipments a year, said Frank Bateman, Ryder’s senior vice president of supply chain services, who believes the impact of companies relocating manufacturing to Mexico is beginning to be felt.

• “The technology is improving, it’s the infrastructure that is the challenge and the cost of the technology moving forward,” Taki Darakos, vice president of vehicle maintenance and fleet service for Pitt Ohio, told the House Transportation and Infrastructure Committee. The hearing was held just over a week after new final greenhouse gas emissions rules for heavy trucks were released by the Biden administration on April 22 writes Bill Cassidy.

• XPO opened six terminals in Q1 and plans to open another six in Q2. It will open an additional 12 by the end of the year and the remainder of the 28 terminals acquired from Yellow in early 2025. In Q1, XPO’s LTL volume rose 4.7% year over year to 51,392 shipments per day, while tonnage per day rose 2.6%. CEO Mario Harik attributed those increases more to gains from existing customers than a better underlying LTL market writes Bill Cassidy.

Parcel

• From Supply Chain Dive - Walmart's GoLocal delivery service now reaches more than 18,000 ZIP codes and has evolved to handle store-to-store transfers, deliveries from fulfillment centers and big and bulky orders. UrbanStems, Sur La Table and Books-A-Million are recent clients that have joined Walmart GoLocal.

• From FT (Subscription may be required)- A discussion on de minimis tariff thresholds which make it easier for small businesses to trade internationally but also may lead to fraud, illegal drugs, unfair trade advantage and more. An interesting chart, a bit dated, in the article shows de minimis volume by country of shipment from the US Office of Trade:

That’s it for now. Please be sure to hit the subscribe button to receive the latest updates.

For readers interested in reading more Journal of Commerce stories, click here to subscribe. Enter code FFNL20 at checkout to receive a 20% discount on any subscription option. (Note that this is only for first-time subscribers or for upgrading a current subscription). 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