Freight Forward - Slow and Steady

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.

Happy 2023 to all! Slow-downs continue as supply chains return to some semblance of normalcy after three years of upheaval.

According to the chief commercial officer at the forwarder Farrow, David Bennett, the most important lesson to be learned from three years of upheaval is that port-related supply chains and inland infrastructure in the US unequivocally cannot handle sustained surges in cargo volume. “The entire infrastructure was ill-prepared for this surge,” Bennett said on the Journal of Commerce’s Port Performance webcast last month.

Indeed, ports, shipping lines, and other supply chain participants are correcting past mistakes, building more resiliency in networks, and in some cases, launching new services.

Ocean Network Express (ONE) signed agreements to acquire a controlling stake in the TraPac terminals at the ports of Los Angeles and Oakland and the Yusen terminal in Los Angeles. 

“The newly acquired container terminals will safeguard ONE’s access to terminal capacity in key and strategic gateways, support its growth ambitions, and enhance its service offerings to customers,” the carrier said in a press release. 

By coordinating its carrier and terminal operations at West Coast ports, ONE intends to expedite the flow of containers from its vessels through the terminals and onto inland destinations.

“The recent disruptions to the supply chain due to COVID-19 have highlighted the importance container terminals play in keeping global trade flowing,” ONE said in the release. 

Meanwhile, larger ships will be deployed on the Asia-Europe and trans-Atlantic trades as part of a reconfigured THE Alliance network that members Hapag-Lloyd, Ocean Network Express, HMM, and Yang Ming will roll out in April 2023. 

A series of new fuel-efficient ships of 23,500 TEU — part of a 12-ship order by Hapag-Lloyd — will begin to replace smaller vessels on the Asia-North Europe trade lane as the ships are delivered from April and will be integrated with megaships from ONE and HMM, THE Alliance announced

“This is part of THE Alliance’s ongoing commitment to offer more sustainable services by minimizing the carbon footprint of its service network,” the group said in a statement. 

But it is also part of a concerted move toward deploying bigger ships that make fewer port calls while cutting down on transshipment, as outlined by Hapag-Lloyd CEO Rolf Habben Jansen in a media briefing. 

“It is also important to simplify transshipment,” Habben Jansen said. “We used to do transshipment in quite a few locations, but we want to consolidate that to 10 to 12 hubs around the world because we believe it makes our network more resilient.” 

A new fee to reduce container buildup at the Port of Houston will go into effect Feb. 1. “The sustained import dwell Fee is intended to minimize long-term storage of containers on the terminals and promote fluidity of cargo movement,” Roger Guenther, executive director at Port Houston, said in the statement. “We’ve seen during the recent increase in demand that containers sitting on terminals for an extended period of time are a challenge. We are implementing this additional tool to help optimize space at our terminals and keep goods moving to the consumers in our region who need them.” 

As ports and shipping lines prepare for the new year, new services are entering the market. Sealand is partnering with a Florida-based ocean carrier to restart direct service between the US and Venezuela, a move that comes as Washington has eased long-standing sanctions against Caracas in a bid to re-establish access to what it hopes will be growing volumes of Venezuelan oil. 

Bad weather and a surge in COVID-19 cases are hitting productivity at major ports in China and South Korea, leading to longer wait times and vessel queues, carriers and analysts say.   

Hapag-Lloyd and Ocean Network Express (ONE) said bad weather delays were particularly acute at Ningbo and Qingdao, while Busan is restricting gate-in for export and transshipment cargo to alleviate severe yard congestion.   

Maritime research firm Linerlytica said soaring COVID-19 numbers in China have also hit operations at terminals and ports in the Yangtze and Pearl River deltas and at Bohai Bay.   

“Congestion has built up around the Chinese ports of Shanghai, Ningbo, and Qingdao over the past week, pushing up the number of container ships waiting at Chinese anchorages to 850,000 TEU — the highest levels seen since September,” the firm said in a recent commentary.  

Linerlytica said congestion and vessel queues at Chinese ports could worsen in the run-up to the start of the Lunar New Year on Jan. 22 as COVID-19 infections continue to surge, affecting the number of dockers turning up for work.   

China announced it had stopped recording the number of new cases on Dec. 14 after ending its three-year zero-COVID policy a week earlier following widespread public unrest against the lockdown, quarantine, and testing measures. 

Air

• MSC Air Cargo will launch an Incheon-Indianapolis route as a complementary service to its container shipping solutions, according to the Incheon International Airport Corp. The cargo carrier plans to begin operating two flights a week on the Indianapolis route on Jan. 1 and expand the number of flights in the first half of 2023.
• According to Bloomberg and other news outlets, Amazon is looking to sell excess space on its cargo planes. If true, this should not come as a surprise as Amazon continues to evolve into a third-party logistics provider.

Inland

November domestic intermodal volumes fell to their lowest November level in seven years. On a year-over-year basis, volumes in North America fell just over 7%, according to the Intermodal Association of North America (IANA). Union Pacific Railroad, which will reduce contract rates by 3.3% for the 12 months beginning Feb. 1 compared with the current period, sources told the Journal of Commerce. The contract rates cover low-volume shippers using 53-foot containers labeled “UMAX” and “EMP.”  

Norfolk Southern Railway (NS) closed one of its two container spillover lots outside Memphis on following a sharp decline in import volumes moved via Savannah since October. Another spillover lot outside Memphis operated by Cargomatic will remain open for now. NS also said it is adding extra capacity to its Rossville terminal outside Memphis to better handle future surges in cargo flow. 

The closure of the Raines Road lot can be tied to improved conditions in Savannah, which is the primary feeder into Memphis.

Last-Mile

•  UPS’ 2023 GRI went into effect on Dec 27, and its demand surcharge (Originally named the COVID-Peak surcharge, which was introduced in 2020) was extended until further notice.
• FedEx’s 2023 GRI goes into effect today, Jan 2.
• Amazon officially began making last-mile deliveries with drones to customers in Lockeford, California, and College Station, Texas. Meanwhile, Walmart expanded its drone delivery service into select markets in Texas, Arizona, and Florida.

Economic Outlook

• Tuesday, Jan 3 – S&P final US PMI for December
• Wednesday, Jan 4 – ISM Manufacturing Index for December – Expected month-to-month decline from 49% in November to 48.8% in December.
• Friday, Jan 6 – Unemployment rate for December – No change from November is expected.

For Journal of Commerce subscribers, the 2023 Review and 2023 Outlook is out. Check out some of the articles on the website.

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

For readers interested in reading more JOC stories, click on CATHYR20 to receive a 20% discount (Note this is for first-time subscribers.).

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