Freight Forward: Volumes Slowly Recovering

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

• #BreakBulk24 - Laurence Allan, executive director and head of Europe insights and analysis at S&P Global Market Intelligence speaking at the start of the Journal of Commerce’s Breakbulk & Project Cargo Conference in New Orleans, said the shipping industry should pay particular attention to what more than six dozen political elections happening globally this year mean for future climate regulation, with the June 6-9 European Parliament elections at the forefront of places to watch writes Eric Johnson.

• #BreakBulk24 – Of the 1,070 vessels in the market, approximately one-third are 16 years or older, placing them in a category where they can no longer serve certain shippers that require ships to be no older than 15 years, said Yorck Niclas Prehm, head of research at shipbroker Toepfer Transport. Ulrich Ulrichs, CEO of BBC Chartering, said owners have been rational since the pandemic, refraining from ordering too many ships. “There’s also the factor that a ship ordered today is more efficient and has more capabilities than a similar ship ordered 10 years ago,” Ulrichs said. “So it’s not an old ship comes out and a new ship comes in, but rather you have some capacity and efficiency advantages even if overall the fleet shrinks Eric Johnson writes from the Breakbulk conference. 

• Green fuels for shipping were included in the list of clean energy technologies adopted by the European Parliament’s Net-Zero Industry Act that was passed in a move aimed at scaling up production capacity to meet 40% of demand by 2030. The legislation, adopted by the European Parliament at the last plenary meeting of its current five-year term, adds advanced biofuels and e-fuels to the net-zero technologies that will be supported, which shipowners believe are vital if the European Union is to meet its 2050 decarbonization targets writes Greg Knowler.

• MSC is set to return to the booming vehicle carrier market with a friendly $698 million bid for Oslo-headquartered tonnage provider Gram Car Carriers in a takeover that is expected to be completed by the year’s end writes Keith Wallis.

• The Panama Canal Authority (ACP) announced that starting in the second half of May, it would allow 31 ships to transit the canal daily, up from 24 ships each day during the first half of May writes Michael Angell. The number of ships allowed to transit will increase to 32 by the start of June writes Michael Angell. But the container shipping industry still needs to plan around the risk that transit restrictions could impact operations in the future, Stuart Sandlin, Hapag-Lloyd’s North American president said at the Georgia International Trade Conference. 

• The city of Baltimore attorneys filed a claim with federal court in northern Maryland seeking to block a petition from Grace Ocean and Synergy Marine that would limit damages from the Dali’s collision with the bridge writes Michael Angell. httpThe city of Baltimore attorneys filed a claim with federal court in northern Maryland seeking to block a petition from Grace Ocean and Synergy Marine that would limit damages from the Dali’s collision with the bridge writes Michael Angell.

Columns

• Opinions mixed on potential for disruption as ILA contract deadline inches closer – Peter Tirschwell

• CSX CEO stumps for more labor-friendly, service-focused railroading - Mark Szakonyi

Earnings

• Kuehne Nagel expects the growth in air and ocean volume seen in its first quarter results to continue into the second half of the year but says the positive contribution to rate levels from the Red Sea disruption will not be felt beyond the second quarter writes Greg Knowler. “We believe from a rate perspective the situation will normalize from the back end of the second quarter,” CEO Stefan Paul told analysts. “What we expect in Q2 is a positive uptick in volume over Q1 and year over year there should be 2% to 5% growth.”

• DSV’s ocean freight volume increased 8.2% year over year to 637,000 TEUs, while air freight rose 2.3% to 335,000 tons writes Greg Knowler.  “We are quite confident we can continue to drive the company forward in the way we have seen in Q1,” DSV CEO Jens Lund told analysts during an earnings call last week, adding that bookings in the forwarder’s air and ocean pipeline pointed to volume growing for the rest of the year.

• Old Dominion Freight Line’s LTL revenue rose 1.6% to $1.45 billion during Q1 and its net profit rose 2.5% to $292.3 million writes Bill Cassidy. “The Yellow exit provided a once-in-a-generation opportunity to gain capacity quickly, but it came at a cost,” Greg Plemmons, executive vice president and COO said. “We feel our consistent expansion strategy is better for us, even though we made an early pass at buying the whole lot.”

• Knight-Swift announced a $2.6 million net loss for the first quarter, while operating profit dropped 85.8% to $20.6 million. Total revenue rose 11.3% year over year to $1.8 billion, buoyed by the acquisition last year of U.S. Xpress Enterprises writes Bill Cassidy. “There’s not as much slack in the supply chain as there once was,” Adam Miller, CEO of Knight-Swift Transportation Holdings, said during a Q1 earnings call. “We’re getting closer to a balance of supply and demand where we see just a little bit of an uptick [in demand] and demand start to eat up capacity in certain markets.”

• Hub Group reported a 10% year-over-year decline in Q1 volume. But volume in April is up 16% year over year through mid-week and 11% higher than March writes Ari Ashe. “We’ve outperformed our initial view of what we’d be doing on volume, but pricing has been more challenged to get that volume,” Hub Group CEO Phil Yeager said on an earnings call. “We assumed ... that we would see an inflection to positive pricing in the second half. We’re assuming now that’s going to be more flattish.”

Inland

Intermodal

• CSX Transportation CEO Joe Hinrichs speaking at the Georgia International Trade Conference last week, said activist investors have put pressure on railroads to look at operating margins more than the service itself provided to shippers writes Ari Ashe.

• Estes Express Line, XPO and Saia, all of which purchased large numbers of terminals from Yellow, are opening terminals this month, including some refurbished facilities they acquired from the bankrupt carrier. And they plan to open more sites in the coming months writes Bill Cassidy.

Trucking

• Knight-Swift will open 32 LTL terminals this year writes Bill Cassidy. That total includes 25 facilities Knight-Swift acquired from defunct LTL provider Yellow. In addition to acquiring terminals and real estate, Knight-Swift continues to look for companies that could be added to its LTL network. “We plan to continue down the path of organic growth, but also maintain a desire to acquire LTL companies that will provide a foothold in the Southwest and Northeast regions,” CEO Adam Miller said.

Parcels

• Bill Cassidy writes that US average daily package volumes (ADV) at UPS were lower than from year-ago levels in the first quarter, but the monthly rate of decline slowed as the quarter progressed, CEO Carol Tomé told analysts during the company’s Q1 earnings call. “In line with recent trends, we continue to see a shift from air to ground as customers prioritize cost savings over transit times by taking advantage of our ground services,” CFO Brian Newman said during the earnings call.

• Additional info from UPS’ Q1 call from my ACN column - USPS announced on April 1 that UPS will become its primary domestic air carrier effective Sept. 30 for a five-and-a-half-year minimum base term. UPS’ Tome noted that the contract “fits beautifully with our B2B volumes.” But it will also be beneficial for this year’s peak season. Tome told analysts that UPS expects a “perky peak” this year. For the USPS contract, UPS will use its integrated network, allowing it to bypass UPS Worldport as needed to fly between regional air gateways. UPS does not plan to add planes because it has “plenty of space on its existing planes” and plans to hire fewer than 200 pilots to support the contract, Tome said.

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