<div class="phx-topic abstract-wrapper">Both volumes and rates in the flatbed sector of the truckload spot market are rising as importers rush industrial products through US ports and across the border.</div>

Both volumes and rates in the flatbed sector of the truckload spot market are rising as importers rush industrial products through US ports and across the border.

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<div class="phx-topic">With tariff deadlines looming, importers are rushing to get industrial goods into the US, sending spot market demand for flatbed trucks soaring in recent weeks. That indicates importers are struggling to find the capacity to move transactional loads of goods such as machinery, steel coils and beams and agricultural equipment ahead of tariffs on Canada and Mexico, while also trying to beat new levies on steel and aluminum as well as cars and trucks from all sources. Add to that list reciprocal tariffs on a broad range of global imports that are scheduled to take effect April 2. Tariffs on Mexico and Canada are slated to be expanded April 2 as well. “No one is able to quantify how this is going to impact things, but if your business makes things with aluminum or steel or lumber, you’re buying now,” said Michael Regan, shipper consultant and chief customer relationship officer with logistics management firm TranzAct Technologies. Flatbed spot rates rose 8.3% from late February through March 25 to $2.36 per mile on the 50 largest US truckload lanes, according to DAT Freight &amp; Analytics. Excluding fuel surcharges, flatbed spot rates on Truckstop’s load boards are up about 7.5% year over year, according to research firm and Truckstop partner FTR Transportation Intelligence. Year over year, posted flatbed spot loads moved are up by double-digit percentages — 34% last week, according to FTR, and 42% on DAT’s load boards. That doesn’t indicate an inflection is coming in overall truckload demand or pricing, however. There is even a split between the spot and contract flatbed markets. Instead, the sudden increase in transactional flatbed demand and rates appears more a market distortion caused by normal seasonality combined with pre-tariff demand. “It really feels like it’s not domestic production-driven but is import activity,” said Avery Vise, vice president of trucking at FTR. Vise points out that spot market flatbed activity is strong in much of the US, especially the Southeast, but also in the Northeast and Midwest, areas with strong port gateways. “We’re seeing increases in the West as well, but much more recently than in the East,” he said. Capital goods imported from Asia would typically arrive in the ports of Los Angeles and Long Beach and move inland by rail, rather than flatbed truck, he said. “It would make sense to see a much stronger increase [in flatbed spot demand] in the East than in the West” if import volumes of heavy goods were rising, said Vise. <h3>Accelerated demand </h3>The speed and timing of the recent increase in flatbed spot activity also points to a pre-tariff pull-forward of goods, said Dean Croke, principal analyst at DAT. “We typically see flatbed demand and pricing move up over a longer trajectory headed toward May,” said Croke. “This year we’ve seen pricing move up quickly in March.” Neither the US housing market nor the manufacturing sector have seen the type of surge that would account for the spike in flatbed demand, Croke and Vise both told the Journal of Commerce. Shrinking flatbed spot market capacity is one factor in the spike, Croke said. “The overall attrition of carriers is having an effect on the specialized part of the market,” he said. Contract flatbed rates have remained stable over the past three months, rising only 2 cents to $2.57 per mile, excluding fuel surcharges, in March, according to DAT. “Large contract [flatbed] carriers are still decreasing rates to hold volume,” Croke said. The DAT flatbed replacement contract rate index is down 6.2% year over year. “The market for moving things like roofing shingles is oversupplied,” he said. It’s also likely that those large contract carriers are shifting more assets to the spot market. The flatbed volume spike will likely diminish after US tariffs take effect — if it is largely due to those tariffs. “There’s a lot of reason to think this is the case, but we’ll only know after the fact,” said Vise. Contact William B. Cassidy at <a href="mailto:bill.cassidy@spglobal.com">bill.cassidy@spglobal.com</a>.</div>

With tariff deadlines looming, importers are rushing to get industrial goods into the US, sending spot market demand for flatbed trucks soaring in recent weeks. That indicates importers are struggling to find the capacity to move transactional loads of goods such as machinery, steel coils and beams and agricultural equipment ahead of tariffs on Canada and Mexico, while also trying to beat new levies on steel and aluminum as well as cars and trucks from all sources. Add to that list reciprocal tariffs on a broad range of global imports that are scheduled to take effect April 2. Tariffs on Mexico and Canada are slated to be expanded April 2 as well. “No one is able to quantify how this is going to impact things, but if your business makes things with aluminum or steel or lumber, you’re buying now,” said Michael Regan, shipper consultant and chief customer relationship officer with logistics management firm TranzAct Technologies. Flatbed spot rates rose 8.3% from late February through March 25 to $2.36 per mile on the 50 largest US truckload lanes, according to DAT Freight & Analytics. Excluding fuel surcharges, flatbed spot rates on Truckstop’s load boards are up about 7.5% year over year, according to research firm and Truckstop partner FTR Transportation Intelligence. Year over year, posted flatbed spot loads moved are up by double-digit percentages — 34% last week, according to FTR, and 42% on DAT’s load boards. That doesn’t indicate an inflection is coming in overall truckload demand or pricing, however. There is even a split between the spot and contract flatbed markets. Instead, the sudden increase in transactional flatbed demand and rates appears more a market distortion caused by normal seasonality combined with pre-tariff demand. “It really feels like it’s not domestic production-driven but is import activity,” said Avery Vise, vice president of trucking at FTR. Vise points out that spot market flatbed activity is strong in much of the US, especially the Southeast, but also in the Northeast and Midwest, areas with strong port gateways. “We’re seeing increases in the West as well, but much more recently than in the East,” he said. Capital goods imported from Asia would typically arrive in the ports of Los Angeles and Long Beach and move inland by rail, rather than flatbed truck, he said. “It would make sense to see a much stronger increase [in flatbed spot demand] in the East than in the West” if import volumes of heavy goods were rising, said Vise. Accelerated demand The speed and timing of the recent increase in flatbed spot activity also points to a pre-tariff pull-forward of goods, said Dean Croke, principal analyst at DAT. “We typically see flatbed demand and pricing move up over a longer trajectory headed toward May,” said Croke. “This year we’ve seen pricing move up quickly in March.” Neither the US housing market nor the manufacturing sector have seen the type of surge that would account for the spike in flatbed demand, Croke and Vise both told the Journal of Commerce. Shrinking flatbed spot market capacity is one factor in the spike, Croke said. “The overall attrition of carriers is having an effect on the specialized part of the market,” he said. Contract flatbed rates have remained stable over the past three months, rising only 2 cents to $2.57 per mile, excluding fuel surcharges, in March, according to DAT. “Large contract [flatbed] carriers are still decreasing rates to hold volume,” Croke said. The DAT flatbed replacement contract rate index is down 6.2% year over year. “The market for moving things like roofing shingles is oversupplied,” he said. It’s also likely that those large contract carriers are shifting more assets to the spot market. The flatbed volume spike will likely diminish after US tariffs take effect — if it is largely due to those tariffs. “There’s a lot of reason to think this is the case, but we’ll only know after the fact,” said Vise. Contact William B. Cassidy at bill.cassidy@spglobal.com .

Trucking News

Flatbed

Surface

Pre-tariff imports seen driving US flatbed spot demand higher

<div class="phx-topic abstract-wrapper">Forwarders say they are seeing utilization only near 50% on the Asia-Mexico lane amid seasonally low demand and tariff uncertainties. </div>

Forwarders say they are seeing utilization only near 50% on the Asia-Mexico lane amid seasonally low demand and tariff uncertainties.

<div class="phx-topic">The Mexican Pacific ports of Lazaro Cardenas and Manzanillo are experiencing delays of up to five days as they face operational challenges caused by bigger ships calling the gateways. “A couple of years ago, the biggest ship arriving in Mexico was about 10,000 TEUs,” said Nicolas Portenza, president of Eternity International Freight Forwarder México. “Now you have Maersk, MSC [Mediterranean Shipping Company] and CMA CGM arriving with vessels between 12,000 TEUs and 16,000 TEUs to a port that is the same size.” As such, sources say carriers had difficulty in March filling vessels, many of which were <a href="https://www.joc.com/article/carriers-boost-tonnage-on-asia-wcsa-to-meet-growing-manufacturing-demand-5950892">brought on recently due to manufacturing growth in Latin America</a>. Freight forwarders say they are seeing utilization near 50% as seasonally low demand combined with tariff uncertainties drive down demand on the Asia-Mexico lane. But despite the bearish market signals, some sources expect a turnaround soon. “I think it will recover during April and May,” Portenza told the Journal of Commerce. “Demand is not weak per se, it’s just not keeping up with the [vessel] supply.” Still, industry sources are paying attention to talk of even more capacity to come serving Central America and the West Coast of South America (WCSA). “There is news of new services to Mexico and also to WCSA,” said a forwarder source with cargo on the lane. “It will be a bloodbath if they come.” <h3>Decreasing blank sailings </h3>Meanwhile, the Asia to West Coast South America and Central America lane is positioned for fewer blanks in April as forwarders report green shoots of demand, although it may not be enough to offset the increased vessel sizes and excess capacity. eeSea as of Monday reports that no blanks are forecast on the lane in April, down from 12 blank sailings in March that accounted for about 12.2% of the total capacity for WCSA imports from Asia. March marked the highest number of blank sailings observed on the trade since September, a likely response to <a href="https://www.joc.com/article/new-capacity-coming-to-asia-mexico-trade-despite-recent-rate-pressure-5967003">several capacity injections on the lane</a> in the past several months. According to Eternity International, the Asia to Mexico lane had a total of five blank sailings spread among four carriers in March, although that is expected to drop to three blanks in April, all from Cosco. Spot rates from Asia to WCSA were pegged at $1,400 per FEU as of Monday, down 46.1% from the first week of January and lower by the same amount year over year, according to Platts, a sister company of the Journal of Commerce within S&amp;P Global. Contact Laura Robb at <a href="mailto:Laura.Robb@spglobal.com">laura.robb@spglobal.com</a>.  </div>

The Mexican Pacific ports of Lazaro Cardenas and Manzanillo are experiencing delays of up to five days as they face operational challenges caused by bigger ships calling the gateways. “A couple of years ago, the biggest ship arriving in Mexico was about 10,000 TEUs,” said Nicolas Portenza, president of Eternity International Freight Forwarder México. “Now you have Maersk, MSC [Mediterranean Shipping Company] and CMA CGM arriving with vessels between 12,000 TEUs and 16,000 TEUs to a port that is the same size.” As such, sources say carriers had difficulty in March filling vessels, many of which were brought on recently due to manufacturing growth in Latin America . Freight forwarders say they are seeing utilization near 50% as seasonally low demand combined with tariff uncertainties drive down demand on the Asia-Mexico lane. But despite the bearish market signals, some sources expect a turnaround soon. “I think it will recover during April and May,” Portenza told the Journal of Commerce. “Demand is not weak per se, it’s just not keeping up with the [vessel] supply.” Still, industry sources are paying attention to talk of even more capacity to come serving Central America and the West Coast of South America (WCSA). “There is news of new services to Mexico and also to WCSA,” said a forwarder source with cargo on the lane. “It will be a bloodbath if they come.” Decreasing blank sailings Meanwhile, the Asia to West Coast South America and Central America lane is positioned for fewer blanks in April as forwarders report green shoots of demand, although it may not be enough to offset the increased vessel sizes and excess capacity. eeSea as of Monday reports that no blanks are forecast on the lane in April, down from 12 blank sailings in March that accounted for about 12.2% of the total capacity for WCSA imports from Asia. March marked the highest number of blank sailings observed on the trade since September, a likely response to several capacity injections on the lane in the past several months. According to Eternity International, the Asia to Mexico lane had a total of five blank sailings spread among four carriers in March, although that is expected to drop to three blanks in April, all from Cosco. Spot rates from Asia to WCSA were pegged at $1,400 per FEU as of Monday, down 46.1% from the first week of January and lower by the same amount year over year, according to Platts, a sister company of the Journal of Commerce within S&P Global. Contact Laura Robb at laura.robb@spglobal.com . 

Maritime

Port News

Container lines

Trans-Pacific

International ports

Container Shipping News

Key Mexican container ports facing delays amid calls by larger vessels

<div class="phx-topic abstract-wrapper">The carrier is deriving an increasing share of its revenue from long-haul trans-Pacific and Asia-Europe services while the contribution from the intra-Asia trade declined last year.</div>

The carrier is deriving an increasing share of its revenue from long-haul trans-Pacific and Asia-Europe services while the contribution from the intra-Asia trade declined last year.

<div class="phx-topic">Taiwan’s Yang Ming Marine Transport will buy three 8,000-TEU methanol-ready container ships from Japanese owner Shoei Kisen Kaisha for up to $360 million as the initial stage of a wider plan to acquire up to 13 vessels of between 8,000 and 15,000 TEUs. The vessels “will strengthen Yang Ming’s global service network” as it increases its focus on long-haul trades, the carrier said in a statement. The ships are under construction at Japan’s Imabari Shipbuilding and are due for delivery between 2028 and 2029. Yang Ming said the total cost of the vessels would be between $339 million and $360 million. The deal was confirmed Friday ahead of an investors conference Monday that showed Yang Ming is deriving an increasing share of revenue from long-haul trans-Pacific and Asia-Europe services, while the contribution from its intra-Asia trade declined year over year. Acquisition of the other vessels under the expansion plan “will be carried out in accordance with internal procurement procedures to ensure mid- to long-term fleet stability and maintain service quality,” the carrier said. It gave no timeline for the remaining vessel acquisitions. Yang Ming’s directors agreed in December to acquire new ships to expand its network and replace 5,500-TEU and 6,500-TEU ships that are more than 20 years old. The carrier said it operated 99 vessels totaling 723,107 TEUs in the first quarter, including 38 chartered-in ships. Figures released during Monday’s conference show trans-Pacific and Asia-Europe services each contributed 38%, equivalent to $2.7 billion, to total revenue of $7 billion last year amid stronger freight rates. That compared with 35% for each trade in 2023, but on lower total revenues of $4.5 billion. The contribution from core intra-Asia services dropped to 9% last year from 12% a year earlier, while the proportion of revenues from longer-haul intra-Asia services to India and the Middle East also fell, to 15% from 18% in 2023. Yang Ming said it saw a mixed freight rate environment in January and February, with rates dipping last month on lower cargo volumes. Still, average revenue per TEU was $1,256 in the first two months, higher than $1,096/TEU the carrier recorded in the first two months of last year. Yang Ming said it expects cargo volume in the second quarter to “recover from the low levels in the first quarter,” although it acknowledged that new tariffs, geopolitical conflicts and ongoing port congestion are creating uncertainty in the market. Contact Keith Wallis at <a href="mailto:keithwallis@hotmail.com">keithwallis@hotmail.com</a>.</div>

Taiwan’s Yang Ming Marine Transport will buy three 8,000-TEU methanol-ready container ships from Japanese owner Shoei Kisen Kaisha for up to $360 million as the initial stage of a wider plan to acquire up to 13 vessels of between 8,000 and 15,000 TEUs. The vessels “will strengthen Yang Ming’s global service network” as it increases its focus on long-haul trades, the carrier said in a statement. The ships are under construction at Japan’s Imabari Shipbuilding and are due for delivery between 2028 and 2029. Yang Ming said the total cost of the vessels would be between $339 million and $360 million. The deal was confirmed Friday ahead of an investors conference Monday that showed Yang Ming is deriving an increasing share of revenue from long-haul trans-Pacific and Asia-Europe services, while the contribution from its intra-Asia trade declined year over year. Acquisition of the other vessels under the expansion plan “will be carried out in accordance with internal procurement procedures to ensure mid- to long-term fleet stability and maintain service quality,” the carrier said. It gave no timeline for the remaining vessel acquisitions. Yang Ming’s directors agreed in December to acquire new ships to expand its network and replace 5,500-TEU and 6,500-TEU ships that are more than 20 years old. The carrier said it operated 99 vessels totaling 723,107 TEUs in the first quarter, including 38 chartered-in ships. Figures released during Monday’s conference show trans-Pacific and Asia-Europe services each contributed 38%, equivalent to $2.7 billion, to total revenue of $7 billion last year amid stronger freight rates. That compared with 35% for each trade in 2023, but on lower total revenues of $4.5 billion. The contribution from core intra-Asia services dropped to 9% last year from 12% a year earlier, while the proportion of revenues from longer-haul intra-Asia services to India and the Middle East also fell, to 15% from 18% in 2023. Yang Ming said it saw a mixed freight rate environment in January and February, with rates dipping last month on lower cargo volumes. Still, average revenue per TEU was $1,256 in the first two months, higher than $1,096/TEU the carrier recorded in the first two months of last year. Yang Ming said it expects cargo volume in the second quarter to “recover from the low levels in the first quarter,” although it acknowledged that new tariffs, geopolitical conflicts and ongoing port congestion are creating uncertainty in the market. Contact Keith Wallis at keithwallis@hotmail.com .

Yang Ming to buy three 8,000-TEU ships in first stage of fleet expansion

<div class="phx-topic abstract-wrapper">In creating the threat of a clearly significant penalty, the US Trade Representative essentially forced observers to not merely give a thumbs up or down to the proposal, but to offer alternative solutions. </div>

In creating the threat of a clearly significant penalty, the US Trade Representative essentially forced observers to not merely give a thumbs up or down to the proposal, but to offer alternative solutions.

<div class="phx-topic">Hearings this week held by the US Trade Representative (USTR) over the potential levying of fees on Chinese-built and -operated ships calling at US ports certainly struck a nerve in the maritime industry. The Section 301 investigation, officially known as “China’s Targeting of the Maritime, Logistics, and Shipbuilding Sectors for Dominance,” prompted 520 comments submitted to the USTR by the March 24 deadline. More than 60 individuals gave testimony over two days of hearings. Perhaps the process was designed to elicit the heavy response the USTR received. <div class="wrapper-narrow float-right-element"><img src="/images/phoenix/5971718_0.1.jpg"></img></div>By proposing fees of up to $1.5 million per US port call by Chinese tonnage, the industry had no option but to take notice. Some providing comments and testimony noted that the imposition of such fees would create an existential threat to their ability to serve US trades or specific ports, or, in some cases, to operate at all. In creating the threat of a clearly significant penalty, the USTR essentially forced those commenting to not merely give a thumbs up or down to the proposal, but to give alternative solutions based on the assumption that the Trump administration wanted something to be done to stimulate US shipbuilding. <h3>‘Think creatively’ </h3>“This essentially turned into a big brainstorming session,” Lauren Beagen, a trade attorney and former counsel at the US Federal Maritime Commission, told the Journal of Commerce this week. Beagen said the hearings forced the industry to think about ways that would allow the Trump administration to progress in its goals toward revitalizing the shipbuilding industry and US merchant fleet that likely wouldn’t have happened if the proposed penalties weren’t severe. “If the USTR just held a public hearing about how trade policies were impacting our shipbuilding industry, no one would have come,” she said. “This made everyone pay attention, and it also forced them to think creatively. How else would you have gotten the entire industry together to brainstorm like this.” To wit, a number of comments submitted to the USTR said the proposed fees were unworkable, but also had alternative suggestions to help invigorate US shipbuilding. The National Association of Waterfront Employers (NAWE), for instance, urged the USTR to consider a per-sailing fee, rather than a fee per port call, to prevent ocean carriers from consolidating port calls and hurting economic interests at US secondary and tertiary ports. <h3>Phased approach </h3>The Duluth Seaway Authority suggested the USTR phase in the port call fees and adopt a tiered approach to assessing the fees based on vessel and cargo types and the economic impact to the region. Similarly, the Port of New York and New Jersey said a phased approach to enforcing the fees would not penalize carriers for vessel and terminal investments that in some cases were made more than a decade ago. Container shipping analyst John McCown said in comments to the USTR that all fees collected in a prospective tariff program should go to a trust fund purely to support the US maritime sector. McCown estimated, using 2024 figures, that $58.9 billion would be collected annually in port fees, which represents 3.8% of the $1.5 trillion in imported goods moved via ocean, according to figures from UN Trade and Development (UNCTAD). “The good news/bad news is that the high value of container cargo puts that sector in the best position to absorb such large fees,” McCown wrote. And as an alternative to port call fees, he floated the idea of assessing per-container fees on boxes moving on Chinese-built ships that would be approximately equivalent to the amount China subsidizes its container line operators and shipbuilding industries. While that proposal, amounting to a fee of up to $60 per container, would generate far less revenue than the port call option, it would have a negligible impact on carrier networks and shippers’ supply chains, McCown argued. The broad effect of the port call fee proposal has been a call to arms across maritime and cargo interests to take seriously the administration’s efforts to reinvigorate US shipbuilding and operations in a way that would have been absent minus the threat of economic pain. Contact Eric Johnson at <a href="mailto:eric.johnson@spglobal.com">eric.johnson@spglobal.com</a>. </div>

Hearings this week held by the US Trade Representative (USTR) over the potential levying of fees on Chinese-built and -operated ships calling at US ports certainly struck a nerve in the maritime industry. The Section 301 investigation, officially known as “China’s Targeting of the Maritime, Logistics, and Shipbuilding Sectors for Dominance,” prompted 520 comments submitted to the USTR by the March 24 deadline. More than 60 individuals gave testimony over two days of hearings. Perhaps the process was designed to elicit the heavy response the USTR received. By proposing fees of up to $1.5 million per US port call by Chinese tonnage, the industry had no option but to take notice. Some providing comments and testimony noted that the imposition of such fees would create an existential threat to their ability to serve US trades or specific ports, or, in some cases, to operate at all. In creating the threat of a clearly significant penalty, the USTR essentially forced those commenting to not merely give a thumbs up or down to the proposal, but to give alternative solutions based on the assumption that the Trump administration wanted something to be done to stimulate US shipbuilding. ‘Think creatively’ “This essentially turned into a big brainstorming session,” Lauren Beagen, a trade attorney and former counsel at the US Federal Maritime Commission, told the Journal of Commerce this week. Beagen said the hearings forced the industry to think about ways that would allow the Trump administration to progress in its goals toward revitalizing the shipbuilding industry and US merchant fleet that likely wouldn’t have happened if the proposed penalties weren’t severe. “If the USTR just held a public hearing about how trade policies were impacting our shipbuilding industry, no one would have come,” she said. “This made everyone pay attention, and it also forced them to think creatively. How else would you have gotten the entire industry together to brainstorm like this.” To wit, a number of comments submitted to the USTR said the proposed fees were unworkable, but also had alternative suggestions to help invigorate US shipbuilding. The National Association of Waterfront Employers (NAWE), for instance, urged the USTR to consider a per-sailing fee, rather than a fee per port call, to prevent ocean carriers from consolidating port calls and hurting economic interests at US secondary and tertiary ports. Phased approach The Duluth Seaway Authority suggested the USTR phase in the port call fees and adopt a tiered approach to assessing the fees based on vessel and cargo types and the economic impact to the region. Similarly, the Port of New York and New Jersey said a phased approach to enforcing the fees would not penalize carriers for vessel and terminal investments that in some cases were made more than a decade ago. Container shipping analyst John McCown said in comments to the USTR that all fees collected in a prospective tariff program should go to a trust fund purely to support the US maritime sector. McCown estimated, using 2024 figures, that $58.9 billion would be collected annually in port fees, which represents 3.8% of the $1.5 trillion in imported goods moved via ocean, according to figures from UN Trade and Development (UNCTAD). “The good news/bad news is that the high value of container cargo puts that sector in the best position to absorb such large fees,” McCown wrote. And as an alternative to port call fees, he floated the idea of assessing per-container fees on boxes moving on Chinese-built ships that would be approximately equivalent to the amount China subsidizes its container line operators and shipbuilding industries. While that proposal, amounting to a fee of up to $60 per container, would generate far less revenue than the port call option, it would have a negligible impact on carrier networks and shippers’ supply chains, McCown argued. The broad effect of the port call fee proposal has been a call to arms across maritime and cargo interests to take seriously the administration’s efforts to reinvigorate US shipbuilding and operations in a way that would have been absent minus the threat of economic pain. Contact Eric Johnson at eric.johnson@spglobal.com .

Trans-Atlantic

Transport, Trade and Regulation News

Plan to tax Chinese ships turned maritime malaise into ‘brainstorming session’

<div class="phx-topic abstract-wrapper">The move comes as Hutchison is facing increasing pressure from the Chinese government over the $22.8 billion sale of its ports business outside of China to BlackRock and TiL, especially the Panama ports.</div>

The move comes as Hutchison is facing increasing pressure from the Chinese government over the $22.8 billion sale of its ports business outside of China to BlackRock and TiL, especially the Panama ports.

<div class="phx-topic">Hong Kong-based CK Hutchison will miss next week’s target date to sign a deal selling its Panama Ports Company (PPC) to a consortium of BlackRock and Mediterranean Shipping Co. subsidiary Terminal Investment Limited (TiL). While the signing will not happen by the initial April 2 target date, the sale that has been shrouded in geopolitical intrigue has not been canceled, Hong Kong newspaper South China Morning Post reported Friday, quoting a source close to Hutchison. No new target date has been announced. The apparent delay comes as Hutchison is facing increasing pressure from the Chinese government over <a href="https://www.joc.com/article/hutchison-inks-228-billion-deal-to-sell-majority-of-port-holdings-to-blackrock-til-5955819">the $22.8 billion sale of its ports business outside of China to BlackRock and TiL</a>, especially the PPC-owned ports, Cristobal and Balboa, at either ends of the Panama Canal. On Friday, China’s State Administration for Market Regulation confirmed its second Anti-Monopoly Department will review the transaction “to protect fair competition in the market and safeguard the public interest.” The regulator gave no timeline for the probe in a notice published on its website. China has also reportedly told state-owned companies to halt new deals with CK Hutchison and other businesses linked to its founder, Hong Kong billionaire Li Ka-shing and his family, pending a review of their China operations, Bloomberg News reported Thursday. Only new ventures are covered by the moratorium, while existing operations are unaffected, Bloomberg said. Sale documentation for PPC was expected to be signed on or before April 2, Hutchison said in its March 4 announcement that it had reached an agreement “in principle” to sell PPC and its overseas ports network outside of China to BlackRock/TiL. The ports-telecoms-retail conglomerate had packaged PPC and its other global ports, excluding its China and Hong Kong terminals, into two separate contracts to enable a quicker sale of PPC and its two Panama ports. Hutchison has a 145-day exclusive negotiating period with BlackRock/TiL to sign final sale documents for both PPC and the other ports, which in total comprise 199 berths in 43 ports spread over 23 countries. The deal was announced amid growing ire within the new Trump administration over alleged Chinese influence in the operation of the Panama Canal. Beijing has not officially commented on the deal, saying it is a commercial transaction, but it has indicated its displeasure in other ways. That includes posting several critical commentaries on government websites, the most recent one on Wednesday, published by a Hong Kong-based pro-Beijing newspaper. Contact Keith Wallis at <a href="mailto:keithwallis@hotmail.com">keithwallis@hotmail.com</a>.</div>

Hong Kong-based CK Hutchison will miss next week’s target date to sign a deal selling its Panama Ports Company (PPC) to a consortium of BlackRock and Mediterranean Shipping Co. subsidiary Terminal Investment Limited (TiL). While the signing will not happen by the initial April 2 target date, the sale that has been shrouded in geopolitical intrigue has not been canceled, Hong Kong newspaper South China Morning Post reported Friday, quoting a source close to Hutchison. No new target date has been announced. The apparent delay comes as Hutchison is facing increasing pressure from the Chinese government over the $22.8 billion sale of its ports business outside of China to BlackRock and TiL , especially the PPC-owned ports, Cristobal and Balboa, at either ends of the Panama Canal. On Friday, China’s State Administration for Market Regulation confirmed its second Anti-Monopoly Department will review the transaction “to protect fair competition in the market and safeguard the public interest.” The regulator gave no timeline for the probe in a notice published on its website. China has also reportedly told state-owned companies to halt new deals with CK Hutchison and other businesses linked to its founder, Hong Kong billionaire Li Ka-shing and his family, pending a review of their China operations, Bloomberg News reported Thursday. Only new ventures are covered by the moratorium, while existing operations are unaffected, Bloomberg said. Sale documentation for PPC was expected to be signed on or before April 2, Hutchison said in its March 4 announcement that it had reached an agreement “in principle” to sell PPC and its overseas ports network outside of China to BlackRock/TiL. The ports-telecoms-retail conglomerate had packaged PPC and its other global ports, excluding its China and Hong Kong terminals, into two separate contracts to enable a quicker sale of PPC and its two Panama ports. Hutchison has a 145-day exclusive negotiating period with BlackRock/TiL to sign final sale documents for both PPC and the other ports, which in total comprise 199 berths in 43 ports spread over 23 countries. The deal was announced amid growing ire within the new Trump administration over alleged Chinese influence in the operation of the Panama Canal. Beijing has not officially commented on the deal, saying it is a commercial transaction, but it has indicated its displeasure in other ways. That includes posting several critical commentaries on government websites, the most recent one on Wednesday, published by a Hong Kong-based pro-Beijing newspaper. Contact Keith Wallis at keithwallis@hotmail.com .

Hutchison to delay Panama ports deal signing amid growing Beijing pressure

<div class="phx-topic abstract-wrapper">The deal comes as the world’s largest container shipping company looks to establish a bigger foothold in surface transportation. </div>

The deal comes as the world’s largest container shipping company looks to establish a bigger foothold in surface transportation.

<div class="phx-topic">A subsidiary of Mediterranean Shipping Co. has agreed in principle to acquire a majority ownership stake in intermodal logistics provider COFC Logistics, one of the most popular options for shippers looking to transport 53-foot domestic containers on BNSF Railway. Medlog USA, the MSC subsidiary, is expected to close the deal next week. It will keep the existing COFC Logistics management team in place, including CEO Garry Old. Terms of the deal were not disclosed. COFC hauls more than 100,000 intermodal shipments per year and grosses between $100 million and $500 million in revenue annually, according to Journal of Commerce estimates. Old, who will remain in his position for the next five years and retain a minority ownership stake in COFC, told the Journal of Commerce that shippers and intermodal marketing companies (IMCs) using COFC will not see any changes, adding that the company’s exclusive partnership with BNSF will remain intact. “The name is still the same, our email addresses, our logos, our brand will not change in any way,” Old said. “Our customers won’t notice any differences.” The deal comes as MSC attempts to get deeper into surface transportation in various countries and follows Medlog acquiring UK-based rail and road logistics provider Maritime Transport last September. Medlog made its first major splash in the US in 2022 when it acquired C&amp;K Holdings, which hauls ocean and domestic containers and owns terminals in nearly all US port cities, as well as rail ramps. Ohio-based COFC owns about 8,000 containers catering to customers who want to diversify their rail freight between BNSF and Union Pacific Railroad. Shippers who aren’t large enough to get the attention of leading IMC J.B. Hunt Transport Services will use brokers that team with COFC Logistics, although even large shippers use COFC to have multiple paths to access BNSF’s intermodal network. Medlog will infuse capital into COFC, which has faced the reality of intermodal contract rates falling from pandemic-level highs while operating costs keep rising. “We are restructuring some debt,” said Old. [The deal] improves our financial position.” Old said while asset-based and non-asset intermodal providers are struggling due to unsustainable rates, shippers don’t always tender the volumes they agree to, known as bid compliance. “Our industry needs to be better with BCO [beneficial cargo owner] compliance,” he said. “If the BCO is awarding 10,000 loads and it ends up being 1,000 loads, that’s a problem. That’s where the frustration sets in.” Contact Ari Ashe at <a href="mailto:ari.ashe@spglobal.com">ari.ashe@spglobal.com</a>.</div>

A subsidiary of Mediterranean Shipping Co. has agreed in principle to acquire a majority ownership stake in intermodal logistics provider COFC Logistics, one of the most popular options for shippers looking to transport 53-foot domestic containers on BNSF Railway. Medlog USA, the MSC subsidiary, is expected to close the deal next week. It will keep the existing COFC Logistics management team in place, including CEO Garry Old. Terms of the deal were not disclosed. COFC hauls more than 100,000 intermodal shipments per year and grosses between $100 million and $500 million in revenue annually, according to Journal of Commerce estimates. Old, who will remain in his position for the next five years and retain a minority ownership stake in COFC, told the Journal of Commerce that shippers and intermodal marketing companies (IMCs) using COFC will not see any changes, adding that the company’s exclusive partnership with BNSF will remain intact. “The name is still the same, our email addresses, our logos, our brand will not change in any way,” Old said. “Our customers won’t notice any differences.” The deal comes as MSC attempts to get deeper into surface transportation in various countries and follows Medlog acquiring UK-based rail and road logistics provider Maritime Transport last September. Medlog made its first major splash in the US in 2022 when it acquired C&K Holdings, which hauls ocean and domestic containers and owns terminals in nearly all US port cities, as well as rail ramps. Ohio-based COFC owns about 8,000 containers catering to customers who want to diversify their rail freight between BNSF and Union Pacific Railroad. Shippers who aren’t large enough to get the attention of leading IMC J.B. Hunt Transport Services will use brokers that team with COFC Logistics, although even large shippers use COFC to have multiple paths to access BNSF’s intermodal network. Medlog will infuse capital into COFC, which has faced the reality of intermodal contract rates falling from pandemic-level highs while operating costs keep rising. “We are restructuring some debt,” said Old. [The deal] improves our financial position.” Old said while asset-based and non-asset intermodal providers are struggling due to unsustainable rates, shippers don’t always tender the volumes they agree to, known as bid compliance. “Our industry needs to be better with BCO [beneficial cargo owner] compliance,” he said. “If the BCO is awarding 10,000 loads and it ends up being 1,000 loads, that’s a problem. That’s where the frustration sets in.” Contact Ari Ashe at ari.ashe@spglobal.com .

North-American rail

Intermodal providers

MSC subsidiary acquiring US intermodal provider COFC Logistics

<div class="phx-topic abstract-wrapper">There is widespread recognition that the industry has been caught in the jaws of a historically unprecedented freight recession — rate deflation accompanied by cost inflation — and if carriers are to return to historical levels of profitability, there is a need for rate and volume increases to deliver top-line growth. </div>

There is widespread recognition that the industry has been caught in the jaws of a historically unprecedented freight recession — rate deflation accompanied by cost inflation — and if carriers are to return to historical levels of profitability, there is a need for rate and volume increases to deliver top-line growth.

<div class="phx-topic">The surface freight transportation industry is now pinning its hope on economic recovery — for the third straight year — on an expected recovery in the second half of the year. The industry consensus calls for incremental improvement in truckload rates driven by gradual improvement in sector fundamentals throughout the year. Nevertheless, the most recent results of many public truckload stocks have been sobering. Although some carriers observed some “green shoots” during peak season, post-election gains have been given back — and then some. Multiples are below historic norms, and fleet sizes continue to contract — despite several years of shrinkage. There is widespread recognition that the industry has been caught in the jaws of a historically unprecedented freight recession caused by rate deflation accompanied by cost inflation. If carriers are to return to historical levels of profitability, there is a need for rate and volume increases to deliver top-line growth. To analyze this dichotomy, I utilized “An Analysis of the Operational Cost of Trucking: 2024 Update.” Prepared by the American Transportation Research Institute (ATRI), this annual report casts a wide net in respondent type, size and operating model; provides historical context for almost the past 20 years and is remarkably transparent when compared with other self-anointed experts. The first chart explains this difference by looking at two distinct metrics: driver cost per hour and fuel cost per mile. Fuel costs have deviated wildly over this period, whereas driver cost has been steadily increasing. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="b372d175-2a73-40b7-83a0-f350f63093d1"></dynamic-object></div>Nevertheless, in an environment where trucking costs are on an inexorable inflationary arc, how have rates remained so depressed? I believe that the issue is that the trucking market is less “free” since the COVID-19 pandemic. A free market exists when supply and demand (through “voluntary exchange”) determine economic outcomes. Buyers and sellers are free to trade goods and services free of governmental intervention or market dominance by one side: monopoly, oligopoly or monopsony. A free market also requires the freedom of firms to enter that market because there are no barriers of entry. Since deregulation, the truckload market has had this freedom. However, market freedom also permits firms to freely depart from the market without any barriers to exit. This has not necessarily been the case since the pandemic. At the smallest increment of production, an individual with a commercial driver’s license could acquire a tractor and trailer, obtain insurance, register with the government and be in business. If the business did not work out, the individual could hand the keys to the equipment lender and be on with their life. COVID changed these dynamics. Equipment was wildly expensive and lenders required more security than just the underlying asset. New entrants needed to pledge their homes or life savings. When the market turned, there was no exit possible because they were “upside down.” The asset was worth less than they paid for it. These owner-operators are now forced into an untenable situation. Having no exit, their only choice is to keep driving until the market changes. Because survival — not profitability — is the goal, their floor price is what I call “direct cash costs.” In the ATRI model, this is fuel, insurance, permits/licenses and tolls. Costs such as equipment payments, maintenance and repair and tires are deferred until the end. I call them “episodic cash.” Driver wages and benefits are notional. The second chart shows how these costs have tracked the past 10 years. I have also included traditional truckload and intermodal. The former has no episodic cash. Maintenance is maintained, and equipment cost is deferred by parking equipment. Non-asset intermodal is all “direct cash” because all components are purchased. Bimodal intermodal providers are not shown, but they would be between traditional truckload and non-asset intermodal. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="7c8a9981-9386-4062-844d-cd07eb8ea529"></dynamic-object></div>The second chart also explains the freight recession. The traditional economies of scale enjoyed by large truckload carriers over owner-operators are meaningless when costs are not “apples to apples.” The same applies to intermodal’s competitive advantage. The intermodal line may be a little high; however, we have not seen a widespread willingness of railroads to cut their rates. This situation is not The Flying Dutchman, a phantom ship doomed to sail forever. Eventually, the equipment will be retired, and “normal” market conditions will return. Until then, this market situation is likely to maintain. Contact Ted Prince at <a href="mailto:ted@tricitiesintermodal.com">ted@tricitiesintermodal.com</a>.</div>

The surface freight transportation industry is now pinning its hope on economic recovery — for the third straight year — on an expected recovery in the second half of the year. The industry consensus calls for incremental improvement in truckload rates driven by gradual improvement in sector fundamentals throughout the year. Nevertheless, the most recent results of many public truckload stocks have been sobering. Although some carriers observed some “green shoots” during peak season, post-election gains have been given back — and then some. Multiples are below historic norms, and fleet sizes continue to contract — despite several years of shrinkage. There is widespread recognition that the industry has been caught in the jaws of a historically unprecedented freight recession caused by rate deflation accompanied by cost inflation. If carriers are to return to historical levels of profitability, there is a need for rate and volume increases to deliver top-line growth. To analyze this dichotomy, I utilized “An Analysis of the Operational Cost of Trucking: 2024 Update.” Prepared by the American Transportation Research Institute (ATRI), this annual report casts a wide net in respondent type, size and operating model; provides historical context for almost the past 20 years and is remarkably transparent when compared with other self-anointed experts. The first chart explains this difference by looking at two distinct metrics: driver cost per hour and fuel cost per mile. Fuel costs have deviated wildly over this period, whereas driver cost has been steadily increasing. Nevertheless, in an environment where trucking costs are on an inexorable inflationary arc, how have rates remained so depressed? I believe that the issue is that the trucking market is less “free” since the COVID-19 pandemic. A free market exists when supply and demand (through “voluntary exchange”) determine economic outcomes. Buyers and sellers are free to trade goods and services free of governmental intervention or market dominance by one side: monopoly, oligopoly or monopsony. A free market also requires the freedom of firms to enter that market because there are no barriers of entry. Since deregulation, the truckload market has had this freedom. However, market freedom also permits firms to freely depart from the market without any barriers to exit. This has not necessarily been the case since the pandemic. At the smallest increment of production, an individual with a commercial driver’s license could acquire a tractor and trailer, obtain insurance, register with the government and be in business. If the business did not work out, the individual could hand the keys to the equipment lender and be on with their life. COVID changed these dynamics. Equipment was wildly expensive and lenders required more security than just the underlying asset. New entrants needed to pledge their homes or life savings. When the market turned, there was no exit possible because they were “upside down.” The asset was worth less than they paid for it. These owner-operators are now forced into an untenable situation. Having no exit, their only choice is to keep driving until the market changes. Because survival — not profitability — is the goal, their floor price is what I call “direct cash costs.” In the ATRI model, this is fuel, insurance, permits/licenses and tolls. Costs such as equipment payments, maintenance and repair and tires are deferred until the end. I call them “episodic cash.” Driver wages and benefits are notional. The second chart shows how these costs have tracked the past 10 years. I have also included traditional truckload and intermodal. The former has no episodic cash. Maintenance is maintained, and equipment cost is deferred by parking equipment. Non-asset intermodal is all “direct cash” because all components are purchased. Bimodal intermodal providers are not shown, but they would be between traditional truckload and non-asset intermodal. The second chart also explains the freight recession. The traditional economies of scale enjoyed by large truckload carriers over owner-operators are meaningless when costs are not “apples to apples.” The same applies to intermodal’s competitive advantage. The intermodal line may be a little high; however, we have not seen a widespread willingness of railroads to cut their rates. This situation is not The Flying Dutchman, a phantom ship doomed to sail forever. Eventually, the equipment will be retired, and “normal” market conditions will return. Until then, this market situation is likely to maintain. Contact Ted Prince at ted@tricitiesintermodal.com .

Surface industry faces obstacles on way to hoped-for H2 recovery

<div class="phx-topic abstract-wrapper">No matter what changes occur, a FedEx Freight spinoff as a standalone LTL carrier will be good for the entire industry, writes Satish Jindel.</div>

No matter what changes occur, a FedEx Freight spinoff as a standalone LTL carrier will be good for the entire industry, writes Satish Jindel.

<div class="phx-topic">On June 25, 2024, during an earnings call, FedEx leaders announced that the company’s board had authorized management to explore options for a sale or spinoff of FedEx Freight, and that a decision would be announced by the end of the year. On Dec. 19, <a href="https://www.joc.com/article/fedex-freight-spinoff-is-latest-move-to-reshape-us-ltl-market-5909683">the leadership announced that a spinoff</a> was the best option and would be completed over 18 months. Why tell the shareholders and the less-than-truckload (LTL) market of this move if it is not happening for many months? Now, competitors and shippers can prepare for the various changes that could result from the FedEx Freight spinoff. Competing carriers and shippers should benefit from FedEx’s Priority and Economy services getting merged for a number of reasons. While the parcel market supports express and ground services, the FedEx Express volume has been shrinking for many years, with FedEx Ground now representing over 80% of total parcel volume. So, if there is a rationale to merge the Express and Ground parcel networks, FedEx Freight’s Priority and Economy services should also be merged. The premium for the Priority service price is so small that it does not make up for the various costs related to offering two services. If the two services were so appealing and financially rewarding, other LTL carriers would have done the same. Yet after 12 years, no other LTL carrier has followed suit. Many LTL carriers with just one service are generating operating margins better than 14.5% of FedEx Freight. As the LTL industry speeds up the transit times on high-volume lanes, the gap between Priority and Economy services will shrink. <h3>Greater role for technology </h3>While the parent company wants to spin it off as FedEx Freight, expect the new board to rename it American Freightways. With relief from intercompany charges of $528 million during fiscal year 2024 paid to FedEx Corporation for marketing, sales, technology and billing support, the spinoff will save FedEx Freight a few hundred million dollars by handling those corporate support functions itself. If it uses that money to go for greater market share with pricing initiatives, it could be good news for shippers. Shippers should get ready for a greater role of technology. With the National Motor Freight Traffic Association finally adopting dimensional pricing, there will be a greater need by shippers and carriers to capture shipment dimensions. This change should ensure more accurate billing and reduce the cost for auditing all freight bills for proper classification. With shippers being required to pay greater attention to the dimensions of the pallets, they can expect FedEx Freight support to improve their palletizing just as FedEx helps parcel customers improve their packaging. Because there are practically no appointment deliveries in the parcel business, expect FedEx Freight to embrace opportunities with AI to reduce the number of appointment deliveries, which should help shippers avoid charges for such service. We can also expect FedEx Freight to take greater interest in participating in LTL industry conferences and contributing its shipment data to SMC3’s national LTL database. No matter which of these changes occur, a FedEx Freight spinoff as a standalone LTL carrier will be good for the entire industry. And for those wondering why FedEx needs 18 months to spin off Freight, just imagine the pressure on the board and leadership that may find that investors are valuing its LTL business at a higher market cap than its parcel business, which is generating just a 5.5% margin compared with 14.5% for LTL business. Contact Satish Jindel at <a href="mailto:info@shipmatrix.com">info@shipmatrix.com</a>. </div>

On June 25, 2024, during an earnings call, FedEx leaders announced that the company’s board had authorized management to explore options for a sale or spinoff of FedEx Freight, and that a decision would be announced by the end of the year. On Dec. 19, the leadership announced that a spinoff was the best option and would be completed over 18 months. Why tell the shareholders and the less-than-truckload (LTL) market of this move if it is not happening for many months? Now, competitors and shippers can prepare for the various changes that could result from the FedEx Freight spinoff. Competing carriers and shippers should benefit from FedEx’s Priority and Economy services getting merged for a number of reasons. While the parcel market supports express and ground services, the FedEx Express volume has been shrinking for many years, with FedEx Ground now representing over 80% of total parcel volume. So, if there is a rationale to merge the Express and Ground parcel networks, FedEx Freight’s Priority and Economy services should also be merged. The premium for the Priority service price is so small that it does not make up for the various costs related to offering two services. If the two services were so appealing and financially rewarding, other LTL carriers would have done the same. Yet after 12 years, no other LTL carrier has followed suit. Many LTL carriers with just one service are generating operating margins better than 14.5% of FedEx Freight. As the LTL industry speeds up the transit times on high-volume lanes, the gap between Priority and Economy services will shrink. Greater role for technology While the parent company wants to spin it off as FedEx Freight, expect the new board to rename it American Freightways. With relief from intercompany charges of $528 million during fiscal year 2024 paid to FedEx Corporation for marketing, sales, technology and billing support, the spinoff will save FedEx Freight a few hundred million dollars by handling those corporate support functions itself. If it uses that money to go for greater market share with pricing initiatives, it could be good news for shippers. Shippers should get ready for a greater role of technology. With the National Motor Freight Traffic Association finally adopting dimensional pricing, there will be a greater need by shippers and carriers to capture shipment dimensions. This change should ensure more accurate billing and reduce the cost for auditing all freight bills for proper classification. With shippers being required to pay greater attention to the dimensions of the pallets, they can expect FedEx Freight support to improve their palletizing just as FedEx helps parcel customers improve their packaging. Because there are practically no appointment deliveries in the parcel business, expect FedEx Freight to embrace opportunities with AI to reduce the number of appointment deliveries, which should help shippers avoid charges for such service. We can also expect FedEx Freight to take greater interest in participating in LTL industry conferences and contributing its shipment data to SMC3’s national LTL database. No matter which of these changes occur, a FedEx Freight spinoff as a standalone LTL carrier will be good for the entire industry. And for those wondering why FedEx needs 18 months to spin off Freight, just imagine the pressure on the board and leadership that may find that investors are valuing its LTL business at a higher market cap than its parcel business, which is generating just a 5.5% margin compared with 14.5% for LTL business. Contact Satish Jindel at info@shipmatrix.com .

How the LTL market could evolve as the FedEx Freight spinoff plays out

Trans-Pacific spot rates slide to 15-month low in March

4-7 Container SR_TP Platts Asia-US spot rates

<div class="phx-topic abstract-wrapper">Ongoing supply chain disruption and a significant increase in trading of container freight futures among speculative investors could accelerate the adoption of financial hedging tools among shippers and other physical industry players.</div>

Ongoing supply chain disruption and a significant increase in trading of container freight futures among speculative investors could accelerate the adoption of financial hedging tools among shippers and other physical industry players.

<div class="phx-topic">After two decades of minimal progress, the environment for the adoption of container freight futures is increasingly ripe as ongoing supply chain disruption has heightened demand for risk management tools among beneficial cargo owners (BCOs). It is too soon to say, but the landscape has shifted such that BCOs and other industry players may give futures, financial instruments aimed at mitigating the risk of rate volatility, a second look. The successful introduction in 2023 of a futures market in Shanghai — the value of which is already multiple times the value of the underlying Asia-Europe freight rate — has added momentum to that shift. “If you look at the level of liquidity that [the Shanghai-traded] futures have been able to achieve within the last 18 months, it’s well in excess of $1.5 billion daily,” Hua Joo Tan, analyst at Linerlytica, explained in a March 24 seminar on container freight futures during Singapore Maritime Week. “To put this in perspective, that’s almost 20 times the size of the physical market of physical containers moving from Asia to North Europe.” The Shanghai futures market has reached that level of liquidity, “with almost zero industry participation at this point,” Tan added. Speculative investors have been far more active in trading than BCOs and other industry players, but the industry itself is headed in that direction. A growing mindset of risk mitigation among BCOs in the face of continuing disruptions has led to increased adoption of index-linked contracts, for example, which mitigate price as a point of stress in contracts. At the Journal of Commerce’s TPM25 conference in early March, the first panel on this topic in several years drew a packed room. A logical next step would be for BCOs to use futures or other financial instruments to hedge against adverse price movements within their index-linked contracts. That’s a big leap, considering that chief financial officers view the risk of rapid increases in container freight rates as an issue to be managed alongside more traditional risks such as foreign currency, interest rates, commodity prices or inflation. That would be a sea change by itself. Container freight futures emerged around the time of the 2008 global financial crisis, the theory being that container freight is a commodity market no different from pork bellies or soybeans. Several investment banks, including Morgan Stanley, thought they saw an opportunity and jumped on board. But container freight futures trading never took off, in large part because the commodity market was an imperfect analogy; although container freight bears some resemblance to a commodity market, with supply and demand driving pricing, the fact that BCOs need shipping irrespective of costs — as the COVID-19 pandemic proved, when prices soared but cargo continued to move — undermined the logic. Fast forward to 2023, container freight futures trading entered the Shanghai International Energy Exchange, part of Shanghai Futures Exchange (SHFE), based on a tradable, auditable version of the Shanghai Containerized Freight Index, called the SCFI-S. The SCFI-S is based on so-called shipped-on-board pricing, rather than rates at the time of booking. Other container freight derivative markets are in development in Europe and North America. In November, the New York Shipping Exchange (NYSHEX) <a href="https://www.joc.com/article/nyshex-says-will-launch-ocean-freight-rate-indexes-next-year-5820643">announced the creation of new shipping rate indexes</a>, developed in conjunction with the Intercontinental Exchange (ICE), that will launch this year. “We expect leading banks like Goldman Sachs and Citi will be able to offer their corporate clients a range of container freight hedging options, such as swaps, options and collars,” NYSHEX CEO Gordon Downes told the Journal of Commerce. “We also expect that a futures market will develop over time to make the cost and process of hedging much more efficient.” “As we see the container shipping industry moving toward index-linked contracts, there is a growing need for ways to hedge the volatility of container spot rates,” Zach Fields, an investor on Goldman Sachs Alternatives’ growth equity team, said in a statement announcing the launch of the NYSHEX indexes. Still, futures have yet to overcome the hurdle they have faced for years: becoming a market for “physical” players, as opposed to just traders. A few China-based physical players dabble in the market, but international forwarders, carriers and BCOs so far have remained on the sidelines. “There’s still a lot of resistance and inertia against the adoption of these freight futures,” Tan said. But that could change, if only because BCOs have a limited ability to mitigate supply chain disruption, which is often unpredictable, and are looking for creative ways to address the challenge. One way has always been to build better relationships with ocean carriers to maximize the odds of cargo being loaded in tight markets through index-linked contracts. These floating contract rates are gaining traction because they ensure a shipper’s cargo won’t be priced below the market and thus become vulnerable to getting rolled in favor of higher-paying freight. But index-linked contracts bring another risk, unanticipated cost increases, which complicate budgeting and can impact financial results and investor relations. Given the rising recognition of supply chain risk, it is time for chief financial officers to give container freight futures a second look. Contact Peter Tirschwell at <a href="mailto:peter.tirschwell@spglobal.com">peter.tirschwell@spglobal.com</a>. </div>

After two decades of minimal progress, the environment for the adoption of container freight futures is increasingly ripe as ongoing supply chain disruption has heightened demand for risk management tools among beneficial cargo owners (BCOs). It is too soon to say, but the landscape has shifted such that BCOs and other industry players may give futures, financial instruments aimed at mitigating the risk of rate volatility, a second look. The successful introduction in 2023 of a futures market in Shanghai — the value of which is already multiple times the value of the underlying Asia-Europe freight rate — has added momentum to that shift. “If you look at the level of liquidity that [the Shanghai-traded] futures have been able to achieve within the last 18 months, it’s well in excess of $1.5 billion daily,” Hua Joo Tan, analyst at Linerlytica, explained in a March 24 seminar on container freight futures during Singapore Maritime Week. “To put this in perspective, that’s almost 20 times the size of the physical market of physical containers moving from Asia to North Europe.” The Shanghai futures market has reached that level of liquidity, “with almost zero industry participation at this point,” Tan added. Speculative investors have been far more active in trading than BCOs and other industry players, but the industry itself is headed in that direction. A growing mindset of risk mitigation among BCOs in the face of continuing disruptions has led to increased adoption of index-linked contracts, for example, which mitigate price as a point of stress in contracts. At the Journal of Commerce’s TPM25 conference in early March, the first panel on this topic in several years drew a packed room. A logical next step would be for BCOs to use futures or other financial instruments to hedge against adverse price movements within their index-linked contracts. That’s a big leap, considering that chief financial officers view the risk of rapid increases in container freight rates as an issue to be managed alongside more traditional risks such as foreign currency, interest rates, commodity prices or inflation. That would be a sea change by itself. Container freight futures emerged around the time of the 2008 global financial crisis, the theory being that container freight is a commodity market no different from pork bellies or soybeans. Several investment banks, including Morgan Stanley, thought they saw an opportunity and jumped on board. But container freight futures trading never took off, in large part because the commodity market was an imperfect analogy; although container freight bears some resemblance to a commodity market, with supply and demand driving pricing, the fact that BCOs need shipping irrespective of costs — as the COVID-19 pandemic proved, when prices soared but cargo continued to move — undermined the logic. Fast forward to 2023, container freight futures trading entered the Shanghai International Energy Exchange, part of Shanghai Futures Exchange (SHFE), based on a tradable, auditable version of the Shanghai Containerized Freight Index, called the SCFI-S. The SCFI-S is based on so-called shipped-on-board pricing, rather than rates at the time of booking. Other container freight derivative markets are in development in Europe and North America. In November, the New York Shipping Exchange (NYSHEX) announced the creation of new shipping rate indexes , developed in conjunction with the Intercontinental Exchange (ICE), that will launch this year. “We expect leading banks like Goldman Sachs and Citi will be able to offer their corporate clients a range of container freight hedging options, such as swaps, options and collars,” NYSHEX CEO Gordon Downes told the Journal of Commerce. “We also expect that a futures market will develop over time to make the cost and process of hedging much more efficient.” “As we see the container shipping industry moving toward index-linked contracts, there is a growing need for ways to hedge the volatility of container spot rates,” Zach Fields, an investor on Goldman Sachs Alternatives’ growth equity team, said in a statement announcing the launch of the NYSHEX indexes. Still, futures have yet to overcome the hurdle they have faced for years: becoming a market for “physical” players, as opposed to just traders. A few China-based physical players dabble in the market, but international forwarders, carriers and BCOs so far have remained on the sidelines. “There’s still a lot of resistance and inertia against the adoption of these freight futures,” Tan said. But that could change, if only because BCOs have a limited ability to mitigate supply chain disruption, which is often unpredictable, and are looking for creative ways to address the challenge. One way has always been to build better relationships with ocean carriers to maximize the odds of cargo being loaded in tight markets through index-linked contracts. These floating contract rates are gaining traction because they ensure a shipper’s cargo won’t be priced below the market and thus become vulnerable to getting rolled in favor of higher-paying freight. But index-linked contracts bring another risk, unanticipated cost increases, which complicate budgeting and can impact financial results and investor relations. Given the rising recognition of supply chain risk, it is time for chief financial officers to give container freight futures a second look. Contact Peter Tirschwell at peter.tirschwell@spglobal.com .

Logistics Technology News

Freight futures get second look amid increased risk, trading volumes

<div class="phx-topic abstract-wrapper">An alliance of global shippers is calling on the IMO to use the April gathering of its Marine Environment Protection Committee to meet the “urgency of the moment” when it comes to lowering emissions from shipping.</div>

An alliance of global shippers is calling on the IMO to use the April gathering of its Marine Environment Protection Committee to meet the “urgency of the moment” when it comes to lowering emissions from shipping.

<div class="phx-topic">An alliance of global cargo owners is urging the International Maritime Organization (IMO) to use its upcoming Marine Environment Protection Committee (MEPC) meeting to approve “a clear, comprehensive, globally consistent set of measures” that will accelerate the transition to clean energy. The 176 member states of the IMO will gather <a href="https://www.joc.com/article/us-in-holding-pattern-over-imo-membership-dnv-5967501">for the 83rd MEPC meeting</a> April 7–11 in London, where topping the agenda will be the design of a greenhouse gas (GHG) fuel intensity regulation and an economic measure for taxing carbon emissions. It is critical that the meeting ends with consensus over both “mid-term measures,” said Ingrid Irigoyen, president and CEO of the Zero Emission Maritime Buyers Alliance (ZEMBA). “Given shipping’s essential role in global trade and private sector actors ready to invest in innovative fuels and technologies under the right conditions, it is critical the IMO succeeds in delivering much-needed regulatory clarity and incentivizes the most scalable, long-term solutions,” Irigoyen wrote in an open letter to IMO Secretary-General Arsenio Dominguez. She pointed out that the 40 global freight buyers within ZEMBA who rely on maritime shipping embarked on their own first-mover initiative in March 2023 to accelerate the market for low- and zero-emission fuels and urged the IMO to match the urgency shown by the private sector shippers. <h3>‘Urgency of the moment’ </h3>The inaugural tender from ZEMBA, <a href="https://www.joc.com/article/hapag-lloyd-wins-asia-europe-green-shipping-tender-to-launch-next-year-5240949">won by Hapag-Lloyd</a>, is expected to prevent at least 82,000 metric tons of carbon dioxide equivalent (CO2e) emissions in 2025 and 2026 through deployment of waste-based, third-party certified maritime biomethane sourced from landfill gas and livestock manure. ZEMBA’s second tender, launched in February, is far more ambitious and seeks commitments from ocean carriers to power at least 80 billion metric ton-nautical miles of ocean shipping using e-fuels. “Our private sector partners are moving quickly to match the urgency of the moment, and we encourage the IMO to act with deliberate speed and ambition as well,” Irigoyen wrote in the open letter. “As global employers and customers of the shipping industry, freight buyers have a significant stake in the sector’s energy transition and the decisions that the IMO will make this year,” she added. The IMO in 2023 revised its roadmap for the industry’s transition that set an end goal of net-zero GHG emissions by or around 2050 and includes key checkpoints for the journey: at least a 20% GHG emissions reduction, and striving for 30%, by 2030; and at least a 70% GHG emissions reduction, striving for 80%, by 2040. The checkpoints are compared to a 2008 GHG emissions baseline. Drawing on the experience gained from ZEMBA, Irigoyen said it was critical that consensus was received over aligning the midterm measures with the trajectories laid out in the GHG strategy. She said the fuel standard must apply to a full “well-to-wake” lifecycle, and the midterm measures must be designed with adequate financial incentives to foster a viable market for long-term scalable fuels and technologies essential to shipping’s transition. “Miscalibration of the financial rewards for fuels and technologies risks locking the sector into unsustainable short-term options, undermining market confidence and increasing the cost of the transition overall,” she wrote. Irigoyen also urged the IMO meeting to develop a “transparent, robust fuel certification framework” with the IMO data collection system updated to support transparent and effective reporting under the midterm measures. Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com">greg.knowler@spglobal.com.</a></div>

An alliance of global cargo owners is urging the International Maritime Organization (IMO) to use its upcoming Marine Environment Protection Committee (MEPC) meeting to approve “a clear, comprehensive, globally consistent set of measures” that will accelerate the transition to clean energy. The 176 member states of the IMO will gather for the 83rd MEPC meeting April 7–11 in London, where topping the agenda will be the design of a greenhouse gas (GHG) fuel intensity regulation and an economic measure for taxing carbon emissions. It is critical that the meeting ends with consensus over both “mid-term measures,” said Ingrid Irigoyen, president and CEO of the Zero Emission Maritime Buyers Alliance (ZEMBA). “Given shipping’s essential role in global trade and private sector actors ready to invest in innovative fuels and technologies under the right conditions, it is critical the IMO succeeds in delivering much-needed regulatory clarity and incentivizes the most scalable, long-term solutions,” Irigoyen wrote in an open letter to IMO Secretary-General Arsenio Dominguez. She pointed out that the 40 global freight buyers within ZEMBA who rely on maritime shipping embarked on their own first-mover initiative in March 2023 to accelerate the market for low- and zero-emission fuels and urged the IMO to match the urgency shown by the private sector shippers. ‘Urgency of the moment’ The inaugural tender from ZEMBA, won by Hapag-Lloyd , is expected to prevent at least 82,000 metric tons of carbon dioxide equivalent (CO2e) emissions in 2025 and 2026 through deployment of waste-based, third-party certified maritime biomethane sourced from landfill gas and livestock manure. ZEMBA’s second tender, launched in February, is far more ambitious and seeks commitments from ocean carriers to power at least 80 billion metric ton-nautical miles of ocean shipping using e-fuels. “Our private sector partners are moving quickly to match the urgency of the moment, and we encourage the IMO to act with deliberate speed and ambition as well,” Irigoyen wrote in the open letter. “As global employers and customers of the shipping industry, freight buyers have a significant stake in the sector’s energy transition and the decisions that the IMO will make this year,” she added. The IMO in 2023 revised its roadmap for the industry’s transition that set an end goal of net-zero GHG emissions by or around 2050 and includes key checkpoints for the journey: at least a 20% GHG emissions reduction, and striving for 30%, by 2030; and at least a 70% GHG emissions reduction, striving for 80%, by 2040. The checkpoints are compared to a 2008 GHG emissions baseline. Drawing on the experience gained from ZEMBA, Irigoyen said it was critical that consensus was received over aligning the midterm measures with the trajectories laid out in the GHG strategy. She said the fuel standard must apply to a full “well-to-wake” lifecycle, and the midterm measures must be designed with adequate financial incentives to foster a viable market for long-term scalable fuels and technologies essential to shipping’s transition. “Miscalibration of the financial rewards for fuels and technologies risks locking the sector into unsustainable short-term options, undermining market confidence and increasing the cost of the transition overall,” she wrote. Irigoyen also urged the IMO meeting to develop a “transparent, robust fuel certification framework” with the IMO data collection system updated to support transparent and effective reporting under the midterm measures. Contact Greg Knowler at greg.knowler@spglobal.com.

Cargo owners push IMO on measures to accelerate energy transition

<div class="phx-topic abstract-wrapper">Capacity improvements at the New Jersey facility will include optimization of the terminal layout, rebuilding berths at a higher level to allow for anticipated increases in the sea level and replacing existing cargo-handling equipment with zero-emission, electric machines.</div>

Capacity improvements at the New Jersey facility will include optimization of the terminal layout, rebuilding berths at a higher level to allow for anticipated increases in the sea level and replacing existing cargo-handling equipment with zero-emission, electric machines.

<div class="phx-topic">APM Terminals will invest more than $500 million to improve cargo handling capacity at its 350-acre Elizabeth terminal after it agreed to a 33-year lease extension with the Port Authority of New York and New Jersey, the two parties announced Monday. The current lease, which was due to expire in December 2029, will be extended to December 2062, according to the new agreement. The deal will be voted on by the port authority’s board of commissioners on March 27. APM Terminals said the capacity improvements will include optimization of the terminal layout, rebuilding the berths at a higher level to allow for anticipated increases in sea level and replacing existing cargo-handling equipment with zero-emission, electric machines. Elizabeth has a current terminal capacity of 2.3 million TEUs over 6,000 feet of wharfage. Specifics of the planned capacity growth at the New Jersey facility were not disclosed. Work to optimize the terminal layout and invest in the electrification of equipment will begin in the coming weeks as soon as the new lease is signed, an APM Terminals spokesperson told the Journal of Commerce. “The optimization of the layout and electrification will take place over the next several years as the terminal is modernized,” the spokesperson said. “Optimization entails improving the densification of the terminal to be able to efficiently handle higher cargo volumes within the same footprint.” The construction work at the terminal will result in an increase in jobs at the facility. “The modernization improvements will result in a significant capacity increase and our experience shows that the biggest driver of longshore employment is increases in volume growth,” the APM spokesperson said. “As a result, we expect our workforce on the terminal to expand as our volumes increase due to these investments.” The Elizabeth terminal handles more than 25% of the annual container throughput at the port’s terminals, which saw combined volumes rise 11.5% last year to 8.7 million TEUs. The Port Authority said the investment supports its 2050 port master plan, which anticipates cargo volumes doubling or tripling by mid-century. “This lease extension secures transformative infrastructure and capacity enhancements at the second-largest container terminal in the East Coast’s busiest port,” Port Authority Executive Director Rick Cotton said in a statement. “These commitments will enable the Port of New York and New Jersey to move more goods, create more jobs and further cement its role as an essential driver of our region’s economy and our nation’s supply chain.” <h3>Fixed berthing windows </h3>The APM Terminals spokesperson said the new Gemini Cooperation network of Maersk and Hapag-Lloyd is expected to slightly increase cargo volumes at the Elizabeth terminal when fully implemented. APM is owned by A.P. Moller–Maersk. APM Terminals is also introducing fixed berthing windows at dedicated berths for Gemini vessels and those of other carriers. “Keeping all services at dedicated and separate berths consistently will isolate port delays,” the spokesperson said, adding that if a vessel arrives late due to bad weather it will only affect other vessels calling at that specific berth. Contact Keith Wallis at <a href="mailto:keithwallis@hotmail.com">keithwallis@hotmail.com</a>.</div>

APM Terminals will invest more than $500 million to improve cargo handling capacity at its 350-acre Elizabeth terminal after it agreed to a 33-year lease extension with the Port Authority of New York and New Jersey, the two parties announced Monday. The current lease, which was due to expire in December 2029, will be extended to December 2062, according to the new agreement. The deal will be voted on by the port authority’s board of commissioners on March 27. APM Terminals said the capacity improvements will include optimization of the terminal layout, rebuilding the berths at a higher level to allow for anticipated increases in sea level and replacing existing cargo-handling equipment with zero-emission, electric machines. Elizabeth has a current terminal capacity of 2.3 million TEUs over 6,000 feet of wharfage. Specifics of the planned capacity growth at the New Jersey facility were not disclosed. Work to optimize the terminal layout and invest in the electrification of equipment will begin in the coming weeks as soon as the new lease is signed, an APM Terminals spokesperson told the Journal of Commerce. “The optimization of the layout and electrification will take place over the next several years as the terminal is modernized,” the spokesperson said. “Optimization entails improving the densification of the terminal to be able to efficiently handle higher cargo volumes within the same footprint.” The construction work at the terminal will result in an increase in jobs at the facility. “The modernization improvements will result in a significant capacity increase and our experience shows that the biggest driver of longshore employment is increases in volume growth,” the APM spokesperson said. “As a result, we expect our workforce on the terminal to expand as our volumes increase due to these investments.” The Elizabeth terminal handles more than 25% of the annual container throughput at the port’s terminals, which saw combined volumes rise 11.5% last year to 8.7 million TEUs. The Port Authority said the investment supports its 2050 port master plan, which anticipates cargo volumes doubling or tripling by mid-century. “This lease extension secures transformative infrastructure and capacity enhancements at the second-largest container terminal in the East Coast’s busiest port,” Port Authority Executive Director Rick Cotton said in a statement. “These commitments will enable the Port of New York and New Jersey to move more goods, create more jobs and further cement its role as an essential driver of our region’s economy and our nation’s supply chain.” Fixed berthing windows The APM Terminals spokesperson said the new Gemini Cooperation network of Maersk and Hapag-Lloyd is expected to slightly increase cargo volumes at the Elizabeth terminal when fully implemented. APM is owned by A.P. Moller–Maersk. APM Terminals is also introducing fixed berthing windows at dedicated berths for Gemini vessels and those of other carriers. “Keeping all services at dedicated and separate berths consistently will isolate port delays,” the spokesperson said, adding that if a vessel arrives late due to bad weather it will only affect other vessels calling at that specific berth. Contact Keith Wallis at keithwallis@hotmail.com .

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APM to spend $500 million to enhance cargo handling at Elizabeth terminal

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The world of LTL is slow to embrace change. Business anachronisms permeate current supply chain processes. These vestiges of the way things used to work define the LTL freight transportation procurement process of many modern shippers.David Knuth, logistics specialist at IEWC, a global supplier of cable and wire based in Wisconsin, is happy to have modernized the RFP process, automating the entire LTL bidding procedure with Bid$ense, SMC³’s automated truckload and LTL freight transportation sourcing solution. But when prompted, he can still recall what once was.In his previous job, a large part of his duties were consumed by creating an intermodal bid package for carriers. In a spreadsheet, Knuth detailed the company’s volumes lane by lane, taking care to delete any errant keystrokes or misleading data. He would then email out the information to each carrier, taking time to respond to detailed technical questions about the spreadsheet data. Finally, he had to compile all the results, create an algorithm that would compare the carriers on each lane, and award the business.“It was a huge undertaking. It took about four months to do,” Knuth said of the old process. “It was almost a full-time job for that part of the year, every year.”In his new job at IEWC, he sat down with Bid$ense on day one and was amazed at the capabilities. Knuth had never before used a bid tool. SMC³’s latest versions of Bid$ense automate the process even further, taking truckload and LTL RFPs entirely online. The tool draws on RFP best-practices protocols to streamline the bidding communication process, enabling bidding carriers to respond accurately and promptly to shipper requests. The solution also does all the distribution work automatically, electronically submitting shipper bid data to carriers based on their actual service capabilities and performance records. Carriers are alerted with timely prompts for RFP deliverables, so shippers aren’t waiting by the phone for responses.Another benefit of automating the process is the data-cleansing assistance. When Knuth sent spreadsheets to carriers, data errors might cloud the bidding process; he might have to resend data or simply accept a price that did not truly reflect the costs of doing business. Data cleansing is incredibly beneficial, he said.The spreadsheet technique also made bidding analysis an onerous task. Since Bid$ense automates and streamlines the entire RFP process, intensive examination is now simple. SMC³ knows that each bid has more than one best outcome. With uniform responses from each carrier, shippers can quickly rank results and create an unlimited quantity of what-if scenarios to make the optimal procurement decision.Jesse Burnett of Central Garden &amp; Pet experiences many of the same benefits. Founded in 1980, Central Garden &amp; Pet has spent the last three decades growing from a small garden supply company to a provider of a range of products from dog chews and bird seed to soil supplements and natural insecticides. For much of its life, the company shipped these disparate goods via LTL and truckload carriers to retailers throughout the country, relying on each business unit to negotiate directly with their freight transportation providers. This arrangement worked fairly well for a small company, but as Central Garden &amp; Pet expanded, leadership decided to consolidate decision making.Burnett helped centralize the transportation decision making in 2015 with SMC³’s Bid$ense. Before Bid$ense, every business unit operated independently as far as negotiating with carriers.“There were a lot of different things just floating around,” he said. “We didn’t have master agreements in place; no national pricing at all. The pricing from carriers was just all over the place, depending on where you were.”The transformations he saw with Bid$ense were immediate. Burnett has been using the tool about every other year since its implementation at the company. Central Garden and Pet’s $19.6 million 2019 LTL bid saved the company just more than 9 percent when compared to its historical average. For Burnett, though, bid automation extends far beyond savings.“We knew that we weren’t getting the best pricing offer from our carriers just because nothing was centralized,” he continued. “We knew that if we combined everything from all these business units and paired it with one corporate offering, then it would drive some cost benefit with it.”When the company initially decided to centralize bid procurement, executives researched a number of different methodologies and technologies. In the end, though, Burnett found that Bid$ense was both widespread and well known, and that his carrier partners already knew how to use the application. Burnett also highlighted the data-cleansing process as a major benefit, saying the rigorous process ensures that carriers always return the best price.“It definitely has helped drive savings,” he said. “Any time you go out there and you drive that competitiveness with the carriers and they know they’re in a bid environment, it seems to sharpen their pencils.”Transportation procurement is an integral part of the modern supply chain. With Bid$ense, shippers can develop a strategic implementation plan that saves them time and money, but also helps them create strong relationships with their carrier partners. These carriers appreciate the solution’s data-cleansing process; when carriers receive a complete shipment history and future volume forecast, they don’t have to guess on pricing. Carriers that receive more data from shippers get a complete picture of that shipper’s freight, allowing them to accurately plan instead of simply preparing for the worst-case scenario. Clean data presented through an automated system can lead to both bigger shipment savings and a lasting partnership between carrier and customer.Whether customers are looking to streamline over-the-road transportation bidding by automating the RFP process or create an entirely new, centralized sourcing process, Bid$ense has the analytical horsepower to get the job done.SMC³ 2020 Customer Case Study

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Shippers save money, time with automated transportation bidding tools

If there’s one immutable truth in the world of logistics, it’s this: LTL is an inherently complex form of transportation. Tariffs, rates, DIM weights, transit times — it’s enough to confuse even seasoned logistics professionals. The solution to this knowledge gap has historically been on-the-job training or university supply chain education, but for a variety of reasons there is now a pressing need for third-party, remote LTL training that prepares logistics workers for transportation success. Global Scope Can Overlook Local Intricacies In the past, professionals looking to move into a supply chain career learned about the basics of supply chain from universities. However, many of these college supply chain programs are now global in scope, focusing on worldwide supply chain management instead of the intricacies of specialized domestic transportation. And even these programs, which used to be widespread, are becoming less common. LTL is not an industry of broad-brush strokes; supply chain professionals really need a pointillistic understanding of the logistics of LTL in order to excel in the industry. Accelerating Need for Dedicated LTL Education This lack of specified training put the onus on employers to prepare new hires with the LTL knowledge needed to do their jobs. Dedicated LTL study is a necessity, not a luxury. At the same time, changes in LTL and the broader supply chain world are accelerating. The reliance on e-commerce has ballooned since the start of the pandemic, and last-mile LTL shipments and related e-commerce strains on the supply chain won’t diminish once social distancing abates. That genie isn’t going back into the bottle. So supply chain employers need logistics workers that are fully versed in all aspects of the industry, ready to solve unique shipping and delivery problems based on their extensive supply chain knowledge But why care about LTL? It’s been reported that some shippers in today’s world are no longer concerned with what mode is used to ship their goods. A Multimodal Approach Ensures On-Time Delivery This mode agnosticism means supply chain stakeholders have to be well versed in all modes of transportation. As unforeseen weather events and other disruptions, such as protests, become more common, savvy logistics employees will need to be armed with familiarity of all modes, not just the most popular, to ensure that freight is delivered on time, without damage, and in the most financially expedient way possible. Offerings like SMC³’s LTL online education courses cover a wide range of topics from LTL basics and operations to more advanced concepts like pricing analytics and transportation law. The company also has plans to continually refresh content, adding new expert presenters and taking the feedback of students to make the courses even better as time goes on. Learn more about&nbsp;<a href="https://logisticstrainingcenter.com/smc3-courses/" rel="noreferrer" class="joc_admin__link">SMC³’s LTL Online Education program</a>&nbsp;and view the 2021 hybrid schedule, featuring live industry experts,&nbsp;<a href="https://www.smc3.com/onlinelearning2021/" rel="noreferrer" class="joc_admin__link">here.</a>

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Quarterly Intelligence

<div class="phx-topic abstract-wrapper">Shippers, carriers and forwarders say uncertainty around consumer demand, tariffs and geopolitical disruptions has produced a wider range of service contract rates this year.</div>

Shippers, carriers and forwarders say uncertainty around consumer demand, tariffs and geopolitical disruptions has produced a wider range of service contract rates this year.

<div class="phx-topic">The largest US retailers are signing their 2025–26 service contracts in the eastbound trans-Pacific at rates that are about 15% to 20% higher than they signed for last year, with midsize importers likely to finalize deals in the coming few weeks at slightly higher rates. Three carriers, seven non-vessel-operating common carriers (NVOs) and two industry consultants told the Journal of Commerce those major retailers have signed service contracts over the past week. The rates in those contracts, which essentially set the floor for negotiations with midsize and smaller shippers, range from $1,600 to $1,800 per FEU from Asia to the US West Coast, and about $1,000 per FEU higher than that to the East Coast. Most trans-Pacific service contracts will run from May 1 through April 30, 2026. Last year, the largest big box retailers signed service contracts in the range of <a href="https://www.joc.com/article/top-us-retailers-set-asia-service-contract-floor-significantly-higher-than-2023-24-5225383">$1,400 to $1,450 per FEU to the West Coast</a> and about $1,000 per FEU higher to the East Coast. However, within weeks of those agreements being signed, spot rates <a href="https://www.joc.com/article/container-market-turn-could-keep-capacity-tight-until-october-5214010">popped to levels not seen since the COVID-19 pandemic</a> due to surging demand and frontloading of imports prior to the expiration of the dockworker contract on the East and Gulf coasts. Several midsize importers — those shipping 30,000 to 40,000 containers per year — are in their second round of negotiations and are expected to sign for rates that are about $100 to $150 per FEU higher than what the largest retailers will pay. “Most of those contracts are done or nearly done,” a carrier executive who asked not to be identified told the Journal of Commerce Wednesday. He expects midsize retailers and other importers to secure contract rates in the range of $1,700 to $1,900 per FEU, up from <a href="https://www.joc.com/article/importers-try-to-push-cargo-to-contract-rates-as-trans-pac-spot-market-surges-5244311">$1,500 to $1,700 per FEU last year</a>. NVOs said their negotiations are likewise on schedule, with the first round nearing completion. They expect to wrap up their contracts later in April. “They’re coming down from the $2,500 initial offer,” said Chistian Sur, executive vice president of ocean freight at Unique Logistics International. “We haven’t gotten below $2,000 yet.” <h3>A wider range of rates </h3>Shippers and carriers say that due to uncertainties in the global trade environment, including the <a href="https://www.joc.com/article/escalating-tariffs-will-cause-profound-trade-pattern-changes-cosco-5967662">Trump administration’s tariffs</a>, the possibility of a <a href="https://www.joc.com/article/ustrs-china-tonnage-tax-would-squeeze-smaller-trades-stakeholders-5967638">tax on US port calls by Chinese-operated and -built ships</a>, <a href="https://www.joc.com/article/houthi-militants-threaten-to-restart-attacks-on-red-sea-shipping-5959250">continued disruptions in the Red Sea</a> and <a href="https://www.joc.com/article/tpm25-carriers-shippers-face-year-of-turmoil-and-uncertainty-5957721">questions over consumer demand</a> in the second half of the year, the range of service contract rates is greater this year than in past years. “The market is really unsettled,” said Benton Kauffman, head of trans-Pacific air and sea logistics at the forwarder DSV Transport Logistics. “Rates are all over the place,” said James Caradonna, executive vice president at forwarder Spedag Americas. Some large importers who held out too long in the 2024–25 contract negotiations and then could not secure sufficient space when US imports from Asia surged by double-digit percentages agreed to rates on the higher end of the spectrum this time around, he noted. The carrier executive said he believes most large customers are trying to spread out their minimum quantity commitments (MQCs) among multiple carriers, which is likely one of the main reasons behind the wider range of pricing this year. However, some shippers have resisted signing at higher rates this year because they believe the market will continue to soften in the second half, Caradonna said. Average spot rates from Asia to the US West Coast fell to $1,600 per FEU this week, down 69.5% from the first week of January and 48.7% year over year, according to Platts, sister company of the Journal of Commerce within S&amp;P Global. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="4dfb665f-cef9-423e-ba98-aecdd9291d5c"></dynamic-object></div>Other midsize importers are hesitant to make their MQCs right now due to demand uncertainty and confidence that the vessel space will be there when they need it, said Kurt McEloy, executive vice president at the forwarder Kerry Apex. “It’s hard for them to nail down their MQCs, so some midsize importers will wait until well into April,” McElroy said. Stephen Nothdurft, vice president of North American sales at forwarder MOL Consolidation Service, said his clients likewise are not concerned about capacity constraints. “Space is widely available,” he said. “There are some blanks, but it’s hard to tell what is [due to] capacity management and what is downstream from service changes early this year.” A midsize importer of home furnishings who asked not to be identified said he is operating under a “normal” timeline of wrapping up the first round of negotiations in March and signing the contract in April. Several NVOs said carriers are also bringing different strategies to contract negotiations this year because of <a href="https://www.joc.com/article/carrier-alliance-shifting-causes-february-dip-in-trans-pacific-vessel-capacity-5937603">changes in the carrier alliances</a> that took effect in February, with some pricing more aggressively in an effort to build market share. The threat by the US Trade Representative (USTR) to levy charges as high as $1.5 million per port call by vessels built in China has some carriers that rely heavily on Chinese-built vessels concerned that customers will reduce their MQCs with them this year, so those lines are also quoting lower prices in order to retain business, NVOs said. Contact Bill Mongelluzzo at <a href="mailto:bill.mongelluzzo@spglobal.com">bill.mongelluzzo@spglobal.com</a>. Contact Laura Robb at <a href="mailto:laura.robb@spglobal.com">laura.robb@spglobal.com</a>. </div>

The largest US retailers are signing their 2025–26 service contracts in the eastbound trans-Pacific at rates that are about 15% to 20% higher than they signed for last year, with midsize importers likely to finalize deals in the coming few weeks at slightly higher rates. Three carriers, seven non-vessel-operating common carriers (NVOs) and two industry consultants told the Journal of Commerce those major retailers have signed service contracts over the past week. The rates in those contracts, which essentially set the floor for negotiations with midsize and smaller shippers, range from $1,600 to $1,800 per FEU from Asia to the US West Coast, and about $1,000 per FEU higher than that to the East Coast. Most trans-Pacific service contracts will run from May 1 through April 30, 2026. Last year, the largest big box retailers signed service contracts in the range of $1,400 to $1,450 per FEU to the West Coast and about $1,000 per FEU higher to the East Coast. However, within weeks of those agreements being signed, spot rates popped to levels not seen since the COVID-19 pandemic due to surging demand and frontloading of imports prior to the expiration of the dockworker contract on the East and Gulf coasts. Several midsize importers — those shipping 30,000 to 40,000 containers per year — are in their second round of negotiations and are expected to sign for rates that are about $100 to $150 per FEU higher than what the largest retailers will pay. “Most of those contracts are done or nearly done,” a carrier executive who asked not to be identified told the Journal of Commerce Wednesday. He expects midsize retailers and other importers to secure contract rates in the range of $1,700 to $1,900 per FEU, up from $1,500 to $1,700 per FEU last year . NVOs said their negotiations are likewise on schedule, with the first round nearing completion. They expect to wrap up their contracts later in April. “They’re coming down from the $2,500 initial offer,” said Chistian Sur, executive vice president of ocean freight at Unique Logistics International. “We haven’t gotten below $2,000 yet.” A wider range of rates Shippers and carriers say that due to uncertainties in the global trade environment, including the Trump administration’s tariffs , the possibility of a tax on US port calls by Chinese-operated and -built ships , continued disruptions in the Red Sea and questions over consumer demand in the second half of the year, the range of service contract rates is greater this year than in past years. “The market is really unsettled,” said Benton Kauffman, head of trans-Pacific air and sea logistics at the forwarder DSV Transport Logistics. “Rates are all over the place,” said James Caradonna, executive vice president at forwarder Spedag Americas. Some large importers who held out too long in the 2024–25 contract negotiations and then could not secure sufficient space when US imports from Asia surged by double-digit percentages agreed to rates on the higher end of the spectrum this time around, he noted. The carrier executive said he believes most large customers are trying to spread out their minimum quantity commitments (MQCs) among multiple carriers, which is likely one of the main reasons behind the wider range of pricing this year. However, some shippers have resisted signing at higher rates this year because they believe the market will continue to soften in the second half, Caradonna said. Average spot rates from Asia to the US West Coast fell to $1,600 per FEU this week, down 69.5% from the first week of January and 48.7% year over year, according to Platts, sister company of the Journal of Commerce within S&P Global. Other midsize importers are hesitant to make their MQCs right now due to demand uncertainty and confidence that the vessel space will be there when they need it, said Kurt McEloy, executive vice president at the forwarder Kerry Apex. “It’s hard for them to nail down their MQCs, so some midsize importers will wait until well into April,” McElroy said. Stephen Nothdurft, vice president of North American sales at forwarder MOL Consolidation Service, said his clients likewise are not concerned about capacity constraints. “Space is widely available,” he said. “There are some blanks, but it’s hard to tell what is [due to] capacity management and what is downstream from service changes early this year.” A midsize importer of home furnishings who asked not to be identified said he is operating under a “normal” timeline of wrapping up the first round of negotiations in March and signing the contract in April. Several NVOs said carriers are also bringing different strategies to contract negotiations this year because of changes in the carrier alliances that took effect in February, with some pricing more aggressively in an effort to build market share. The threat by the US Trade Representative (USTR) to levy charges as high as $1.5 million per port call by vessels built in China has some carriers that rely heavily on Chinese-built vessels concerned that customers will reduce their MQCs with them this year, so those lines are also quoting lower prices in order to retain business, NVOs said. Contact Bill Mongelluzzo at bill.mongelluzzo@spglobal.com . Contact Laura Robb at laura.robb@spglobal.com .

Forwarding

Largest US importers finalizing contracts in ‘unsettled’ trans-Pacific

<div class="phx-topic abstract-wrapper">Consolidation in container shipping over the last two decades and better capacity management in recent years show that the old ways of looking at vessel capacity are outdated, writes Journal of Commerce Executive Editor Mark Szakonyi.</div>

Consolidation in container shipping over the last two decades and better capacity management in recent years show that the old ways of looking at vessel capacity are outdated, writes Journal of Commerce Executive Editor Mark Szakonyi.

<div class="phx-topic">The conventional thinking is that container lines are heading for another down cycle due to mounting overcapacity and weakening global demand. After record profits during the COVID-19 pandemic era and $60 billion more in 2024, JP Morgan in a March 17 research note said it thinks the industry is “entering a multi-year period of losses.” That may very well be how this year and 2026 shake out. But a scenario in which external factors keep restraining effective container shipping capacity and carriers muster enough pricing discipline isn’t outlandish, either. <div class="wrapper-narrow float-right-element"><img src="/images/phoenix/5970290_0.1.jpg"></img></div>Internally, thanks to consolidation over the last two decades and better capacity management in recent years, whether through blank sailings or holding firm on contract allocations when space gets tight, the old ways of looking at capacity aren’t relevant. Even so, the size of the current order book is daunting, with new orders representing a quarter of the existing fleet, according to S&amp;P Global’s Sea-web, a sister company of the Journal of Commerce. Maersk CEO Vincent Clerc said approximately 2 million TEUs of capacity will be delivered this year, equating to 6% of the existing fleet, according to Sea-web. Another 1.5 million to 2 million TEUs could be released whenever the Red Sea reopens to commercial traffic, Clerc said during the company’s first-quarter earnings call Feb. 6. The industry’s return to Suez Canal transits is expected to cause three to six months of disruption, with ships repositioning and causing bunching at European and US East Coast ports, ultimately reducing effective capacity. “The overcapacity anticipated last year has been delayed to 2025, but the supply-demand equation is much more nuanced and benign than what we had in front of us just a year ago before the outbreak of the Red Sea disruption,” Clerc told investors. He added that Maersk expects stronger global demand in 2025 than last year, expanding at 4% — in line with the market — despite the US slapping tariffs on goods from China, Europe and other trading partners. <h3>Red Sea factor is ever-present </h3>So much depends on when the container shipping industry deems it safe to route through the Red Sea. US President Donald Trump’s decision to move a second aircraft carrier to the Middle East on March 23, a week after his order of strikes on Houthi-held areas in Yemen, may not open the waterway as he hopes. “The resumption of US airstrikes significantly increases the likelihood of further Houthi attacks on US and US-allied naval assets in the Red Sea and Gulf of Aden — representing a severe risk to all vessels in transit due to uncertainties around Houthi targeting selection,” said Jack Kennedy, head of Middle East and North Africa country risk at S&amp;P Global Market Intelligence. Kennedy said it was unlikely that the US would be able to “restore unchecked freedom of navigation” in six months by pressuring Iran to stop helping its Houthi proxies. He doubts that the US can uproot the Houthi without help from the UAE and Saudi Arabia, a move that would most likely trigger retaliation from the Houthis. The Israel-Hamas ceasefire, announced Jan. 15, initially raised hopes of a return to Red Sea transits, Jeremy Nixon, CEO of Ocean Network Express (ONE), said Monday at Singapore Maritime Week. “That doesn’t look likely now based on the events, particularly in the last week, so probably routing around the Cape of Good Hope is a continued paradigm for likely the rest of this year is the way things stand, and that has a big impact on our operations, big impact on the supply and demand,” Nixon said. <h3>Unused levers </h3>Independent of the Red Sea, carriers still have unused levers to curb overcapacity, including idling and slow steaming, Jan Tiedemann, senior analyst at Alphaliner, said at TPM25 in Long Beach earlier this month. Less than 1% of tonnage is idling, reflecting the belief of carriers that it’s better to have extra tonnage in case of disruption than send older vessels to the scrapping yards, he said. Scrapping last year was well below 1%, but there is limited yard capacity to break ships if carriers retire older tonnage. While container lines have sailed ships faster due to Red Sea diversions, there is plenty of functional capacity that can be reabsorbed by slowing down by just a few knots. “That doesn’t seem a lot, but if [a] ship only sails at 18 knots, and it goes down to 15, that’s quite a reduction in terms of the percentage” of capacity needed, Tiedemann said. Global port congestion and other events that pull down ocean reliability are curbing the effective capacity of the fleet, according to Simon Sundboell, founder and CEO of maritime intelligence firm eeSea. For example, the deployment of capacity out of Asia to Europe, North America and the Caribbean and Central America rose 7.9% year over year in 2024, according to eeSea. But the functional capacity was just 3.4%. The question for 2025 and beyond is not whether there will be tonnage overcapacity, as there surely will be, but to what degree there will an overhang of functional capacity. Contact Mark Szakonyi at <a href="https://www.joc.com/article/mark.szakonyi@spglobal.com.">mark.szakonyi@spglobal.com</a>.</div>

The conventional thinking is that container lines are heading for another down cycle due to mounting overcapacity and weakening global demand. After record profits during the COVID-19 pandemic era and $60 billion more in 2024, JP Morgan in a March 17 research note said it thinks the industry is “entering a multi-year period of losses.” That may very well be how this year and 2026 shake out. But a scenario in which external factors keep restraining effective container shipping capacity and carriers muster enough pricing discipline isn’t outlandish, either. Internally, thanks to consolidation over the last two decades and better capacity management in recent years, whether through blank sailings or holding firm on contract allocations when space gets tight, the old ways of looking at capacity aren’t relevant. Even so, the size of the current order book is daunting, with new orders representing a quarter of the existing fleet, according to S&P Global’s Sea-web, a sister company of the Journal of Commerce. Maersk CEO Vincent Clerc said approximately 2 million TEUs of capacity will be delivered this year, equating to 6% of the existing fleet, according to Sea-web. Another 1.5 million to 2 million TEUs could be released whenever the Red Sea reopens to commercial traffic, Clerc said during the company’s first-quarter earnings call Feb. 6. The industry’s return to Suez Canal transits is expected to cause three to six months of disruption, with ships repositioning and causing bunching at European and US East Coast ports, ultimately reducing effective capacity. “The overcapacity anticipated last year has been delayed to 2025, but the supply-demand equation is much more nuanced and benign than what we had in front of us just a year ago before the outbreak of the Red Sea disruption,” Clerc told investors. He added that Maersk expects stronger global demand in 2025 than last year, expanding at 4% — in line with the market — despite the US slapping tariffs on goods from China, Europe and other trading partners. Red Sea factor is ever-present So much depends on when the container shipping industry deems it safe to route through the Red Sea. US President Donald Trump’s decision to move a second aircraft carrier to the Middle East on March 23, a week after his order of strikes on Houthi-held areas in Yemen, may not open the waterway as he hopes. “The resumption of US airstrikes significantly increases the likelihood of further Houthi attacks on US and US-allied naval assets in the Red Sea and Gulf of Aden — representing a severe risk to all vessels in transit due to uncertainties around Houthi targeting selection,” said Jack Kennedy, head of Middle East and North Africa country risk at S&P Global Market Intelligence. Kennedy said it was unlikely that the US would be able to “restore unchecked freedom of navigation” in six months by pressuring Iran to stop helping its Houthi proxies. He doubts that the US can uproot the Houthi without help from the UAE and Saudi Arabia, a move that would most likely trigger retaliation from the Houthis. The Israel-Hamas ceasefire, announced Jan. 15, initially raised hopes of a return to Red Sea transits, Jeremy Nixon, CEO of Ocean Network Express (ONE), said Monday at Singapore Maritime Week. “That doesn’t look likely now based on the events, particularly in the last week, so probably routing around the Cape of Good Hope is a continued paradigm for likely the rest of this year is the way things stand, and that has a big impact on our operations, big impact on the supply and demand,” Nixon said. Unused levers Independent of the Red Sea, carriers still have unused levers to curb overcapacity, including idling and slow steaming, Jan Tiedemann, senior analyst at Alphaliner, said at TPM25 in Long Beach earlier this month. Less than 1% of tonnage is idling, reflecting the belief of carriers that it’s better to have extra tonnage in case of disruption than send older vessels to the scrapping yards, he said. Scrapping last year was well below 1%, but there is limited yard capacity to break ships if carriers retire older tonnage. While container lines have sailed ships faster due to Red Sea diversions, there is plenty of functional capacity that can be reabsorbed by slowing down by just a few knots. “That doesn’t seem a lot, but if [a] ship only sails at 18 knots, and it goes down to 15, that’s quite a reduction in terms of the percentage” of capacity needed, Tiedemann said. Global port congestion and other events that pull down ocean reliability are curbing the effective capacity of the fleet, according to Simon Sundboell, founder and CEO of maritime intelligence firm eeSea. For example, the deployment of capacity out of Asia to Europe, North America and the Caribbean and Central America rose 7.9% year over year in 2024, according to eeSea. But the functional capacity was just 3.4%. The question for 2025 and beyond is not whether there will be tonnage overcapacity, as there surely will be, but to what degree there will an overhang of functional capacity. Contact Mark Szakonyi at mark.szakonyi@spglobal.com .

Container ship overcapacity may be more ‘benign’ than order book suggests

<div class="phx-topic abstract-wrapper">While there is no strong demand trigger for LTL freight on the horizon, providers continue to add terminals and lanes to growing networks. </div>

While there is no strong demand trigger for LTL freight on the horizon, providers continue to add terminals and lanes to growing networks.

<div class="phx-topic">US freight demand is declining, but less-than-truckload (LTL) carriers keep building, adding terminals and lanes at a time when they might be expected to rein in expansion plans. Instead of hedging against uncertainty, LTL trucking companies say they are positioning themselves for the upswing in freight demand they hope will come sometime this year. “For the first time in decades, nobody is seeing the traditional March peak for LTL,” Chris Jamroz, CEO of Roadrunner, told the Journal of Commerce. “It used to be that anybody who had a pulse could deliver a great result in LTL in March.” Not this year. Four of the top 10 publicly owned LTL companies reported declines in shipments and tonnage in January and February, with only one, Saia, reporting gains, including a 5.5% increase in shipments — almost certainly market share gains from competitors. Shipments at FedEx Freight, the largest US LTL provider, fell 4.7% year over year in the quarter that ended Feb. 28. Shipments were down 5.9% from a year ago at Old Dominion Freight Line (ODFL) in January and February and were 6.2% lower at XPO in February. Shipments per day were down 1% in January and February at ABF Freight System, but the ArcBest subsidiary’s tonnage slipped 6%, according to its mid-quarter report. ABF in February began hauling more heavy-weight truckload-rated shipments to bolster its volumes.The Cass Freight Shipments Index, a broad measure of freight volume that blends LTL, truckload and rail shipments, was down 5.5% year over year in February and 9.5% from two years ago. The annualized decline was 8.2% in January. Although data for early March isn’t available yet, LTL executives and shippers point to little change in freight demand. LTL executives who spoke with the Journal of Commerce but did not want to be identified say freight volumes were down by low single-digit percentages from a year ago. Those executives are still optimistic, though, partly because they are winning contractual rate hikes, as they have been since <a href="https://www.joc.com/article/us-ltl-sector-growth-efficiencies-still-fueled-by-loss-of-yellow-5715785">bankrupt LTL provider Yellow collapsed</a> in 2023. The US long-haul LTL producer price index (PPI) rose 6.3% from a year ago in January and 6.1% in February. The measure of all-inclusive LTL selling prices is now at its highest point ever, having recovered from a 12% slide between June 2022 and April 2023. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="eea5e7a8-7e1e-4d7c-9068-ac1fc2db0a5e"></dynamic-object></div>The LTL PPI is now 12.3% higher than it was when Yellow shut down in July 2023. That makes it easier for LTL carriers to begin building toward a demand recovery. “We still see a soft domestic economy, but it feels like it’s improving,” Adam Satterfield, CFO of Old Dominion Freight Line, told the Journal of Commerce. “Sequentially, we saw shipments and tonnage improve more than average from January to February.” <h3>Larger, denser LTL networks</h3>ODFL spent $664 million over the past two years on its service center network — without buying terminals from Yellow. “We continue to add capacity,” said Satterfield. “Capacity is an important part of the equation in the first year of an economic inflection.” After two slow years, ODFL has “more excess capacity than we’ve ever had,” at about 30%, Satterfield said. “But we still have a robust capex [capital expenditure] plan,” he added. “Investing in new service centers is a key part of our strategy, and we want to stay ahead of the curve.” ODFL opened four facilities in 2024 and has several service centers under construction that can be opened when the market heats up, he said. Other carriers, including regional LTL providers Dayton Freight Lines, A. Duie Pyle and Averitt <a href="https://www.joc.com/article/ltl-carriers-expanding-networks-to-prepare-for-long-term-growth-5915148">are opening or expanding service centers</a> to gain greater freight density and expand next-day and same-day service. Yellow continues to sell the last of its terminals. There is still less LTL capacity available than there was before Yellow’s exit, Satterfield said. That is helping to keep LTL pricing elevated. Roadrunner, which is leasing a former Yellow terminal in Atlanta, one of its network hubs, last week expanded by adding 278 lanes, its largest expansion since its current restructuring began in 2021. One-third of those 278 new lanes are more than 1,000 miles long, originating at the company’s hubs in Atlanta, Detroit, Nashville, Cleveland and Grand Rapids, Michigan. The new lanes aren’t a reaction to rising demand, however; they’re all about prepositioning for coming demand. LTL carriers are also prepping for the eventual spinoff of FedEx Freight as an independent carrier in 2026 and a possible LTL play by Amazon. “We’re at the bottom of the trough, but we will go up, and we want to be positioned to respond to shippers very fast,” Jamroz said. Contact William B. Cassidy at <a href="mailto:bill.cassidy@spglobal.com">bill.cassidy@spglobal.com</a>. </div>

US freight demand is declining, but less-than-truckload (LTL) carriers keep building, adding terminals and lanes at a time when they might be expected to rein in expansion plans. Instead of hedging against uncertainty, LTL trucking companies say they are positioning themselves for the upswing in freight demand they hope will come sometime this year. “For the first time in decades, nobody is seeing the traditional March peak for LTL,” Chris Jamroz, CEO of Roadrunner, told the Journal of Commerce. “It used to be that anybody who had a pulse could deliver a great result in LTL in March.” Not this year. Four of the top 10 publicly owned LTL companies reported declines in shipments and tonnage in January and February, with only one, Saia, reporting gains, including a 5.5% increase in shipments — almost certainly market share gains from competitors. Shipments at FedEx Freight, the largest US LTL provider, fell 4.7% year over year in the quarter that ended Feb. 28. Shipments were down 5.9% from a year ago at Old Dominion Freight Line (ODFL) in January and February and were 6.2% lower at XPO in February. Shipments per day were down 1% in January and February at ABF Freight System, but the ArcBest subsidiary’s tonnage slipped 6%, according to its mid-quarter report. ABF in February began hauling more heavy-weight truckload-rated shipments to bolster its volumes. The Cass Freight Shipments Index, a broad measure of freight volume that blends LTL, truckload and rail shipments, was down 5.5% year over year in February and 9.5% from two years ago. The annualized decline was 8.2% in January. Although data for early March isn’t available yet, LTL executives and shippers point to little change in freight demand. LTL executives who spoke with the Journal of Commerce but did not want to be identified say freight volumes were down by low single-digit percentages from a year ago. Those executives are still optimistic, though, partly because they are winning contractual rate hikes, as they have been since bankrupt LTL provider Yellow collapsed in 2023. The US long-haul LTL producer price index (PPI) rose 6.3% from a year ago in January and 6.1% in February. The measure of all-inclusive LTL selling prices is now at its highest point ever, having recovered from a 12% slide between June 2022 and April 2023. The LTL PPI is now 12.3% higher than it was when Yellow shut down in July 2023. That makes it easier for LTL carriers to begin building toward a demand recovery. “We still see a soft domestic economy, but it feels like it’s improving,” Adam Satterfield, CFO of Old Dominion Freight Line, told the Journal of Commerce. “Sequentially, we saw shipments and tonnage improve more than average from January to February.” Larger, denser LTL networks ODFL spent $664 million over the past two years on its service center network — without buying terminals from Yellow. “We continue to add capacity,” said Satterfield. “Capacity is an important part of the equation in the first year of an economic inflection.” After two slow years, ODFL has “more excess capacity than we’ve ever had,” at about 30%, Satterfield said. “But we still have a robust capex [capital expenditure] plan,” he added. “Investing in new service centers is a key part of our strategy, and we want to stay ahead of the curve.” ODFL opened four facilities in 2024 and has several service centers under construction that can be opened when the market heats up, he said. Other carriers, including regional LTL providers Dayton Freight Lines, A. Duie Pyle and Averitt are opening or expanding service centers to gain greater freight density and expand next-day and same-day service. Yellow continues to sell the last of its terminals. There is still less LTL capacity available than there was before Yellow’s exit, Satterfield said. That is helping to keep LTL pricing elevated. Roadrunner, which is leasing a former Yellow terminal in Atlanta, one of its network hubs, last week expanded by adding 278 lanes, its largest expansion since its current restructuring began in 2021. One-third of those 278 new lanes are more than 1,000 miles long, originating at the company’s hubs in Atlanta, Detroit, Nashville, Cleveland and Grand Rapids, Michigan. The new lanes aren’t a reaction to rising demand, however; they’re all about prepositioning for coming demand. LTL carriers are also prepping for the eventual spinoff of FedEx Freight as an independent carrier in 2026 and a possible LTL play by Amazon. “We’re at the bottom of the trough, but we will go up, and we want to be positioned to respond to shippers very fast,” Jamroz said. Contact William B. Cassidy at bill.cassidy@spglobal.com .

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