<div class="phx-topic abstract-wrapper">The grouping of the world’s largest container lines into four large alliances covering all east-west trades has had an unexpected result: Shippers no longer view alliances as potential vehicles for rate collusion, and, in fact, have come to appreciate their ability to prop up smaller lines that are finding it increasingly difficult to compete against the three largest carriers.</div>

The grouping of the world’s largest container lines into four large alliances covering all east-west trades has had an unexpected result: Shippers no longer view alliances as potential vehicles for rate collusion, and, in fact, have come to appreciate their ability to prop up smaller lines that are finding it increasingly difficult to compete against the three largest carriers.

<div>WASHINGTON — The grouping of the world’s largest container lines into four large alliances covering all east-west trades has had an unexpected result: Shippers no longer view alliances as potential vehicles for rate collusion, and, in fact, have come to appreciate their ability to prop up smaller lines that are finding it increasingly difficult to compete against the three largest carriers.The shift shows that as the largest carriers, particularly Maersk Line and CMA-CGM, which report results publicly, pull away from the larger group of mid-tier carriers in profitability, there is growing concern that if smaller carriers start failing a nightmare...

WASHINGTON — The grouping of the world’s largest container lines into four large alliances covering all east-west trades has had an unexpected result: Shippers no longer view alliances as potential vehicles for rate collusion, and, in fact, have come to appreciate their ability to prop up smaller lines that are finding it increasingly difficult to compete against the three largest carriers. The shift shows that as the largest carriers, particularly Maersk Line and CMA-CGM, which report results publicly, pull away from the larger group of mid-tier carriers in profitability, there is growing concern that if smaller carriers start failing a nightmare scenario could ensue for shippers. If small players are driven out of the market, a small number of mega-carriers could achieve the power to exert price leadership in the market. Shippers’ softening view of alliances is a sharp change from their initial reaction to Maersk, Mediterranean Shipping Co. and CMA CGM’s proposed vessel sharing alliance in June 2013. In public many shippers voiced lukewarm support but grumbled behind closed doors. Chinese regulators blocked the alliance, known as the P3 Network, a year ago, but others followed in its wake. Shippers “were right to raise a yellow flag when these alliances were cobbled together and proposed. They had the appearance of game-changers,” said Bruce Carlton, president and CEO of the National Industrial Transportation League, the largest U.S. shipper organization. “With some time to observe actual performance, there’s less to be afraid of than we once thought.” The level of scrutiny that maritime regulators gave the proposed shipping alliance also assured shippers that the major vessel-sharing agreements wouldn’t be rubber-stamped, said Chris Welsh, secretary general of the U.K.-based Global Shippers’ Forum, the world’s largest group of ocean container shippers. “The FMC took unprecedented steps in the planned monitoring of the P3 ( the proposed and defunct alliance of Maersk, MSC and CMA CGM ),” he said. “The range of demands they were going to make on carriers in terms of rates and capacity indicated they were going to look at it seriously.” Global maritime regulators aren’t letting down their guard. Following a June meeting in Brussels, the U.S. Federal Maritime Commission, the European Commission's Directorate-General for Competition and the Chinese Ministry of Transport pledged to work together more to keep a sharper eye on the alliances. The regulators concluded they haven’t hurt competition, FMC Chairman Mario Cordero said. The three regulatory groups, which met for the first time in December 2013, plan to meet again in a year FMC Commissioner Richard Lidinsky said the meeting sent a strong message to alliance members that they aren’t above the scrutiny of governments and “we are watching you.” He was the sole FMC commissioner to vote against allowing the P3 Network and the 2M , the tie-up of Maersk and MSC that followed Beijing’s momentous veto of the P3. Following the decision of Maersk and MSC to pursue their own alliance, CMA CGM quickly struck up an alliance with United Arab Shipping Co. and China Shipping, known as Ocean Three . Even before the P3 was struck down, the G6 alliance — APL, Hapag-Lloyd, Hyundai Merchant Marine, MOL, NYK and OOCL — had already expanded into the Asia-U.S. West Coast and trans-Atlantic routes, thanks to the blessing of the FMC. In late 2014, the CKYHE Alliance got the go-ahead from the FMC to further integrate its newest member, Evergreen Line, into its alliance covering the trans-Pacific and trans-Atlantic lanes. The other members are Cosco, "K" Line, Yang Ming and Hanjin Shipping. When the dust cleared, 19 of the 20 largest global carriers were part of an alliance encompassing the three major east-west trade lanes, the trans-Atlantic, the trans-Pacific and Asia-Europe--unprecedented coverage for the alliance system. Zim Integrated Shipping Services CEO Rafi Danieli told JOC.com in April that he wasn’t worried the company was the only major carrier not in an alliance, saying partnerships with and joint ventures were sufficient. Through the alliances, carriers gain access to the economies of scale achieved through large ships, share the increasingly larger vessels being deployed, allowing them to fill capacity and avoid losses accrued by operating less-than-full ships. In essence, the four mega-alliances compete with each other and their respective fellow members, as the pacts are operational, while forbidding joint marketing and sales, Welsh said. Slot-sharing is hardly new, but the degree of integration used by alliances, and their reach certainly is — they make up roughly 90 percent of container capacity on major lanes. “Is that a preferable scenario to greater acquisitions and mergers in the market that would reduce competition? Yes,” Welsh told JOC.com The alliances don’t appear to have brought about shipper’s greatest fear of rate collusions, either. Maritime regulators haven’t stepped in to break up the VSAs. In his report to Federal Maritime Commissioners on June 24, Bob Blair of FMC’s Bureau of Trade Analysis said his review of the 2M alliance has “raised no red flags” of anticompetitive behavior by Maersk and MSC. It would be difficult for 2M and other alliances to collude rates or limit capacity on trade lanes, Blair said. The FMC has considered the possibility of alliances setting rates or capacity strategies through their membership in discussion groups, namely the Transpacific Stabilization Agreement, an agreement involving 15 of the largest carriers on the trade lane. But the likelihood of these “special circumstances” dampening competition is unlikely BTA said, considering the complexity of coordination with so many carriers would be difficult to create, run or hide from regulators. Although regulators haven’t found any indication of alliance rate setting, shipper suspicion of broader carrier misbehavior lingers. The European Union in November 2013 said it was investigating whether 14 carriers had colluded on rates on European lanes after it raided their offices roughly two years prior. But no charges have come down and regulators haven’t said anything since. More recently, China fined 21 carriers in the China-Japan trade a total of $684,000 for quoting customers rates below levels filed with the Shanghai Shipping Exchange. But those suspecting alliance members are colluding on prices would have a hard time finding evidence in market rates. Spot rates on the major three trade lanes are modest at best, as in the case of the trans-Atlantic , sluggish in trans-Pacific and edging below the cost of service in the Asia-Europe lane . There’s little evidence that contract rates are much different. One-third of trans-Pacific shippers surveyed by JOC.com earlier this year said contract rates for 2015-2016 were virtually unchanged from the prior year. Twenty-one percent of shippers said rates rose 1 to 3 percent, while one-third said rates increased more than 3 percent, according to the survey of more than 100 shippers. “I haven’t had complaints about shipping rates in very long time. If they are colluding on prices, they are doing a horrible job about it,” said Carlton, who said he doesn’t think carriers are price-fixing. What shippers have been complaining about is poor service reliability , which may be caused partly by shipping alliances, and getting inferior service from an alliance partner of their preferred carrier. In defense of massive vessel-sharing agreements, carriers said they would improve service by offering more port pairings and reducing the number of dropped sailings. There are few signs of this, and the boggled roll-out of the G6 shows that in some cases service has suffered from alliances, as Blair suggested during his presentation to FMC commissioners. He said 2M didn’t have the same negative impact on service. Alliance services also sometimes require the calling on multiple marine terminals within a single port, adding more touches and contributing to congestion. Considering how many factors contribute to congestion, including volume surges from mega-ships , chassis dislocation and labor slowdowns, it’s hard to determine just how much alliances are a factor, said Welsh, of GSF. Still, he wants alliance members to benchmark their performance on major trade lanes and share the information with regulators as a backstop against carriers abusing VSAs to allow service to deteriorate. GSF’s call for carriers to pull out of rate-setting conferences that are allowed in some trade lanes outside the U.S. and Europe, and from U.S.-sanctioned discussion agreements, is unlikely to be heeded. The shipping alliances are still in their infancy, and kinks are still getting worked out, potentially leading to better service, Welsh said. Carriers are struggling to fuse operations that have different corporate cultures and operating histories, Carlton said. “Getting it to fit for two land-based companies can take years,” he said. Alliances “are much more complicated.” Whether or not the service improves, alliances’ ability to help keep medium and small carriers in the game comes with a catch for shippers. They embolden those carriers to order larger vessels, which unless demand grows steadily, will exacerbate the overhang of capacity and keep rates volatile. Additionally, if marine terminals, railroads and carriers can’t find a better way to handle the unloading and loading of cargo from mega-ships then congestion will worsen. The price of increased competition doesn’t come cheap. Contact Mark Szakonyi at mark.szakonyi@ihs.com and follow him on Twitter: @szakonyi_joc .

Transport, Trade and Regulation News

Container lines

Shippers view carrier alliances as bulwarks for competition

<div class="phx-topic abstract-wrapper">The latest deals will increase the total number of methanol-enabled ships Wan Hai has on order to 32, worth a total of almost $5 billion.</div>

The latest deals will increase the total number of methanol-enabled ships Wan Hai has on order to 32, worth a total of almost $5 billion.

Feature image

<div class="phx-topic">Wan Hai Lines has ordered four additional 16,000-TEU methanol-ready, dual-fuel container ships from two South Korean shipyards at a cost of up to $816 million, the Taiwan-headquartered carrier said. The latest deals will increase the total number of methanol-enabled ships Wan Hai has on order to 32, worth a total of almost $5 billion. Wan Hai, ranked 11th in the world by Alphaliner in terms of capacity, said two of the vessels will be built by HD Hyundai Samho, while the other pair will be constructed by Samsung Heavy Industries. Each of the four ships will cost between $187 million and $204 million, the carrier said Thursday. All of Wan Hai’s ships on order are scheduled for delivery in 2026 and 2027 and will increase the carrier’s owned fleet to almost 150 ships totaling around 950,000 TEUs in capacity. The orders also mark further expansion of Wan Hai’s long-haul network to North and South America, India and the Middle East, while increasing the number of owned vessels and reducing the need for chartered tonnage. The latest contracts were confirmed by Wan Hai after it announced that its operating revenue surged 34% year on year in the first quarter to $1.1 billion amid high rates and solid freight volumes. Contact Keith Wallis at <a href="mailto:keithwallis@hotmail.com">keithwallis@hotmail.com</a>. </div>

Wan Hai Lines has ordered four additional 16,000-TEU methanol-ready, dual-fuel container ships from two South Korean shipyards at a cost of up to $816 million, the Taiwan-headquartered carrier said. The latest deals will increase the total number of methanol-enabled ships Wan Hai has on order to 32, worth a total of almost $5 billion. Wan Hai, ranked 11th in the world by Alphaliner in terms of capacity, said two of the vessels will be built by HD Hyundai Samho, while the other pair will be constructed by Samsung Heavy Industries. Each of the four ships will cost between $187 million and $204 million, the carrier said Thursday. All of Wan Hai’s ships on order are scheduled for delivery in 2026 and 2027 and will increase the carrier’s owned fleet to almost 150 ships totaling around 950,000 TEUs in capacity. The orders also mark further expansion of Wan Hai’s long-haul network to North and South America, India and the Middle East, while increasing the number of owned vessels and reducing the need for chartered tonnage. The latest contracts were confirmed by Wan Hai after it announced that its operating revenue surged 34% year on year in the first quarter to $1.1 billion amid high rates and solid freight volumes. Contact Keith Wallis at keithwallis@hotmail.com .

Maritime

Trans-Pacific

Wan Hai orders four 16,000-TEU ships amid expansion of long-haul network

<div class="phx-topic abstract-wrapper">F. Paul De Maria will become the new CEO of the group representing ocean carriers and marine terminal operators at East and Gulf coast ports. </div>

F. Paul De Maria will become the new CEO of the group representing ocean carriers and marine terminal operators at East and Gulf coast ports.

<div class="phx-topic">The United States Maritime Alliance (USMX) has picked F. Paul De Maria as its new chief executive officer after he successfully led negotiations for a new contract between maritime employers and the International Longshoremen’s Association (ILA), which itself praised De Maria as a “tough negotiator.” De Maria joined the USMX in 2012 as its vice president of labor relations after he oversaw stevedoring operations for Ports America along the East and Gulf coasts. He was promoted to executive vice president and chief operating officer at the USMX in 2021. De Maria will replace Dave Adam as CEO of the USMX, which represents ocean carriers and marine terminal operators at East and Gulf coast ports. “It’s an honor to lead this organization as we work together with the ILA to ensure we have the strong and efficient supply chains necessary to ensure American companies can access the global marketplace,” De Maria said Thursday in a statement from the USMX. The USMX in 2022 <a href="https://www.joc.com/article/ila-open-to-starting-contract-talks-soon-with-usmx-5218348">started preliminary negotiations</a> with the ILA over a new six-year master contract with the hope of concluding a deal well before the previous contract’s 2024 expiration. But the talks dragged out over issues involving <a href="https://www.joc.com/article/ila-unmoved-by-latest-industry-leading-wage-offer-from-usmx-5703227">pay</a> and <a href="https://www.joc.com/article/ila-usmx-reach-tentative-deal-that-avoids-another-port-strike-5919519">marine terminal automation</a>, eventually leading to <a href="https://www.joc.com/article/ila-usmx-agree-on-new-wage-offer-and-contract-extension-that-reopens-ports-5741882">a brief strike last October</a>. An active presence at <a href="https://www.joc.com/article/ila-usmx-reach-tentative-deal-that-avoids-another-port-strike-5919519">the final contract talks in January 2025</a>, De Maria was credited with “helping secure a landmark new agreement that protects current ILA jobs and establishes a framework for implementing technologies that will create additional jobs while modernizing East and Gulf Coast ports,” the USMX said in the statement announcing the leadership change. The ILA’s leadership also praised De Maria for his role in negotiating a new contract, which <a href="https://www.joc.com/article/ila-ratifies-new-six-year-deal-with-higher-entry-pay-automation-protection-5951338">the union’s rank and file approved in February</a>. “If it weren’t for Paul’s leadership, we would have been on the picket line again,” ILA President Harold Daggett said in a Facebook message last February. “We all knew that Paul was a tough negotiator, but he showed a lot of skill in how he worked with our bargaining committee.” Contact Michael Angell at <a href="mailto:michael.angell@spglobal.com">michael.angell@spglobal.com</a>. </div>

The United States Maritime Alliance (USMX) has picked F. Paul De Maria as its new chief executive officer after he successfully led negotiations for a new contract between maritime employers and the International Longshoremen’s Association (ILA), which itself praised De Maria as a “tough negotiator.” De Maria joined the USMX in 2012 as its vice president of labor relations after he oversaw stevedoring operations for Ports America along the East and Gulf coasts. He was promoted to executive vice president and chief operating officer at the USMX in 2021. De Maria will replace Dave Adam as CEO of the USMX, which represents ocean carriers and marine terminal operators at East and Gulf coast ports. “It’s an honor to lead this organization as we work together with the ILA to ensure we have the strong and efficient supply chains necessary to ensure American companies can access the global marketplace,” De Maria said Thursday in a statement from the USMX. The USMX in 2022 started preliminary negotiations with the ILA over a new six-year master contract with the hope of concluding a deal well before the previous contract’s 2024 expiration. But the talks dragged out over issues involving pay and marine terminal automation , eventually leading to a brief strike last October . An active presence at the final contract talks in January 2025 , De Maria was credited with “helping secure a landmark new agreement that protects current ILA jobs and establishes a framework for implementing technologies that will create additional jobs while modernizing East and Gulf Coast ports,” the USMX said in the statement announcing the leadership change. The ILA’s leadership also praised De Maria for his role in negotiating a new contract, which the union’s rank and file approved in February . “If it weren’t for Paul’s leadership, we would have been on the picket line again,” ILA President Harold Daggett said in a Facebook message last February. “We all knew that Paul was a tough negotiator, but he showed a lot of skill in how he worked with our bargaining committee.” Contact Michael Angell at michael.angell@spglobal.com .

North American ports

Marine terminals

Longshore labor

De Maria elevated to lead USMX after his work on new ILA contract

<div class="phx-topic abstract-wrapper">The award is less than the electronics giant sought in its complaint against Zim over detention and demurrage billing, a case that saw the judge chide Zim’s billing practices. </div>

The award is less than the electronics giant sought in its complaint against Zim over detention and demurrage billing, a case that saw the judge chide Zim’s billing practices.

<div class="phx-topic">Zim Integrated Shipping Services must pay Samsung Electronics $3.7 million in damages because the ocean carrier unreasonably held the release of Samsung containers during various billing disputes between the parties over detention and demurrage (D&amp;D) charges in 2021 and 2022, a judge for the Federal Maritime Commission (FMC) has ruled. In a decision published Wednesday, the FMC judge also rebuked Zim for its billing practices, saying they could run afoul of US shipping laws. When it brought the complaint in October 2022, the South Korean electronics giant originally wanted over $12 million in damages from the D&amp;D charges and additional trucking costs. Samsung said the D&amp;D charges spanned almost 10,000 separate charges on nearly 3,000 containers. Most of those containers moved under carrier haulage or so-called “store door” agreements where Zim was responsible for hiring the trucker. Samsung argued that since it did not hire the drayage driver, it shouldn’t pay any fees when a trucker is delayed in retrieving a container. However, the judge determined that many of those charges related to Samsung’s inability to receive cargo at the time. Samsung asked Zim about pre-pulling containers out of ports to avoid demurrage charges, the judge’s ruling said, a finding that shows Samsung was aware it could face those charges. Moreover, the judge did not buy Samsung’s argument that it was not the shipper, just the consignee, and should not be responsible for Zim’s charges. The judge determined the shippers were direct affiliates of Samsung, and thus can also be a responsible party in Zim’s service contracts. “It cannot be categorically found that all D&amp;D charges on door/carrier haulage shipments should have been paid by Zim,” the decision read. That was also the case when Samsung itself recommended a trucker to Zim, but the trucker failed to perform, the judge ruled. Zim started to refuse releasing some of Samsung’s containers due to the mounting D&amp;D bills, a practice that Samsung alleged also violated shipping law and incurred further demurrage. The FMC judge ruled that an ocean carrier can hold cargo for unpaid charges. However, many of the unpaid charges ended up being for containers that weren’t Samsung’s or were not otherwise justified or itemized on Zim’s invoices, the judge determined, making the holds unreasonable. While Zim eventually corrected the invoice errors, it “struggled to manage customer-specific invoice requirements and procedures during a very busy period,” the judge said. “The evidence shows significant problems with Zim’s invoicing practices because of billing the wrong party, delays in sending invoices, and inaccuracies or missing information,” the decision read. While there was no evidence these were regular practices, “Zim risks violating the Ocean Shipping Reform Act [of 2022] if this level of inaccurate billing continues,” it added. Zim was not immediately available for comment late Thursday.Contact Michael Angell at <a href="mailto:michael.angell@spglobal.com">michael.angell@spglobal.com</a>. </div>

Zim Integrated Shipping Services must pay Samsung Electronics $3.7 million in damages because the ocean carrier unreasonably held the release of Samsung containers during various billing disputes between the parties over detention and demurrage (D&D) charges in 2021 and 2022, a judge for the Federal Maritime Commission (FMC) has ruled. In a decision published Wednesday, the FMC judge also rebuked Zim for its billing practices, saying they could run afoul of US shipping laws. When it brought the complaint in October 2022, the South Korean electronics giant originally wanted over $12 million in damages from the D&D charges and additional trucking costs. Samsung said the D&D charges spanned almost 10,000 separate charges on nearly 3,000 containers. Most of those containers moved under carrier haulage or so-called “store door” agreements where Zim was responsible for hiring the trucker. Samsung argued that since it did not hire the drayage driver, it shouldn’t pay any fees when a trucker is delayed in retrieving a container. However, the judge determined that many of those charges related to Samsung’s inability to receive cargo at the time. Samsung asked Zim about pre-pulling containers out of ports to avoid demurrage charges, the judge’s ruling said, a finding that shows Samsung was aware it could face those charges. Moreover, the judge did not buy Samsung’s argument that it was not the shipper, just the consignee, and should not be responsible for Zim’s charges. The judge determined the shippers were direct affiliates of Samsung, and thus can also be a responsible party in Zim’s service contracts. “It cannot be categorically found that all D&D charges on door/carrier haulage shipments should have been paid by Zim,” the decision read. That was also the case when Samsung itself recommended a trucker to Zim, but the trucker failed to perform, the judge ruled. Zim started to refuse releasing some of Samsung’s containers due to the mounting D&D bills, a practice that Samsung alleged also violated shipping law and incurred further demurrage. The FMC judge ruled that an ocean carrier can hold cargo for unpaid charges. However, many of the unpaid charges ended up being for containers that weren’t Samsung’s or were not otherwise justified or itemized on Zim’s invoices, the judge determined, making the holds unreasonable. While Zim eventually corrected the invoice errors, it “struggled to manage customer-specific invoice requirements and procedures during a very busy period,” the judge said. “The evidence shows significant problems with Zim’s invoicing practices because of billing the wrong party, delays in sending invoices, and inaccuracies or missing information,” the decision read. While there was no evidence these were regular practices, “Zim risks violating the Ocean Shipping Reform Act [of 2022] if this level of inaccurate billing continues,” it added. Zim was not immediately available for comment late Thursday. Contact Michael Angell at michael.angell@spglobal.com .

FMC judge awards Samsung $3.7 million from Zim in billing dispute

<div class="phx-topic abstract-wrapper">S&amp;P Global’s Flash PMI for April, released Thursday, shows that economic output in the developed world hit its lowest point since 2023, boding poorly for container growth this year. </div>

S&P Global’s Flash PMI for April, released Thursday, shows that economic output in the developed world hit its lowest point since 2023, boding poorly for container growth this year.

<div class="phx-topic">New Orleans — The global economy is in a precarious state driven by tariff uncertainty, ramping up the likelihood of a recession in much of the Western world, an economic and geopolitical analyst for S&amp;P Global said Thursday. Natznet Tesfay, speaking at the Journal of Commerce’s Breakbulk and Project Cargo Conference here, said S&amp;P Global’s base expectation is “subdued economic growth,” which would likely keep global container volumes from expanding. But the likelihood of the United States, Canada and much of Europe entering a technical recession this year, defined as two straight quarters of GDP retraction, is rising as uncertainty around US tariffs mounts, Tesfay said. <div class="wrapper-narrow float-right-element"><img src="/images/phoenix/5990611_0.1.jpg"></img></div>“There’s this moment we’re standing in where there’s a number of policies, and there’s boundaries and pivots of certain policies taken to reassure markets, investors and address consumer concerns,” said Tesfay, vice president of Insights and Analysis for S&amp;P Global Market Intelligence. “Demand remains a very big concern for us.” S&amp;P Global is the parent company of the Journal of Commerce. S&amp;P’s Flash PMI for April, released Thursday, shows that the developed world’s economic output hit its lowest point since December 2023, with near stagnant or falling activity in the US, European Union, United Kingdom and Japan. The uncertainty over US tariff policy and the resulting economic slowdown are weighing on container growth prospects, with <a href="https://www.joc.com/article/fallout-from-us-china-trade-war-to-depress-trans-pacific-volumes-drewry-5990686">analyst Drewry forecasting a 1% retraction</a> in global container volumes for 2025. S&amp;P’s base-case scenario for the global economy envisions higher inflation pressures, less scope for monetary and fiscal stimulus, slowing growth in the US and China, and continued lagging of the eurozone. Its downside scenario would be marked by an escalation of trade protectionism, tighter-for-longer financial conditions, and concerns over debt sustainability, driving up yields. Even if the US tariffs are eventually significantly reduced, Tesfay said the world had already entered a period of “conditional globalization.” “[Nation] states are increasingly involved in defining who you can trade with, on what terms and based on protecting the number of strategic actors,” she said. Amid all the unknowns for the short-term economy, the one long-term certainty is that the role of India, Africa and Latin America in producing goods for the world is bound to grow, particularly as the US tries to reduce its dependence on Chinese imports, Tesfay said. Contact Mark Szakonyi at <a href="mark.szakonyi@spglobal.com">mark.szakonyi@spglobal.com</a>.</div>

New Orleans — The global economy is in a precarious state driven by tariff uncertainty, ramping up the likelihood of a recession in much of the Western world, an economic and geopolitical analyst for S&P Global said Thursday. Natznet Tesfay, speaking at the Journal of Commerce’s Breakbulk and Project Cargo Conference here, said S&P Global’s base expectation is “subdued economic growth,” which would likely keep global container volumes from expanding. But the likelihood of the United States, Canada and much of Europe entering a technical recession this year, defined as two straight quarters of GDP retraction, is rising as uncertainty around US tariffs mounts, Tesfay said. “There’s this moment we’re standing in where there’s a number of policies, and there’s boundaries and pivots of certain policies taken to reassure markets, investors and address consumer concerns,” said Tesfay, vice president of Insights and Analysis for S&P Global Market Intelligence. “Demand remains a very big concern for us.” S&P Global is the parent company of the Journal of Commerce. S&P’s Flash PMI for April, released Thursday, shows that the developed world’s economic output hit its lowest point since December 2023, with near stagnant or falling activity in the US, European Union, United Kingdom and Japan. The uncertainty over US tariff policy and the resulting economic slowdown are weighing on container growth prospects, with analyst Drewry forecasting a 1% retraction in global container volumes for 2025. S&P’s base-case scenario for the global economy envisions higher inflation pressures, less scope for monetary and fiscal stimulus, slowing growth in the US and China, and continued lagging of the eurozone. Its downside scenario would be marked by an escalation of trade protectionism, tighter-for-longer financial conditions, and concerns over debt sustainability, driving up yields. Even if the US tariffs are eventually significantly reduced, Tesfay said the world had already entered a period of “conditional globalization.” “[Nation] states are increasingly involved in defining who you can trade with, on what terms and based on protecting the number of strategic actors,” she said. Amid all the unknowns for the short-term economy, the one long-term certainty is that the role of India, Africa and Latin America in producing goods for the world is bound to grow, particularly as the US tries to reduce its dependence on Chinese imports, Tesfay said. Contact Mark Szakonyi at mark.szakonyi@spglobal.com .

Supply chain

Container Shipping News

Breakbulk25: Shipping industry faces rising likelihood of US recession: analyst

<div class="phx-topic abstract-wrapper">The companies say it is important to be agile with capacity deployment if there is a significant decline in volumes crossing the docks at Los Angeles and Long Beach amid the trade conflict with China.</div>

The companies say it is important to be agile with capacity deployment if there is a significant decline in volumes crossing the docks at Los Angeles and Long Beach amid the trade conflict with China.

<div class="phx-topic">Top trucking and rail carriers are warning that volatility linked to uncertain US tariff policy will lead to weaker volumes on the West Coast in the short term and may negatively impact the second half of the year unless clarity comes soon. Economists in recent weeks have downgraded their forecasts for US gross domestic product (GDP), while ocean carriers are reporting sharp declines in <a href="https://www.joc.com/article/hapag-lloyd-saw-china-bookings-drop-hard-after-us-enacted-tariffs-5990185">bookings from China</a>. Maritime consultancy Drewry earlier Thursday said it expects Asia to North America <a href="https://www.joc.com/article/fallout-from-us-china-trade-war-to-depress-trans-pacific-volumes-drewry-5990686">container volumes</a> to drop 5.5% this year. Knight-Swift Transportation and Union Pacific Railroad (UP), during their respective first-quarter earnings calls this week, said it is important to be nimble with capacity if there is a significant decline in volume crossing the docks at Los Angeles and Long Beach. “Maybe a third [of our customers] are not making any changes because of tariffs … some of our customers that don’t have as much exposure to China,” Adam Miller, CEO of Knight-Swift, said during an earnings call Wednesday. “Then there are [customers] that are more in a ‘wait and see bucket,’ drawing down inventory and living off that. There are also some that have told us that they’ve canceled or stopped ordering from China and figuring out how to adjust their supply chain to avoid the cost.” UP CEO Jim Vena, likewise, said focusing on what the railroad can control is essential for navigating any downturn in Asian imports to the West Coast. “There are still a lot of unknowns related to volumes and the economy, but what I do know is that we are driving efficiency throughout our network,” Vena said on the Thursday earnings call. “We are in a good position and will be agile and responsive as we move forward.” <h3>Adjusting capacity to demand </h3>Knight-Swift said there was an impact on freight volumes in March and April, which fell short of the usual seasonal uptick. The carrier plans to cull its capacity by retaining actively used trucks and selling those that are underutilized and not generating revenue. “We can now turn [underutilized tractors] into capital and sell [them] in what’s been a relatively good used equipment market,” Miller said. “If we see a surge in a market that rebounds, we have flexibility to slow down what we [sell] as we have new tractors that come in.” Meanwhile, any downturn in freight demand may prolong what has already been three years of shippers exerting pricing leverage over carriers during contract negotiations. Knight-Swift reported low- to mid-single-digit percentage increases in January and February contracts, but momentum stalled as trade tensions escalated in March. “If we’re able to get some clarity on trade policy, [maybe we] see some seasonality in June that helps offset maybe some of the unseasonable weakness we will see in May,” said Miller. “That’s really the question: How do things play out in June? There’s a lot of ways that this could play out, but we’re watching it really closely and trying to position ourselves to navigate it as well as we can.” <h3>Agile on the rails </h3>Union Pacific anticipates weakness in the international intermodal market for the remainder of the year due to global trade tensions and West Coast market share losses to East Coast ports following the end of labor woes in the latter. “The best thing we can do is just have all the products that we have, a strong service product, and stay close to our customers because we’ve been seeing these supply chain patterns change at the drop of a hat,” said Kenny Rocker, UP’s executive vice president of sales and marketing. The railroad outlined operational strategies if a steep decline in West Coast imports persists. First, UP would take locomotives and railcars out of service that aren’t being utilized. Second, the railroad would consolidate loads on less popular inland routes, running fewer but fully loaded trains. Finally, UP would explore opportunities to mix containers alongside other non-containerized freight traveling to the same destination. Those measures would help reduce operational costs to offset the revenue lost from less cargo moving inland. Still, UP might be hesitant to pull too much capacity out of the market because it remains bullish on domestic intermodal and there are opportunities to take freight away from trucking. Contact Ari Ashe at <a href="mailto:ari.ashe@spglobal.com">ari.ashe@spglobal.com</a>.</div>

Top trucking and rail carriers are warning that volatility linked to uncertain US tariff policy will lead to weaker volumes on the West Coast in the short term and may negatively impact the second half of the year unless clarity comes soon. Economists in recent weeks have downgraded their forecasts for US gross domestic product (GDP), while ocean carriers are reporting sharp declines in bookings from China . Maritime consultancy Drewry earlier Thursday said it expects Asia to North America container volumes to drop 5.5% this year. Knight-Swift Transportation and Union Pacific Railroad (UP), during their respective first-quarter earnings calls this week, said it is important to be nimble with capacity if there is a significant decline in volume crossing the docks at Los Angeles and Long Beach. “Maybe a third [of our customers] are not making any changes because of tariffs … some of our customers that don’t have as much exposure to China,” Adam Miller, CEO of Knight-Swift, said during an earnings call Wednesday. “Then there are [customers] that are more in a ‘wait and see bucket,’ drawing down inventory and living off that. There are also some that have told us that they’ve canceled or stopped ordering from China and figuring out how to adjust their supply chain to avoid the cost.” UP CEO Jim Vena, likewise, said focusing on what the railroad can control is essential for navigating any downturn in Asian imports to the West Coast. “There are still a lot of unknowns related to volumes and the economy, but what I do know is that we are driving efficiency throughout our network,” Vena said on the Thursday earnings call. “We are in a good position and will be agile and responsive as we move forward.” Adjusting capacity to demand Knight-Swift said there was an impact on freight volumes in March and April, which fell short of the usual seasonal uptick. The carrier plans to cull its capacity by retaining actively used trucks and selling those that are underutilized and not generating revenue. “We can now turn [underutilized tractors] into capital and sell [them] in what’s been a relatively good used equipment market,” Miller said. “If we see a surge in a market that rebounds, we have flexibility to slow down what we [sell] as we have new tractors that come in.” Meanwhile, any downturn in freight demand may prolong what has already been three years of shippers exerting pricing leverage over carriers during contract negotiations. Knight-Swift reported low- to mid-single-digit percentage increases in January and February contracts, but momentum stalled as trade tensions escalated in March. “If we’re able to get some clarity on trade policy, [maybe we] see some seasonality in June that helps offset maybe some of the unseasonable weakness we will see in May,” said Miller. “That’s really the question: How do things play out in June? There’s a lot of ways that this could play out, but we’re watching it really closely and trying to position ourselves to navigate it as well as we can.” Agile on the rails Union Pacific anticipates weakness in the international intermodal market for the remainder of the year due to global trade tensions and West Coast market share losses to East Coast ports following the end of labor woes in the latter. “The best thing we can do is just have all the products that we have, a strong service product, and stay close to our customers because we’ve been seeing these supply chain patterns change at the drop of a hat,” said Kenny Rocker, UP’s executive vice president of sales and marketing. The railroad outlined operational strategies if a steep decline in West Coast imports persists. First, UP would take locomotives and railcars out of service that aren’t being utilized. Second, the railroad would consolidate loads on less popular inland routes, running fewer but fully loaded trains. Finally, UP would explore opportunities to mix containers alongside other non-containerized freight traveling to the same destination. Those measures would help reduce operational costs to offset the revenue lost from less cargo moving inland. Still, UP might be hesitant to pull too much capacity out of the market because it remains bullish on domestic intermodal and there are opportunities to take freight away from trucking. Contact Ari Ashe at ari.ashe@spglobal.com .

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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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