<div class="phx-topic abstract-wrapper">As freight demand lags, trucking's payroll drops from post-recession peak.</div>

As freight demand lags, trucking's payroll drops from post-recession peak.

<div>Trucking employment remains at levels higher than the peak numbers reached before the recession, but efforts to expand for-hire trucking payrolls have stalled. In fact, trucking employment reached a plateau in 2015 and has slipped in 2016 as unemployment drops. That’s a sign that it’s not trucking jobs that are lacking this year, but freight to fill trucks.In June, the number of employees on for-hire carrier payrolls dropped 0.4 percent on a seasonally adjusted basis, both from May and from a year ago, U.S. Bureau of Labor Statistics data show. The year-over-year drop in the number of trucking employees tracked...

Trucking employment remains at levels higher than the peak numbers reached before the recession, but efforts to expand for-hire trucking payrolls have stalled. In fact, trucking employment reached a plateau in 2015 and has slipped in 2016 as unemployment drops. That’s a sign that it’s not trucking jobs that are lacking this year, but freight to fill trucks. In June, the number of employees on for-hire carrier payrolls dropped 0.4 percent on a seasonally adjusted basis, both from May and from a year ago, U.S. Bureau of Labor Statistics data show. The year-over-year drop in the number of trucking employees tracked by the BLS was the first since July 2010, when hiring began to rise after a three-year decline. The year-over-year decline in June should be a warning light for shippers concerned about truck capacity and the future direction of truck pricing. Weak freight demand, in part attributed to high inventories , has kept truck capacity loose and reversed strong price increases of the past few years. Trucking companies, especially larger ones, are now actively suppressing capacity. “Pricing is under pressure in trucking, and that’s starting to remove more capacity in the trucking market,” David Ross, a managing director at investment research firm Stifel, said at the SMC3 Connections 2016 conference in Chicago last month. “The U.S. economy is stuck in low gear for now. We’re stuck in this 2 percent growth band and can’t seem to grow any faster than that.” Companies such as Landstar System, Werner Enterprises and Covenant Transport reduced tractor counts in the first quarter, as did Knight Transportation and USA Truck, which cut its average number of in-service tractors 16.7 percent while the number of “seated” tractors in its truckload fleet dropped 11.6 percent. Anecdotal reports suggest the trend continues. Class 8 truck orders plunged 34 percent year-over-year in June to the lowest monthly total since July 2012 and the worst June since 2009, transportation research firm FTR said last week. On a seasonally adjusted basis, the for-hire trucking industry lost 6,300 jobs in June, the fourth time this year employment at the truckload and less-than-truckload carriers tracked by the Labor Department agency fell. The raw, unadjusted trucking job numbers climbed in June, but at a much slower rate than a year ago, contributing to the seasonally adjusted decline. That pushed the JOC For-Hire Trucking Employment Index from 100.9 in May to 100.4 last month. That still puts trucking employment slightly above its pre-recession peak in early 2007, however. The index, based on trucking employment levels in the fourth quarter of 2006, has been above 100 for all but one month since January 2015, peaking at 101.3 in January of this year. Since then, the number of trucking jobs, seasonally adjusted, has dropped by 12,300. Trucking employment slipped as the U.S. added 287,000 jobs in June, also seasonally adjusted. The fact that the index remains so close to its all-time high indicates the bottom isn’t dropping out of the trucking market, but that the route to further growth is blocked. The roadblock is likely to remain in place until stronger consumer demand generates more freight demand. In contrast, warehousing businesses gained jobs for the 30th consecutive month, increasing payroll numbers 0.5 percent from May and 6.7 percent from a year ago. The split between rising warehousing employment and stuttering trucking recruitment reflects tight warehouse capacity and the rapid growth of e-commerce orders. It’s a shift in the distribution landscape that transportation providers and their shippers are struggling to cope with in 2016. With the U.S. unemployment rate at 4.9 percent in June, businesses report an increasingly difficult time hiring new employees. Trucking companies apparently are having more difficulty finding qualified drivers and other workers, as a smaller number of job seekers turn to more attractive, higher-paying industries, including construction, for employment. The impact of the “gig” economy, in which workers take part-time, often contract jobs such as driving for Uber, is another unknown. Such jobs, which allow drivers to work locally and set their own hours without needing a commercial drivers license, may appeal to some potential truckers, especially those who don’t qualify for the highest-paying trucking jobs. Wages in the transportation and warehousing sector are climbing, according to BLS data. Hourly wages in the sector were 38 cents higher than a year ago in June, at an average of $21.07 per hour, the BLS data show. Transport wages rose 19 cents from May after dropping 8 cents that month. However, construction wages on average were 19 percent higher, at $25.97 an hour, a 14 cent increase from May and a 68 cent jump from a year ago. As for long-haul trucking, “There are some people who won’t do it at any price,” Ross told SMC3. “The carrier is going to have to work hard to make it as driver friendly as possible.” The American Trucking Associations noted a significant reduction in truckload driver turnover in the first quarter, meaning more drivers are staying put rather than leapfrogging from one job to another for a better pay rate or more miles, another sign of weak freight demand. Turnover at large truckload fleets fell to its lowest levels since the second quarter of 2015, the trucking lobbying group reported. At smaller fleets — carriers with less than $30 million in annual revenue — turnover dipped 1 percentage point to 88 percent, the lowest figure since the third quarter of 2015, the ATA said. “The decline in turnover is reflective of the softening in the freight economy during the first quarter,” Bob Costello, ATA chief economist, said last week. That freight economy may not get much better until late this year, if then. The U.S. economy will probably expand 2.5 percent in the third quarter, and 2 percent to 2.5 percent in the fourth quarter, Don Ratajczak, consulting economist at Georgia State University, told the SMC3 conference. "I would have said 3 percent for the third quarter, but Brexit probably slows us down a bit," largely by strengthening the dollar and discouraging exports , he said. Contact William B. Cassidy at bill.cassidy@ihs.com and follow him on Twitter: @wbcassidy_joc.

Trucking labor

Truckload

Amid weak demand, trucking hits hiring roadblock

<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.

Feature image

<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 .

Container lines

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 .

Transport, Trade and Regulation News

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 .

Maritime

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 .

Intermodal providers

Knight-Swift, Union Pacific brace for West Coast volume downturn

<div class="phx-topic abstract-wrapper">Carriers and importers are dealing with confusion over how tariffs in general, and the trade war between Washington and Beijing specifically, will affect commerce on the US’ busiest trade lane over the next 12 months.</div>

Carriers and importers are dealing with confusion over how tariffs in general, and the trade war between Washington and Beijing specifically, will affect commerce on the US’ busiest trade lane over the next 12 months.

<div class="phx-topic">Uncertainty over the Trump administration’s ever-changing tariff policy is claiming another casualty: the traditional timeline for the signing of annual service contracts between ocean carriers and importers in the eastbound trans-Pacific. Sources tell the Journal of Commerce the typical timeline for locking up deals, most of which begin May 1, has been delayed by at least two weeks. The reason? Confusion over how tariffs in general, and the trade war between Washington and Beijing specifically, will affect commerce on the US’ busiest trade lane over the next 12 months. “The tariff tiff is complicating matters,” said Ben Coleman, president of the forwarder Teampower Logistics. While ocean carriers and their largest retail customers are continuing to disagree over pricing levels in the 2025–26 service contract negotiations, the tariff uncertainty is causing hesitation among shippers who need to make a final decision on the volumes they will import as part of the so-called minimum quantity commitments (MQCs) that must be adhered to during the life of the contracts. Adding another two weeks this late in the negotiating cycle before carriers sign contracts with their largest customers is unusual, Kevin Parkerson, a consultant and former logistics manager at national retailers, told the Journal of Commerce. “Typically by April 23 this should all be done,” he said. On pricing matters, the largest retailers are said to be locked in a standoff with carriers over a $100-per-FEU difference in rates for their 2025–26 service contracts. Carriers are refusing to budge from the $1,600-per-FEU floor for West Coast trade and $2,600 per FEU to the East Coast that <a href="https://www.joc.com/article/trans-pac-gri-offers-resistance-to-retailers-push-for-lower-contract-rates-5977200">they negotiated earlier this month</a>, forwarders and industry consultants say. In the contracts that they have not already signed, some big-box retailers want to pay no more than $1,500 per FEU to the West Coast. “The big guys are on hold,” Parkerson said. “They’re digging in.” Container lines and major US importers generally conclude annual service contract talks by early April, with non-vessel-operating common carriers (NVOs) nailing down their own contracts by late April or early May. Carriers normally extend existing contracts beyond the typical April 30 end for smaller importers and NVOs who are in the final stages of contract talks. The revised timeline will extend those negotiations past the May 1 start date for many of the new contracts. While many of the second- and third-tier importers and NVOs have either concluded negotiations with their core carriers or are close to finalizing them at rates ranging from $1,600 to $1,900 per FEU or higher to the West Coast, they are waiting for the largest retailers to set the floor for rates before they sign the agreements, sources say. A second industry consultant who formerly served as a logistics manager at national retailers said $100 per FEU may not sound like a game-breaker. However, “If you’re shipping a couple of hundred thousand containers, that’s a lot of money,” he noted. <h3>Blank sailings prop up spot rates </h3>Meanwhile, NVOs say carriers are emboldened by the current level of spot and freight-all-kinds (FAK) rates from Asia to the US, which remain higher than the existing 2024–25 service contract rates <a href="https://www.joc.com/article/asia-us-blank-sailing-forecast-for-may-increasing-amid-cancellations-5988996">despite a 37% drop in bookings from China</a> since March 31. The spot rate to the West Coast on Wednesday was $2,067 per FEU, with rates to the East Coast at $3,067 per FEU, according to Platts, a Journal of Commerce sister company within S&amp;P Global. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="e56fd23a-cfad-4929-899f-b91371ff9fc0"></dynamic-object></div>With US imports from China plummeting because of the tariffs, carriers announced the blanking of dozens of sailings through May, which forwarders say will keep spot rates elevated through the remainder of the service contracting season. Meanwhile, if negotiations with the largest retailers drag on past May 1, carriers are expected to extend existing contracts with their core customers until the new deals are signed. “But if this continues on for a while, eventually you’re going to get a bubble,” the second consultant said, adding that there will be a rush by importers and NVOs to sign their contracts. That could force rates higher in May. Contact Bill Mongelluzzo at <a href="mailto:bill.mongelluzzo@spglobal.com">bill.mongelluzzo@spglobal.com</a>.</div>

Uncertainty over the Trump administration’s ever-changing tariff policy is claiming another casualty: the traditional timeline for the signing of annual service contracts between ocean carriers and importers in the eastbound trans-Pacific. Sources tell the Journal of Commerce the typical timeline for locking up deals, most of which begin May 1, has been delayed by at least two weeks. The reason? Confusion over how tariffs in general, and the trade war between Washington and Beijing specifically, will affect commerce on the US’ busiest trade lane over the next 12 months. “The tariff tiff is complicating matters,” said Ben Coleman, president of the forwarder Teampower Logistics. While ocean carriers and their largest retail customers are continuing to disagree over pricing levels in the 2025–26 service contract negotiations, the tariff uncertainty is causing hesitation among shippers who need to make a final decision on the volumes they will import as part of the so-called minimum quantity commitments (MQCs) that must be adhered to during the life of the contracts. Adding another two weeks this late in the negotiating cycle before carriers sign contracts with their largest customers is unusual, Kevin Parkerson, a consultant and former logistics manager at national retailers, told the Journal of Commerce. “Typically by April 23 this should all be done,” he said. On pricing matters, the largest retailers are said to be locked in a standoff with carriers over a $100-per-FEU difference in rates for their 2025–26 service contracts. Carriers are refusing to budge from the $1,600-per-FEU floor for West Coast trade and $2,600 per FEU to the East Coast that they negotiated earlier this month , forwarders and industry consultants say. In the contracts that they have not already signed, some big-box retailers want to pay no more than $1,500 per FEU to the West Coast. “The big guys are on hold,” Parkerson said. “They’re digging in.” Container lines and major US importers generally conclude annual service contract talks by early April, with non-vessel-operating common carriers (NVOs) nailing down their own contracts by late April or early May. Carriers normally extend existing contracts beyond the typical April 30 end for smaller importers and NVOs who are in the final stages of contract talks. The revised timeline will extend those negotiations past the May 1 start date for many of the new contracts. While many of the second- and third-tier importers and NVOs have either concluded negotiations with their core carriers or are close to finalizing them at rates ranging from $1,600 to $1,900 per FEU or higher to the West Coast, they are waiting for the largest retailers to set the floor for rates before they sign the agreements, sources say. A second industry consultant who formerly served as a logistics manager at national retailers said $100 per FEU may not sound like a game-breaker. However, “If you’re shipping a couple of hundred thousand containers, that’s a lot of money,” he noted. Blank sailings prop up spot rates Meanwhile, NVOs say carriers are emboldened by the current level of spot and freight-all-kinds (FAK) rates from Asia to the US, which remain higher than the existing 2024–25 service contract rates despite a 37% drop in bookings from China since March 31. The spot rate to the West Coast on Wednesday was $2,067 per FEU, with rates to the East Coast at $3,067 per FEU, according to Platts, a Journal of Commerce sister company within S&P Global. With US imports from China plummeting because of the tariffs, carriers announced the blanking of dozens of sailings through May, which forwarders say will keep spot rates elevated through the remainder of the service contracting season. Meanwhile, if negotiations with the largest retailers drag on past May 1, carriers are expected to extend existing contracts with their core customers until the new deals are signed. “But if this continues on for a while, eventually you’re going to get a bubble,” the second consultant said, adding that there will be a rush by importers and NVOs to sign their contracts. That could force rates higher in May. Contact Bill Mongelluzzo at bill.mongelluzzo@spglobal.com .

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Tariff uncertainty disrupting timeline for trans-Pacific service contract talks

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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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