<div class="phx-topic abstract-wrapper">Tight space in air cargo will keep rates up and keep shippers under pressure, especially during peak periods.</div>

Tight space in air cargo will keep rates up and keep shippers under pressure, especially during peak periods.

<div><div><img></div>A UPS air cargo flight. Photo credit: Shutterstock.LONG BEACH, California — Book air freight cargo early and prioritize space over price is the advice from forwarders as the robust demand experienced for much of last year continues into 2018.Data from the <a>International Air Transport Association</a> (IATA) shows that global air freight demand rose 8 percent in January compared with the same month last year and well up on the 5.8 percent annual growth recorded in December 2017. Sanne Manders, COO of Flexport, said shippers can expect the air freight market to be tight through 2018, driven largely by global e-commerce....

A UPS air cargo flight. Photo credit: Shutterstock. LONG BEACH, California — Book air freight cargo early and prioritize space over price is the advice from forwarders as the robust demand experienced for much of last year continues into 2018.Data from the International Air Transport Association (IATA) shows that global air freight demand rose 8 percent in January compared with the same month last year and well up on the 5.8 percent annual growth recorded in December 2017. Sanne Manders, COO of Flexport, said shippers can expect the air freight market to be tight through 2018, driven largely by global e-commerce. “Rates will be on average high, and volatile. It will be hard to secure space. That’s why we decided to secure space in the form of biweekly charter from HKG to LAX,” he told JOC.com.“My advice: prioritize space over price. Those are two sides of the same coin, but shippers often overlook space. Locking in space well in advance is a good strategy, but expect to pay a small reliability premium for that.”Shippers certainly paid the price in 2017, with rising volume through most of the year keeping available capacity under severe pressure, pushing air cargo rates up to unprecedented levels. Delays of 15 to 20 days were reported out of China airports during the peak November to December season as fast growing e-commerce combined with general cargo to generate high levels of traffic, and air freight rates on the busy China-North America routes shot up to $12 per kilogram. No sign of end to rising air cargo demand Manel Galindo, CEO of Freightos WebCargo, said there was no indication on the horizon that demand would drop this year with cargo movements in January and February higher than they were in early 2016. “So it seems likely that come the next peak season there will be similar capacity constraints, which will have a similar impact on pricing. Right now, as well as e-commerce growth, generally healthy world trade is also pushing up demand,” he said.Alexandre de Juniac, IATA’s director general and CEO, said demand drivers for air cargo were positive and global demand for manufacturing exports was buoyant. Meeting this strong demand was leading to longer supply chain delivery times, and de Juniac said companies seeking faster delivery times to make up for these longer production times could push demand even higher.“With 8 percent growth in January, it’s been a solid start to 2018 for air cargo. That follows an exceptional 2017 in which demand grew by 9 percent,” he said. “We expect demand for air cargo to taper to a more normal 4.5 percent growth rate for 2018.”Unlike container shipping, there is limited supply of air cargo space, which is keeping upward pressure on freight rates.“That means shippers are facing high prices again next peak season. Big shippers can agree on allotments well in advance, but smaller shippers don’t have much leeway in booking ahead,” Galindo said. “Smaller shippers only get a four-week window for booking ahead. Airlines aren’t inclined to allow early bookings because they make most of their profit in peak season. That said, in peak season, booking four weeks early can still make a big difference.” C.H. Robinson said capacity will become harder to find as airlines try to engage with large shippers in a variety of industries and negotiate directly for their air freight needs.“There is only so much air cargo space available,” the third-party logistics provider said in a report on air trends in 2018. “If large shippers absorb a larger slice of the available capacity, small- and medium-sized shippers will probably find it a lot more difficult to secure air space for their freight.“Generally speaking, the longer the lead time you can allow between pick up and delivery to customers, the more able you will be to find available space and contain your costs.” Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler .

Air Cargo

Choose space over price in 2018, air cargo shippers warned

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

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

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

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

Logistics Technology News

Container Shipping News

Freight futures get second look amid increased risk, trading volumes

<div class="phx-topic abstract-wrapper">In a move to better utilize its leased pool of trailers, Uber Freight has partnered with software vendor Optimal Dynamics to bundle loads for drivers across 10 trailer pool locations. </div>

In a move to better utilize its leased pool of trailers, Uber Freight has partnered with software vendor Optimal Dynamics to bundle loads for drivers across 10 trailer pool locations.

<div class="phx-topic">Uber Freight has extended the reach of its drop-and-hook program to target truckload moves in the 500- to 1,000-mile range, so-called “tweener” shipments that have previously been elusive for the freight broker to serve with the program. The trailer pool that supports Uber Freight’s drop-and-hook program, called Powerloop, was launched in 2018 with the goal of reducing the turnaround time for a driver at a facility compared with a live load or unload. To that end, Uber Freight said this week it is now offering bundled drop-and-hook loads to carriers that enable it to serve large shippers with high volumes of freight with variable patterns. It does so by allowing drivers to tap into pools of leased Powerloop trailers at various points across the country, rather than being limited by a certain geographic distance to a specific trailer pool. Loads are available in the Midwest, Texas, Georgia, California and Pennsylvania, with more areas to be added. “We’re providing our customers dedicated long haul capacity,” Alyssa Correale, vice president of operations at Uber Freight, told the Journal of Commerce. “Powerloop previously offered short-haul capacity that needed to loop back. Now this opens up long-haul that will come back on a longer timeframe to service that ‘tweener’ freight of 500 to 1,000 miles.” A year ago, Uber Freight said it was focusing on better utilization of its Powerloop assets as demand grew. This week, Correale said that by giving drivers a sequence of longer-haul moves, it can provide capacity options to shippers, consistent volumes to carriers, and maintain high utilization rates of its leased trailers. To enable the best recommendations for those sequenced moves using drop-and-hook trailers, Correale said Uber Freight is partnering with technology provider Optimal Dynamics, which provides optimization software to carriers and private fleets. “If we string together all the loads in an optimization exercise, we can really drive up revenue on that asset,” Correale said. “We’re mostly solving for trailer revenue per week, but someone has to haul that trailer, and so it made sense to partner with the best carrier optimization platform.” <h3>Big volumes, irregular patterns </h3>The sequenced moves, which Uber Freight calls tours, are triggered by acceptance of an initial contract rate for a shipper. Optimal Dynamics then continuously analyzes whether the pre-determined next legs are still the best options or whether a spot rate that still taps into the trailer pool might provide better revenue on a second or third leg. The program is running with about 100 trucks in 10 locations with three core shipper customers, Correale said. The sweet spot for Powerloop tours are shippers with a minimum of 10 to 20 loads per week, with long lengths of haul and irregular patterns that can leverage the geographic footprint of Uber Freight’s network. “This is more flexibility than traditional dedicated,” she said. “It’s where you wish you could do dedicated but it doesn’t quite fit.” The Uber Freight program comes as large truckload carriers and diversified trucking services providers are shifting assets to serve higher demand from shippers for dedicated services. JB Hunt recently pegged the value of the overall dedicated trucking market at $90 billion, approximately 10% of the entire US truckload industry. The drop-and-hook model typically requires large numbers of trailers, but a surplus of trailers built during the pandemic and muted freight demand through 2023 and into 2024 have meant those trailers are largely available. Powerloop now has 1,000 leased trailers. Uber Freight is utilizing them at a 91% rate by marrying GPS tracking of the assets, loads from shippers in its network and a core group of power-only carriers. Contact Eric Johnson at <a href="mailto:eric.johnson@spglobal.com">eric.johnson@spglobal.com</a>. </div>

Uber Freight has extended the reach of its drop-and-hook program to target truckload moves in the 500- to 1,000-mile range, so-called “tweener” shipments that have previously been elusive for the freight broker to serve with the program. The trailer pool that supports Uber Freight’s drop-and-hook program, called Powerloop, was launched in 2018 with the goal of reducing the turnaround time for a driver at a facility compared with a live load or unload. To that end, Uber Freight said this week it is now offering bundled drop-and-hook loads to carriers that enable it to serve large shippers with high volumes of freight with variable patterns. It does so by allowing drivers to tap into pools of leased Powerloop trailers at various points across the country, rather than being limited by a certain geographic distance to a specific trailer pool. Loads are available in the Midwest, Texas, Georgia, California and Pennsylvania, with more areas to be added. “We’re providing our customers dedicated long haul capacity,” Alyssa Correale, vice president of operations at Uber Freight, told the Journal of Commerce. “Powerloop previously offered short-haul capacity that needed to loop back. Now this opens up long-haul that will come back on a longer timeframe to service that ‘tweener’ freight of 500 to 1,000 miles.” A year ago, Uber Freight said it was focusing on better utilization of its Powerloop assets as demand grew. This week, Correale said that by giving drivers a sequence of longer-haul moves, it can provide capacity options to shippers, consistent volumes to carriers, and maintain high utilization rates of its leased trailers. To enable the best recommendations for those sequenced moves using drop-and-hook trailers, Correale said Uber Freight is partnering with technology provider Optimal Dynamics, which provides optimization software to carriers and private fleets. “If we string together all the loads in an optimization exercise, we can really drive up revenue on that asset,” Correale said. “We’re mostly solving for trailer revenue per week, but someone has to haul that trailer, and so it made sense to partner with the best carrier optimization platform.” Big volumes, irregular patterns The sequenced moves, which Uber Freight calls tours, are triggered by acceptance of an initial contract rate for a shipper. Optimal Dynamics then continuously analyzes whether the pre-determined next legs are still the best options or whether a spot rate that still taps into the trailer pool might provide better revenue on a second or third leg. The program is running with about 100 trucks in 10 locations with three core shipper customers, Correale said. The sweet spot for Powerloop tours are shippers with a minimum of 10 to 20 loads per week, with long lengths of haul and irregular patterns that can leverage the geographic footprint of Uber Freight’s network. “This is more flexibility than traditional dedicated,” she said. “It’s where you wish you could do dedicated but it doesn’t quite fit.” The Uber Freight program comes as large truckload carriers and diversified trucking services providers are shifting assets to serve higher demand from shippers for dedicated services. JB Hunt recently pegged the value of the overall dedicated trucking market at $90 billion, approximately 10% of the entire US truckload industry. The drop-and-hook model typically requires large numbers of trailers, but a surplus of trailers built during the pandemic and muted freight demand through 2023 and into 2024 have meant those trailers are largely available. Powerloop now has 1,000 leased trailers. Uber Freight is utilizing them at a 91% rate by marrying GPS tracking of the assets, loads from shippers in its network and a core group of power-only carriers. Contact Eric Johnson at eric.johnson@spglobal.com .

Truck brokers

Truckload

Uber Freight offering drop-and-hook option as dedicated-like product for shippers

<div class="phx-topic abstract-wrapper">Brent Sadler served in the US Navy for 26 years and now works as a senior research fellow at the Heritage Foundation.</div>

Brent Sadler served in the US Navy for 26 years and now works as a senior research fellow at the Heritage Foundation.

<div class="phx-topic">Retired US Navy Capt. Brent Sadler has been nominated by President Donald Trump to serve as the next administrator of the US Maritime Administration (MARAD). Sadler’s nomination was sent this week to the Senate Committee on Commerce, Science and Transportation. A timeline for his confirmation wasn’t immediately available. If confirmed, he will fill the role left vacant when former administrator Ann Phillips resigned in January. MARAD is part of the Department of Transportation. Sadler would be positioned to lead MARAD as the Trump administration pushes for <a href="https://www.joc.com/article/ustrs-china-tonnage-tax-would-squeeze-smaller-trades-stakeholders-5967638">significant changes in the maritime industry</a> around US shipbuilding policies. Sadler has expressed interest in disrupting the shipbuilding space, having written an article for the US Naval Institute entitled, “The Nation Needs a Shipbuilding Revolution” just last month. “The world of shipping is on the cusp of a paradigm shift in part because of changing geostrategic realities and technological innovation,” Sadler wrote. “This does not mean ‘outperforming’ China’s heavily subsidized and government-directed shipbuilding and shipping industries. Rather, a smarter approach that changes modern logistics through a blue-ocean strategy is needed — a multifaceted approach that creates new market space rather than continuing to compete in a conventional way.” Sadler served 26 years in the navy, having served on numerous operational tours on nuclear-powered submarines since graduating from the US Naval Academy in 1994. He currently serves as a senior research fellow at the Heritage Foundation, the conservative think tank behind Project 2025. Contact Laura Robb at <a href="mailto:Laura.Robb@spglobal.com">laura.robb@spglobal.com</a>.  </div>

Retired US Navy Capt. Brent Sadler has been nominated by President Donald Trump to serve as the next administrator of the US Maritime Administration (MARAD). Sadler’s nomination was sent this week to the Senate Committee on Commerce, Science and Transportation. A timeline for his confirmation wasn’t immediately available. If confirmed, he will fill the role left vacant when former administrator Ann Phillips resigned in January. MARAD is part of the Department of Transportation. Sadler would be positioned to lead MARAD as the Trump administration pushes for significant changes in the maritime industry around US shipbuilding policies. Sadler has expressed interest in disrupting the shipbuilding space, having written an article for the US Naval Institute entitled, “The Nation Needs a Shipbuilding Revolution” just last month. “The world of shipping is on the cusp of a paradigm shift in part because of changing geostrategic realities and technological innovation,” Sadler wrote. “This does not mean ‘outperforming’ China’s heavily subsidized and government-directed shipbuilding and shipping industries. Rather, a smarter approach that changes modern logistics through a blue-ocean strategy is needed — a multifaceted approach that creates new market space rather than continuing to compete in a conventional way.” Sadler served 26 years in the navy, having served on numerous operational tours on nuclear-powered submarines since graduating from the US Naval Academy in 1994. He currently serves as a senior research fellow at the Heritage Foundation, the conservative think tank behind Project 2025. Contact Laura Robb at laura.robb@spglobal.com . 

Breakbulk News

Transport, Trade and Regulation News

North American ports

Maritime

Trump taps retired navy captain to head US Maritime Administration

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

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

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

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

Container lines

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

<div class="phx-topic abstract-wrapper">Major carriers had lined up rate increases with the intention of strengthening their bargaining power during service contract negotiations, but overcapacity seems to have kept that tactic in check. </div>

Major carriers had lined up rate increases with the intention of strengthening their bargaining power during service contract negotiations, but overcapacity seems to have kept that tactic in check.

<div class="phx-topic">Ocean carriers on the India-US trade lane are realizing they are in no position to push through rate increases in a market saddled with excess capacity and faltering demand. Reflecting that skepticism, most carriers have recalled their April rate increase notices — mostly in the range of $500 per container — for bookings from West India to the US East Coast, local freight forwarder sources told the Journal of Commerce this week. “Hapag-Lloyd and CMA CGM have canceled their GRI [general rate increase] plans scheduled for the early part of April, while Maersk has revised its peak season surcharge date to April 20,” a forwarder who didn’t want to be identified said. “Right now, it’s a shippers’ market.” Local sources at Mediterranean Shipping Co. were unavailable to confirm the status of its GRI plans for April. Forwarders generally believe with no void vessel calls declared for next month on the premier India-USEC routings as of now, carriers could even struggle to hold end-March rates up into the coming weeks. Sources at the lead carriers who spoke with the Journal of Commerce noted that recent GRIs could have worked better if smaller lines working on slot rights had also made similar attempts. “A few Asian carriers are very aggressive in their pricing to fill the weekly space they have,” a European carrier source said. “Rate efforts will fail so long as some carriers are undercutting achievable spot rates.” Forwarder sources put spot rate quotes from Cosco Shipping/OOCL and HMM at between $1,400 and $1,700 per FEU for bookings from Nhava Sheva to New York. Ocean Network Express is another liner usually quoting 20% to 25% lower than its established peers, sources say. Major carriers had arguably lined up rate increases effective March 1 and March 15 with the intention of strengthening their bargaining power during service contract negotiations, but overcapacity seems to have kept that tactic in check. Contact Bency Mathew at <a href="https://www.joc.com/article/bencymathew@gmail.com">bencyvmathew@gmail.com</a>.</div>

Ocean carriers on the India-US trade lane are realizing they are in no position to push through rate increases in a market saddled with excess capacity and faltering demand. Reflecting that skepticism, most carriers have recalled their April rate increase notices — mostly in the range of $500 per container — for bookings from West India to the US East Coast, local freight forwarder sources told the Journal of Commerce this week. “Hapag-Lloyd and CMA CGM have canceled their GRI [general rate increase] plans scheduled for the early part of April, while Maersk has revised its peak season surcharge date to April 20,” a forwarder who didn’t want to be identified said. “Right now, it’s a shippers’ market.” Local sources at Mediterranean Shipping Co. were unavailable to confirm the status of its GRI plans for April. Forwarders generally believe with no void vessel calls declared for next month on the premier India-USEC routings as of now, carriers could even struggle to hold end-March rates up into the coming weeks. Sources at the lead carriers who spoke with the Journal of Commerce noted that recent GRIs could have worked better if smaller lines working on slot rights had also made similar attempts. “A few Asian carriers are very aggressive in their pricing to fill the weekly space they have,” a European carrier source said. “Rate efforts will fail so long as some carriers are undercutting achievable spot rates.” Forwarder sources put spot rate quotes from Cosco Shipping/OOCL and HMM at between $1,400 and $1,700 per FEU for bookings from Nhava Sheva to New York. Ocean Network Express is another liner usually quoting 20% to 25% lower than its established peers, sources say. Major carriers had arguably lined up rate increases effective March 1 and March 15 with the intention of strengthening their bargaining power during service contract negotiations, but overcapacity seems to have kept that tactic in check. Contact Bency Mathew at bencyvmathew@gmail.com .

Port News

International ports

Carriers jettison India-US April rate hike plans after shaky March recovery erodes

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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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Filling the Supply Chain Education Gap with LTL Education Courses

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