<div class="phx-topic abstract-wrapper">The fleet of idled surplus container ships hit 718,000 20-foot-equivalent units in mid-December, and lay-ups will persist for the next two years, as record deliveries of new vessels will continue to keep supply and demand out of sync, according to industry analyst Alphaliner.</div>

The fleet of idled surplus container ships hit 718,000 20-foot-equivalent units in mid-December, and lay-ups will persist for the next two years, as record deliveries of new vessels will continue to keep supply and demand out of sync, according to industry analyst Alphaliner.

<div>The fleet of idled surplus container ships hit 718,000 20-foot-equivalent units in mid-December, and lay-ups will persist for the next two years, as record deliveries of new vessels will continue to keep supply and demand out of sync, according to industry analyst Alphaliner.The idle fleet is expected to rise until the end of March as the current excess supply is aggravated by accelerating ship deliveries through the first half of 2014.<a><img></a>Projected Growth in Global Container Ship Fleet Source: Alphaliner <a>Full-size chart</a> Demand is expected to pick up in April as several East-West services withdrawn during the slack winter season are...

The fleet of idled surplus container ships hit 718,000 20-foot-equivalent units in mid-December, and lay-ups will persist for the next two years, as record deliveries of new vessels will continue to keep supply and demand out of sync, according to industry analyst Alphaliner. The idle fleet is expected to rise until the end of March as the current excess supply is aggravated by accelerating ship deliveries through the first half of 2014. Projected Growth in Global Container Ship Fleet Source: Alphaliner Full-size chart Demand is expected to pick up in April as several East-West services withdrawn during the slack winter season are reinstated, but it will not be sufficient to absorb all of the surplus capacity, Alphaliner forecast. The idle fleet averaged 595,000 TEUs in 2013, down from 651,000 TEUs in 2012, mainly due to the record number of vessels scrapped this year. The lay-up of surplus box ships since the fourth quarter of 2008 has been the most severe and prolonged in the industry’s history and is now entering its fifth year. Prior to 2008, there had not been any period when the idle fleet exceeded 200,000 TEUs, and idle periods had not persisted for over a year, Alphaliner noted. Over the past 12 months new ship orders have reached 1.78 million TEUs, representing 21.7 percent of the existing fleet, up from a 10-year low of 19.4 percent in July. The surge in orders will keep shipyards busy into 2015, with 1.6 million TEUs slated for delivery in 2014 followed by 1.76 million TEUs in 2015. Barring significant deferrals and cancellations of orders, the new capacity due for delivery in the next two years will break the previous record of 1.58 million TEUs set in 2008.

Forwarding

Container lines

Alphaliner: Idle Container Ship Fleet to Persist for Two More Years

<div class="phx-topic abstract-wrapper">There remains no guarantee of safety for ships, crew and cargo passing through the waterway, which means it would likely be out of bounds for the rest of the year, says CEO Vincent Clerc.</div>

There remains no guarantee of safety for ships, crew and cargo passing through the waterway, which means it would likely be out of bounds for the rest of the year, says CEO Vincent Clerc.

Feature image

<div class="phx-topic">Maersk has ruled out a return to Red Sea transits this year despite an assertion from US President Donald Trump this week that Houthi militants in Yemen “have capitulated” and agreed to stop attacks on commercial shipping in the region. CEO Vincent Clerc told analysts on a first-quarter earnings call Thursday that it would not be responsible to return to the Red Sea and Suez Canal when there were no guarantees over the safety of crew, ships and cargo. That means Maersk vessels will continue to divert around southern Africa. “If the US will stop bombing (the Houthi), that's good,” Clerc said. “Whether this means there is not only safety today, but safety for the foreseeable future for us sending our colleagues, our assets and our customers’ cargo through the Red Sea again, we're pretty far from that threshold.” Trump on Tuesday said <a href="https://www.joc.com/article/apparent-houthi-ceasefire-raises-container-shipping-overcapacity-risk-5999930">the Houthi had “capitulated”</a> and that the US would suspend its aerial strikes on militant positions in Yemen. "They just don't want to fight,” Trump told reporters. “We will honor that, and we will stop the bombings. But, more importantly, we will take their word. They say they will not be blowing up ships anymore and that's what the purpose of what we were doing." Ocean carriers have been forced to divert around the Cape of Good Hope for the past 18 months to avoid missile and drone attacks launched by the Houthi from southern Yemen. The militants have said the attacks were a show of solidarity for Gaza amid the Israel-Hamas war. A Houthi official told Reuters the US and Houthis had agreed to "no longer target each other," but that attacks on Israel would continue. However, a Houthi media statement issued late Wednesday, just a day after the Trump ceasefire announcement, claimed the militants had conducted an attack against the US aircraft carrier Harry S. Truman and its support vessels. <h3>Red Sea return ‘not responsible’ </h3>Jack Kennedy, head of Middle East and North Africa country risk at S&amp;P Global Market Intelligence, said the US-Houthi ceasefire announcement represented “a pragmatic, limited de-escalation rather than a pathway toward comprehensive peace.” ”The Houthis are likely to use any relative pause in US bombing to rearm and rebuild infrastructure that has been targeted over the course of the existing campaign that began on March 15,” Kennedy said in a customer brief this week. “Houthi targeting and identification of vessels it accuses of supporting Israel has previously, in our view, been inconsistent and based on incomplete information, maintaining severe risks for shipping in transit due to misidentification,” he added. An Israel-Hamas ceasefire and the Houthis’ pledge to not attack commercial vessels was announced in January, but did not provide enough certainty to most container lines to restart their Suez Canal sailings. Clerc said the strong link between Houthi attacks and the Gaza war, which he said was worsening, and the lack of any formal structure to this week’s US-Houthi ceasefire claim by the White House, rendered the chances of a return of shipping to the Red Sea this year "very, very low.” “Going through something as complex, costly and hard to reverse as a complete redeployment of our shipping networks back through the Red Sea based on news of a deal whose contour we don't understand, whose terms we don't understand, and which has been breached already, I think is really not responsible,” he said. The carrier’s Gemini Cooperation partner Hapag-Lloyd said its position on sailing through the Red Sea also remained unchanged following the comments by Trump. “There is not much we can say at this point other than that we will continue to closely monitor and analyze the latest developments and their impact on the security situation in the Red Sea,” Hapag-Lloyd spokesperson Tim Seifert told the Journal of Commerce. “Otherwise, the following applies unchanged: We will return to the Red Sea when it is safe to do so.” Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com">greg.knowler@spglobal.com</a>. </div>

Maersk has ruled out a return to Red Sea transits this year despite an assertion from US President Donald Trump this week that Houthi militants in Yemen “have capitulated” and agreed to stop attacks on commercial shipping in the region. CEO Vincent Clerc told analysts on a first-quarter earnings call Thursday that it would not be responsible to return to the Red Sea and Suez Canal when there were no guarantees over the safety of crew, ships and cargo. That means Maersk vessels will continue to divert around southern Africa. “If the US will stop bombing (the Houthi), that's good,” Clerc said. “Whether this means there is not only safety today, but safety for the foreseeable future for us sending our colleagues, our assets and our customers’ cargo through the Red Sea again, we're pretty far from that threshold.” Trump on Tuesday said the Houthi had “capitulated” and that the US would suspend its aerial strikes on militant positions in Yemen. "They just don't want to fight,” Trump told reporters. “We will honor that, and we will stop the bombings. But, more importantly, we will take their word. They say they will not be blowing up ships anymore and that's what the purpose of what we were doing." Ocean carriers have been forced to divert around the Cape of Good Hope for the past 18 months to avoid missile and drone attacks launched by the Houthi from southern Yemen. The militants have said the attacks were a show of solidarity for Gaza amid the Israel-Hamas war. A Houthi official told Reuters the US and Houthis had agreed to "no longer target each other," but that attacks on Israel would continue. However, a Houthi media statement issued late Wednesday, just a day after the Trump ceasefire announcement, claimed the militants had conducted an attack against the US aircraft carrier Harry S. Truman and its support vessels. Red Sea return ‘not responsible’ Jack Kennedy, head of Middle East and North Africa country risk at S&P Global Market Intelligence, said the US-Houthi ceasefire announcement represented “a pragmatic, limited de-escalation rather than a pathway toward comprehensive peace.” ”The Houthis are likely to use any relative pause in US bombing to rearm and rebuild infrastructure that has been targeted over the course of the existing campaign that began on March 15,” Kennedy said in a customer brief this week. “Houthi targeting and identification of vessels it accuses of supporting Israel has previously, in our view, been inconsistent and based on incomplete information, maintaining severe risks for shipping in transit due to misidentification,” he added. An Israel-Hamas ceasefire and the Houthis’ pledge to not attack commercial vessels was announced in January, but did not provide enough certainty to most container lines to restart their Suez Canal sailings. Clerc said the strong link between Houthi attacks and the Gaza war, which he said was worsening, and the lack of any formal structure to this week’s US-Houthi ceasefire claim by the White House, rendered the chances of a return of shipping to the Red Sea this year "very, very low.” “Going through something as complex, costly and hard to reverse as a complete redeployment of our shipping networks back through the Red Sea based on news of a deal whose contour we don't understand, whose terms we don't understand, and which has been breached already, I think is really not responsible,” he said. The carrier’s Gemini Cooperation partner Hapag-Lloyd said its position on sailing through the Red Sea also remained unchanged following the comments by Trump. “There is not much we can say at this point other than that we will continue to closely monitor and analyze the latest developments and their impact on the security situation in the Red Sea,” Hapag-Lloyd spokesperson Tim Seifert told the Journal of Commerce. “Otherwise, the following applies unchanged: We will return to the Red Sea when it is safe to do so.” Contact Greg Knowler at greg.knowler@spglobal.com .

Maritime

Container Shipping News

Asia-Europe

US-Houthi ceasefire claim not sufficient for carrier return to Red Sea: Maersk

<div class="phx-topic abstract-wrapper">The tight supply of warehousing for frontloaded freight is diverting truck shipments as shippers reposition inventory.</div>

The tight supply of warehousing for frontloaded freight is diverting truck shipments as shippers reposition inventory.

<div class="phx-topic">Rising demand for bonded warehousing amid <a href="https://www.joc.com/article/tariff-related-disruption-spreading-as-us-shippers-pause-plans-5989017">high US tariffs</a> is disrupting the flow of freight by truck to inland US markets, drayage providers say. That and high volumes of freight frontloaded to avoid paying those tariffs are throwing some supply chains and inland distribution networks off-kilter as uncertainty deepens around US trade disputes and the potential for trade deals to lower tariffs. Frontloaded freight, first <a href="http://go.microsoft.com/fwlink/p/?LinkId=255141">from China</a> and now from other US trading partners facing reciprocal tariffs by July, is forcing US shippers to find new storage space for goods, whether bonded facilities, <a href="https://www.joc.com/article/us-importers-turning-to-foreign-trade-zones-amid-tariff-hikes-5999587">free trade zones</a> (FTZs) or any available warehouse. They’re looking for overflow space and a tariff-safe haven for their goods, and that is shifting shipments and inventory across the country, said Paul Brashier, vice president of global supply chain for ITS Logistics, a Reno, Nevada-based drayage and logistics provider. “Bonded storage, especially for Chinese goods, is something we’re seeing tons of demand for right now,” Brashier told the Journal of Commerce Wednesday. Demand is high for bonded trucking as well, in which a carrier moves goods in bond from a port. But bonded warehouses <a href="https://www.joc.com/article/us-importers-turn-to-canadian-bonded-storage-to-delay-payment-of-tariffs-5990113">are hard to find</a>. Shippers that can’t find bonded storage in the US are looking as far away as Canada. That means freight is shifting to new lanes and perhaps new trucking companies. “Let’s say you frontloaded a ton of goods and you get them into the best port you can as quickly as possible,” he said. “They’re not destined for their normal supply chain.” The situation underscores the need for what industrial real-estate developer Prologis calls “flexible inventory positioning in the evolving landscape.” “A disconnected world will require more warehouse space, not less,” Prologis CFO Timothy D. Arndt said during a first-quarter earnings call last month. Discussions between Prologis and more than 300 customers in April found many companies accelerating shipments, Arndt said, adding: “They’re also rerouting volumes and have urgent demand for overflow space.” What those shippers need is short-term flexibility, and they’re turning to third-party logistics providers (3PLs) to find it, he said. “3PLs’ space is getting more utilized, with one prominent name describing that they’ve increased their utilization from 83% to over 90%,” Arndt said. 3PLs are looking for more space for importers, including space at ITS Logistics, which has about 5 million square feet of warehousing at three campuses, Brashier said. “I was approached recently by a 3PL looking to onboard us for additional space,” he said. “Those conversations weren’t happening six months ago, and they are now.” ITS Logistics is also seeing more demand for cross-dock services and direct long-distance trucking or drayage to customers further in the US, skipping intermediate distribution centers. “There’s a lot of stuff moving between distribution centers,” Brashier said, a sign that inventory is being repositioned. Such deviation from “normal” supply chains — especially if it proves long lasting — leads to higher costs for shippers as goods they import move to markets farther from ports. Disruption likely will decline as tariffs take effect and shipments drop. “We’ve got to let everything from the China cut-off process through the system,” Brashier said. <h3>Going with the ‘overflow’ </h3>A Prologis study released this month found that 75% of US real estate demand is tied to regional distribution and local consumer consumption, not global trade. That, in turn, could mean less space available for the overflow of international goods. “Many of our customers source domestically and are relatively unaffected, while others have the capability to adapt or even stand to benefit,” Arndt said. Some Prologis customers are already making decisions, despite uncertainty over US trade policy. “Even in the last two weeks, we signed a lot of leases, and we’ve signed build-to-suits,” Hamid R. Moghadam, Prologis’ chairman and CEO, said during the company’s call. “These customers could have just said, ‘okay, let’s punt on those until we have clarity,’” he said. <h3>Spot market volumes soar </h3>The disruption caused by the diversion of freight is igniting the truckload spot market in terms of volumes. “We’re seeing record numbers of loads moved nationally, surpassing the highest numbers we saw during the pandemic,” Dean Croke, principal analyst at DAT Freight &amp; Analytics, told the Journal of Commerce Thursday. Spot loads moved out of Los Angeles are up 17% from February through May; in the previous two years, the number of loads went down in the same period. Spot loads moved from Los Angeles to Phoenix are up 52% in the February–May period, Croke said. Last week was the busiest week ever for DAT’s spot market load boards, with volumes 6% higher than the week ending Nov. 12, 2021 — the height of the COVID-19 pandemic retail freight surge, he said. In addition, “we’re seeing new lanes pop up because shippers are finding new suppliers,” Croke said. However, even with freight diversions and inventory repositioning, there’s little sign that excess truck capacity is being absorbed by the disruption. “This hasn’t affected spot market rates, which shows there’s enough capacity in the contract and spot markets,” Croke said. Contact William B. Cassidy at <a href="mailto:bill.cassidy@spglobal.com">bill.cassidy@spglobal.com</a>.</div>

Rising demand for bonded warehousing amid high US tariffs is disrupting the flow of freight by truck to inland US markets, drayage providers say. That and high volumes of freight frontloaded to avoid paying those tariffs are throwing some supply chains and inland distribution networks off-kilter as uncertainty deepens around US trade disputes and the potential for trade deals to lower tariffs. Frontloaded freight, first from China and now from other US trading partners facing reciprocal tariffs by July, is forcing US shippers to find new storage space for goods, whether bonded facilities, free trade zones (FTZs) or any available warehouse. They’re looking for overflow space and a tariff-safe haven for their goods, and that is shifting shipments and inventory across the country, said Paul Brashier, vice president of global supply chain for ITS Logistics, a Reno, Nevada-based drayage and logistics provider. “Bonded storage, especially for Chinese goods, is something we’re seeing tons of demand for right now,” Brashier told the Journal of Commerce Wednesday. Demand is high for bonded trucking as well, in which a carrier moves goods in bond from a port. But bonded warehouses are hard to find . Shippers that can’t find bonded storage in the US are looking as far away as Canada. That means freight is shifting to new lanes and perhaps new trucking companies. “Let’s say you frontloaded a ton of goods and you get them into the best port you can as quickly as possible,” he said. “They’re not destined for their normal supply chain.” The situation underscores the need for what industrial real-estate developer Prologis calls “flexible inventory positioning in the evolving landscape.” “A disconnected world will require more warehouse space, not less,” Prologis CFO Timothy D. Arndt said during a first-quarter earnings call last month. Discussions between Prologis and more than 300 customers in April found many companies accelerating shipments, Arndt said, adding: “They’re also rerouting volumes and have urgent demand for overflow space.” What those shippers need is short-term flexibility, and they’re turning to third-party logistics providers (3PLs) to find it, he said. “3PLs’ space is getting more utilized, with one prominent name describing that they’ve increased their utilization from 83% to over 90%,” Arndt said. 3PLs are looking for more space for importers, including space at ITS Logistics, which has about 5 million square feet of warehousing at three campuses, Brashier said. “I was approached recently by a 3PL looking to onboard us for additional space,” he said. “Those conversations weren’t happening six months ago, and they are now.” ITS Logistics is also seeing more demand for cross-dock services and direct long-distance trucking or drayage to customers further in the US, skipping intermediate distribution centers. “There’s a lot of stuff moving between distribution centers,” Brashier said, a sign that inventory is being repositioned. Such deviation from “normal” supply chains — especially if it proves long lasting — leads to higher costs for shippers as goods they import move to markets farther from ports. Disruption likely will decline as tariffs take effect and shipments drop. “We’ve got to let everything from the China cut-off process through the system,” Brashier said. Going with the ‘overflow’ A Prologis study released this month found that 75% of US real estate demand is tied to regional distribution and local consumer consumption, not global trade. That, in turn, could mean less space available for the overflow of international goods. “Many of our customers source domestically and are relatively unaffected, while others have the capability to adapt or even stand to benefit,” Arndt said. Some Prologis customers are already making decisions, despite uncertainty over US trade policy. “Even in the last two weeks, we signed a lot of leases, and we’ve signed build-to-suits,” Hamid R. Moghadam, Prologis’ chairman and CEO, said during the company’s call. “These customers could have just said, ‘okay, let’s punt on those until we have clarity,’” he said. Spot market volumes soar The disruption caused by the diversion of freight is igniting the truckload spot market in terms of volumes. “We’re seeing record numbers of loads moved nationally, surpassing the highest numbers we saw during the pandemic,” Dean Croke, principal analyst at DAT Freight & Analytics, told the Journal of Commerce Thursday. Spot loads moved out of Los Angeles are up 17% from February through May; in the previous two years, the number of loads went down in the same period. Spot loads moved from Los Angeles to Phoenix are up 52% in the February–May period, Croke said. Last week was the busiest week ever for DAT’s spot market load boards, with volumes 6% higher than the week ending Nov. 12, 2021 — the height of the COVID-19 pandemic retail freight surge, he said. In addition, “we’re seeing new lanes pop up because shippers are finding new suppliers,” Croke said. However, even with freight diversions and inventory repositioning, there’s little sign that excess truck capacity is being absorbed by the disruption. “This hasn’t affected spot market rates, which shows there’s enough capacity in the contract and spot markets,” Croke said. Contact William B. Cassidy at bill.cassidy@spglobal.com .

Supply chain

Trucking News

Drayage

Truckload

Surface

Tariffs amplify US warehousing demand, disrupt inland truck routes

<div class="phx-topic abstract-wrapper">The main heavy-lift components needed for datacenters are cooling infrastructure such as large-scale air conditioners and backup power infrastructure such as batteries, diesel generators and transformers. </div>

The main heavy-lift components needed for datacenters are cooling infrastructure such as large-scale air conditioners and backup power infrastructure such as batteries, diesel generators and transformers.

<div class="phx-topic">The already rapid construction of datacenters in the US is struggling to keep up with the growing needs of artificial intelligence and cloud storage — and now, tariffs are amplifying those hurdles. Capital expenditures by the five largest cloud infrastructure providers increased by almost 60% in the second quarter of 2024 year over year to $55 billion, according to data from S&amp;P Global Market Intelligence, and most of that spending is directed to the building of datacenters that host AI capabilities. Market Intelligence data also shows the datacenter footprint is projected to grow more than 58% — to more than 480 million square feet — between 2024 and 2029. “The datacenter industry has been growing dramatically in the past several years even before the AI explosion two years ago,” said Liu Perkins, S&amp;P Global Market Intelligence’s senior research analyst on datacenter infrastructure. “The cloud datacenters have already been in strong growth. But on top of that, this AI growth has triggered a big change, [positioning] the North American market in the leading position, and now the rest of the world is trying to catch up as well.” S&amp;P Global is the parent company of the Journal of Commerce. Speaking at the Journal of Commerce Breakbulk and Project Cargo Conference in New Orleans last month, Beth Branch, president and CEO of the Port of New Orleans and CEO of the New Orleans Public Belt Railroad, said that datacenters offered a “really massive” opportunity for breakbulk and project cargo over the coming years. She referenced Meta’s construction of a $10 billion AI datacenter in northeast Louisiana — which will be Meta’s largest site globally — as an example of the scale of data projects in the pipeline. Growth has been driven further by government investments and incentivization. “The speed that datacenters are being built has become condensed,” a project cargo shipper told the Journal of Commerce. “The velocity that projects like this can be done in is amazing when there is government money available that can be thrown at them.” Dan Thompson, an S&amp;P Global research analyst with a focus on datacenters, said that the industry is “operating behind the curve” in terms of fulfilling demand, and while companies are aggressively building datacenters, questions remain whether they can truly meet the infrastructure needs for emerging technologies such as AI. <h3>Sourcing hurdles could stunt growth </h3>The demand for datacenters has led to a significant manufacturing backlog, which some analysts say could be impacted by tariffs on Chinese products, thus affecting project timelines and import costs. AI and cloud storage are forcing exponential growth in the datacenter industry, and in an industry where manufacturing is already a significant pain point, tariffs on Chinese-sourced infrastructure components are a taboo topic for many datacenter engineering, procurement and construction companies (EPCs). According to S&amp;P Global Market Intelligence, AI’s growing use of graphic processing units (GPUs) consumes as much as 10 times more energy per chip than traditional central processing units (CPUs). While many of the infrastructure components are subject to manufacturing hurdles, transformer availability continues to pose a critical issue, said Thompson. The datacenter projects — costing about $10 million per megawatt — usually take about 12 to 18 months in the US, with two to three years needed in other countries, he said. While the US tends to get the projects done faster, there are delays — especially on the manufacturing side. As such, many project managers have begun to get ahead of their procurement schedules, opting to head off any growing backlog. “We see a lot of providers, operators, try to secure the supply of key parts and equipment way ahead of time — putting orders in a year or two ahead of their schedule to try and secure the supply,” Perkins said. The main heavy-lift components needed for datacenters are cooling infrastructure — such as large-scale air conditioners — and backup power infrastructure such as batteries, diesel generators and transformers. “A lot of the delays are in getting these large-scale transformers,” said Thompson. “It seems to me that manufacturing can’t keep up. Along with diesel generators — the leads times on those keep getting longer.” Both Perkins and Thompson agreed that tariffs have exacerbated concerns around sourcing, which was already considered a difficult topic before the Trump tariffs were implemented in April. “Suddenly, no one wants to get very precise as to where all of this stuff comes from,” said Thompson. “Most companies have some manufacturing in the United States, but it may just be assembly.” <h3>Destination factors a consideration </h3>Much of the datacenter construction is taking place in rural areas of Ohio, Wyoming, Virginia and Texas. That means things such as the availability of power and roads designed to handle heavy cargo pose significant infrastructure challenges. Much of the equipment is brought in and assembled locally before installation, but large components continue to pose hurdles for the projects. Additionally, beyond the roads, there is a need for terminals designed to handle sufficient pounds per square foot for the heavyweight components being used. While many of the existing datacenters were constructed near hubs and urban areas, there is a growing need to serve more rural areas with lower network connectivity. As such, the development of centers in those areas often presents a catch-22 — depending on existing utility infrastructure but demanding increased output from that same infrastructure. “In addition to the traditional hubs, there’s also emergent places, especially because of the increase of the need,” said Perkins. “That capacity is driving more demand to the utility system, and the utility is not quick enough to catch up to provide the energy required by these datacenters, forcing datacenters to go where energy is available.” There are also the accompanying power centers to construct, needed to supply the vast amounts of energy needed for datacenters and offering another cargo avenue for the heavy-lift industry. “Datacenters do not want to build their own power plants; that’s not their goal. They would much rather take power from the grid,” said Amy Groeschel, principal research analyst, costs and technology, at S&amp;P Global Commodity Insights. “So, the siting of those datacenters will become very key.” And while the growth in datacenter development poses a hurdle for manufacturers, it also offers an opportunity for project cargo vessel operators. “The time on the water is back to the normal situation,” Perkins said. “It was chaos during the pandemic and for a short time post-pandemic, but I think that the shipment part is [back to normal] already. I think the challenge is specifically with manufacturing capability.” Contact Laura Robb at <a href="mailto:laura.robb@spglobal.com">laura.robb@spglobal.com</a>.  </div>

The already rapid construction of datacenters in the US is struggling to keep up with the growing needs of artificial intelligence and cloud storage — and now, tariffs are amplifying those hurdles. Capital expenditures by the five largest cloud infrastructure providers increased by almost 60% in the second quarter of 2024 year over year to $55 billion, according to data from S&P Global Market Intelligence, and most of that spending is directed to the building of datacenters that host AI capabilities. Market Intelligence data also shows the datacenter footprint is projected to grow more than 58% — to more than 480 million square feet — between 2024 and 2029. “The datacenter industry has been growing dramatically in the past several years even before the AI explosion two years ago,” said Liu Perkins, S&P Global Market Intelligence’s senior research analyst on datacenter infrastructure. “The cloud datacenters have already been in strong growth. But on top of that, this AI growth has triggered a big change, [positioning] the North American market in the leading position, and now the rest of the world is trying to catch up as well.” S&P Global is the parent company of the Journal of Commerce. Speaking at the Journal of Commerce Breakbulk and Project Cargo Conference in New Orleans last month, Beth Branch, president and CEO of the Port of New Orleans and CEO of the New Orleans Public Belt Railroad, said that datacenters offered a “really massive” opportunity for breakbulk and project cargo over the coming years. She referenced Meta’s construction of a $10 billion AI datacenter in northeast Louisiana — which will be Meta’s largest site globally — as an example of the scale of data projects in the pipeline. Growth has been driven further by government investments and incentivization. “The speed that datacenters are being built has become condensed,” a project cargo shipper told the Journal of Commerce. “The velocity that projects like this can be done in is amazing when there is government money available that can be thrown at them.” Dan Thompson, an S&P Global research analyst with a focus on datacenters, said that the industry is “operating behind the curve” in terms of fulfilling demand, and while companies are aggressively building datacenters, questions remain whether they can truly meet the infrastructure needs for emerging technologies such as AI. Sourcing hurdles could stunt growth The demand for datacenters has led to a significant manufacturing backlog, which some analysts say could be impacted by tariffs on Chinese products, thus affecting project timelines and import costs. AI and cloud storage are forcing exponential growth in the datacenter industry, and in an industry where manufacturing is already a significant pain point, tariffs on Chinese-sourced infrastructure components are a taboo topic for many datacenter engineering, procurement and construction companies (EPCs). According to S&P Global Market Intelligence, AI’s growing use of graphic processing units (GPUs) consumes as much as 10 times more energy per chip than traditional central processing units (CPUs). While many of the infrastructure components are subject to manufacturing hurdles, transformer availability continues to pose a critical issue, said Thompson. The datacenter projects — costing about $10 million per megawatt — usually take about 12 to 18 months in the US, with two to three years needed in other countries, he said. While the US tends to get the projects done faster, there are delays — especially on the manufacturing side. As such, many project managers have begun to get ahead of their procurement schedules, opting to head off any growing backlog. “We see a lot of providers, operators, try to secure the supply of key parts and equipment way ahead of time — putting orders in a year or two ahead of their schedule to try and secure the supply,” Perkins said. The main heavy-lift components needed for datacenters are cooling infrastructure — such as large-scale air conditioners — and backup power infrastructure such as batteries, diesel generators and transformers. “A lot of the delays are in getting these large-scale transformers,” said Thompson. “It seems to me that manufacturing can’t keep up. Along with diesel generators — the leads times on those keep getting longer.” Both Perkins and Thompson agreed that tariffs have exacerbated concerns around sourcing, which was already considered a difficult topic before the Trump tariffs were implemented in April. “Suddenly, no one wants to get very precise as to where all of this stuff comes from,” said Thompson. “Most companies have some manufacturing in the United States, but it may just be assembly.” Destination factors a consideration Much of the datacenter construction is taking place in rural areas of Ohio, Wyoming, Virginia and Texas. That means things such as the availability of power and roads designed to handle heavy cargo pose significant infrastructure challenges. Much of the equipment is brought in and assembled locally before installation, but large components continue to pose hurdles for the projects. Additionally, beyond the roads, there is a need for terminals designed to handle sufficient pounds per square foot for the heavyweight components being used. While many of the existing datacenters were constructed near hubs and urban areas, there is a growing need to serve more rural areas with lower network connectivity. As such, the development of centers in those areas often presents a catch-22 — depending on existing utility infrastructure but demanding increased output from that same infrastructure. “In addition to the traditional hubs, there’s also emergent places, especially because of the increase of the need,” said Perkins. “That capacity is driving more demand to the utility system, and the utility is not quick enough to catch up to provide the energy required by these datacenters, forcing datacenters to go where energy is available.” There are also the accompanying power centers to construct, needed to supply the vast amounts of energy needed for datacenters and offering another cargo avenue for the heavy-lift industry. “Datacenters do not want to build their own power plants; that’s not their goal. They would much rather take power from the grid,” said Amy Groeschel, principal research analyst, costs and technology, at S&P Global Commodity Insights. “So, the siting of those datacenters will become very key.” And while the growth in datacenter development poses a hurdle for manufacturers, it also offers an opportunity for project cargo vessel operators. “The time on the water is back to the normal situation,” Perkins said. “It was chaos during the pandemic and for a short time post-pandemic, but I think that the shipment part is [back to normal] already. I think the challenge is specifically with manufacturing capability.” Contact Laura Robb at laura.robb@spglobal.com . 

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<div class="phx-topic abstract-wrapper">Importers in the US are rewiring their supply chains and drawing extra inventory from Canada, Mexico and domestically in a “wait and see” response to the trans-Pacific trade war, according to Vincent Clerc.</div>

Importers in the US are rewiring their supply chains and drawing extra inventory from Canada, Mexico and domestically in a “wait and see” response to the trans-Pacific trade war, according to Vincent Clerc.

<div class="phx-topic">US retailers are in a race to find inventory from alternative sources to China, with Maersk CEO Vincent Clerc warning Thursday they may have until summer to fill stocks or risk seeing shortages “across the board.” Volume from China to the US has fallen 30% to 40% since the Trump administration’s imposition of 145% tariffs on most Chinese imports on April 9, Clerc told analysts on the carrier’s first-quarter earnings call. “Everybody is rewiring their supply chains and looking at bringing in extra inventory based on the SKUs [stock keeping units] that they’re most concerned with,” Clerc said, as shippers waited to see whether there would be any easing of tariffs on China. “Right now, the race is about trying to get your hands on as much inventory as possible,” he added. “They’re drawing on the inventories they have in Canada. They’re drawing on inventories they have in Mexico, and on distributors and other vendors inside the US to see how long they can hoard those goods.” Clerc said in the industrials and automotive sectors, and in commodities such as rare earth and semiconductors, the import decline was “going to bite soon.” “There are certain commodities where you can’t substitute imports freely, both in terms of SKUs but also in terms of quantities, because the capacity there was in China is not readily available elsewhere to support the US market,” he said. While empty shelves in big box retailers in the US were not “right around the corner,” Clerc said if inventory could not be found before the summer “it’s going to start to hurt quite a lot across the board.” Maersk is not as exposed as other carriers to the trans-Pacific disruption. The dramatic drop in US imports from China had little effect on its first-quarter result, with China-US trade comprising only 5% of the carrier’s total volume. Maersk reported a strong start to the year with revenue in the first quarter rising 7.8% year over year to $13.3 billion and earnings before interest, taxes, depreciation and amortization (EBITDA) up 70% at $2.7 billion. Earnings before interest and taxes (EBIT) of $1.25 billion were six times higher than the year-ago period, as was a net profit of $1.2 billion. The carrier’s volume in the first quarter grew just 0.1% year over year at 2.9 million FEUs, but it was a decline of 6.5% compared with the last quarter of 2024. Its average rates followed a similar trajectory, rising 2.5% year over year to $2,427 per FEU but down 8.7% quarter over quarter. <h3>Geopolitics drags down global volume forecast </h3>Maersk left its full-year EBIT forecast of zero to $3 billion unchanged. But the increasing macroeconomic and geopolitical uncertainty saw the carrier leave open the possibility of negative growth in global container volumes, revising its forecast to a range between -1% and 4%. Its previous forecast was for 4% market growth in volumes. Clerc explained the reasoning behind the revised volume growth, saying the supply-side risks from new tonnage being delivered combined with a return to Red Sea transits have faded this year. Although significant amounts of capacity were still entering the market, there was little chance of carriers returning to the Red Sea this year despite <a href="https://www.joc.com/article/apparent-houthi-ceasefire-raises-container-shipping-overcapacity-risk-5999930">an apparent ceasefire with the Houthis announced earlier this week</a> by US President Donald Trump. On the demand side, Clerc pointed to the erratic nature of the US tariffs that were creating new levels of uncertainty. “For me, 145% tariffs on China were not really in the base case that we had ... and some of these other tariffs that have been set on pause for 90 days were also higher than what most people expected,” he said. The Trump administration a month ago announced a 90-day pause for countries open to negotiations, leaving a 10% across-the-board baseline tariff in place during the negotiating period. Some positive trade momentum has begun to emerge. The White House announced a trade deal between the US and the UK Thursday, although no details were provided, and representatives from the US and China are set to meet for trade talks in Switzerland this weekend. “If this resolves itself quickly with a lot of trade deals within the 90 days, and maybe a de-escalation with China, you will see the demand side bounce back to somewhere around 4% for the year,” Clerc said. But if the tariffs became entrenched, it would lead to lower global demand and increase the risk of recession in the US, he added. “Because ultimately, given the lack of alternatives to China, both in terms of scale and breadth, this will have to be passed on to consumers,” Clerc said. Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com">greg.knowler@spglobal.com</a>. </div>

US retailers are in a race to find inventory from alternative sources to China, with Maersk CEO Vincent Clerc warning Thursday they may have until summer to fill stocks or risk seeing shortages “across the board.” Volume from China to the US has fallen 30% to 40% since the Trump administration’s imposition of 145% tariffs on most Chinese imports on April 9, Clerc told analysts on the carrier’s first-quarter earnings call. “Everybody is rewiring their supply chains and looking at bringing in extra inventory based on the SKUs [stock keeping units] that they’re most concerned with,” Clerc said, as shippers waited to see whether there would be any easing of tariffs on China. “Right now, the race is about trying to get your hands on as much inventory as possible,” he added. “They’re drawing on the inventories they have in Canada. They’re drawing on inventories they have in Mexico, and on distributors and other vendors inside the US to see how long they can hoard those goods.” Clerc said in the industrials and automotive sectors, and in commodities such as rare earth and semiconductors, the import decline was “going to bite soon.” “There are certain commodities where you can’t substitute imports freely, both in terms of SKUs but also in terms of quantities, because the capacity there was in China is not readily available elsewhere to support the US market,” he said. While empty shelves in big box retailers in the US were not “right around the corner,” Clerc said if inventory could not be found before the summer “it’s going to start to hurt quite a lot across the board.” Maersk is not as exposed as other carriers to the trans-Pacific disruption. The dramatic drop in US imports from China had little effect on its first-quarter result, with China-US trade comprising only 5% of the carrier’s total volume. Maersk reported a strong start to the year with revenue in the first quarter rising 7.8% year over year to $13.3 billion and earnings before interest, taxes, depreciation and amortization (EBITDA) up 70% at $2.7 billion. Earnings before interest and taxes (EBIT) of $1.25 billion were six times higher than the year-ago period, as was a net profit of $1.2 billion. The carrier’s volume in the first quarter grew just 0.1% year over year at 2.9 million FEUs, but it was a decline of 6.5% compared with the last quarter of 2024. Its average rates followed a similar trajectory, rising 2.5% year over year to $2,427 per FEU but down 8.7% quarter over quarter. Geopolitics drags down global volume forecast Maersk left its full-year EBIT forecast of zero to $3 billion unchanged. But the increasing macroeconomic and geopolitical uncertainty saw the carrier leave open the possibility of negative growth in global container volumes, revising its forecast to a range between -1% and 4%. Its previous forecast was for 4% market growth in volumes. Clerc explained the reasoning behind the revised volume growth, saying the supply-side risks from new tonnage being delivered combined with a return to Red Sea transits have faded this year. Although significant amounts of capacity were still entering the market, there was little chance of carriers returning to the Red Sea this year despite an apparent ceasefire with the Houthis announced earlier this week by US President Donald Trump. On the demand side, Clerc pointed to the erratic nature of the US tariffs that were creating new levels of uncertainty. “For me, 145% tariffs on China were not really in the base case that we had ... and some of these other tariffs that have been set on pause for 90 days were also higher than what most people expected,” he said. The Trump administration a month ago announced a 90-day pause for countries open to negotiations, leaving a 10% across-the-board baseline tariff in place during the negotiating period. Some positive trade momentum has begun to emerge. The White House announced a trade deal between the US and the UK Thursday, although no details were provided, and representatives from the US and China are set to meet for trade talks in Switzerland this weekend. “If this resolves itself quickly with a lot of trade deals within the 90 days, and maybe a de-escalation with China, you will see the demand side bounce back to somewhere around 4% for the year,” Clerc said. But if the tariffs became entrenched, it would lead to lower global demand and increase the risk of recession in the US, he added. “Because ultimately, given the lack of alternatives to China, both in terms of scale and breadth, this will have to be passed on to consumers,” Clerc said. Contact Greg Knowler at greg.knowler@spglobal.com .

Trans-Pacific

US in race to replenish China stocks to avoid summer shortages: Maersk CEO

<div class="phx-topic abstract-wrapper">Sources anticipate the additional rerouting costs in the region will force other ocean carriers to follow suit on similar surcharges.</div>

Sources anticipate the additional rerouting costs in the region will force other ocean carriers to follow suit on similar surcharges.

<div class="phx-topic">Shippers are beginning to feel the financial pinch of the sudden escalation in military tensions between India and Pakistan in the form of contingency surcharges levied by mainline ocean carriers. The first known levy comes from CMA CGM, which has slapped an “operational recovery surcharge” of $800 per container for Pakistan exports and $300 per box for imports. The extra charges are due to start May 15 on non-US trade lanes and from June 6 for US cargo. “This decision has been necessitated by the recent geopolitical developments in the region, which are significantly impacting our operations,” the French carrier told Pakistani customers. “To ensure that we continue to provide you with the high level of service you expect from us, we have had to adapt and adjust our services accordingly.” Sources anticipate additional rerouting costs in the region will force other carriers to follow suit on similar surcharges. Indian shippers should also expect some “add-on” charges, albeit milder than that of the Pakistan scale, local forwarders believe. The Indian government last week imposed a ban on Pakistan-origin cargo passing through its ports, raising the risk of schedule disruptions for services with twin market coverage in India and Pakistan. Major liners are frantically adjusting schedules and rotations for their Indian networks calling both markets to keep freight moving, with Hapag-Lloyd choosing Salalah Port in Oman and CMA CGM opting for Abu Dhabi’s Khalifa Port as alternative transshipment hubs to serve Pakistani trades with feeder support. Salalah is already a key intermediate point for Gemini Cooperation services, including Hapag-Lloyd’s India-Europe string (IOS). “We are actively working on evaluating long-term alternative solutions and rerouting measures to minimize the impact on [customer] supply chain,” Hapag-Lloyd said in a customer advisory. CMA CGM has also announced a new feeder loop, known as the PIKEX, with a rotation of Jebel Ali, Khalifa, Karachi, Port Qasim, Colombo, Karachi and Jebel Ali to handle Pakistan cargo relays. “We have undertaken a thorough review of our maritime services to ensure the continued reliability and safety of ... cargo shipments,” CMA CGM said. Contact Bency Mathew at <a href="mailto:bencyvmathew@gmail.com">bencyvmathew@gmail.com</a>. </div>

Shippers are beginning to feel the financial pinch of the sudden escalation in military tensions between India and Pakistan in the form of contingency surcharges levied by mainline ocean carriers. The first known levy comes from CMA CGM, which has slapped an “operational recovery surcharge” of $800 per container for Pakistan exports and $300 per box for imports. The extra charges are due to start May 15 on non-US trade lanes and from June 6 for US cargo. “This decision has been necessitated by the recent geopolitical developments in the region, which are significantly impacting our operations,” the French carrier told Pakistani customers. “To ensure that we continue to provide you with the high level of service you expect from us, we have had to adapt and adjust our services accordingly.” Sources anticipate additional rerouting costs in the region will force other carriers to follow suit on similar surcharges. Indian shippers should also expect some “add-on” charges, albeit milder than that of the Pakistan scale, local forwarders believe. The Indian government last week imposed a ban on Pakistan-origin cargo passing through its ports, raising the risk of schedule disruptions for services with twin market coverage in India and Pakistan. Major liners are frantically adjusting schedules and rotations for their Indian networks calling both markets to keep freight moving, with Hapag-Lloyd choosing Salalah Port in Oman and CMA CGM opting for Abu Dhabi’s Khalifa Port as alternative transshipment hubs to serve Pakistani trades with feeder support. Salalah is already a key intermediate point for Gemini Cooperation services, including Hapag-Lloyd’s India-Europe string (IOS). “We are actively working on evaluating long-term alternative solutions and rerouting measures to minimize the impact on [customer] supply chain,” Hapag-Lloyd said in a customer advisory. CMA CGM has also announced a new feeder loop, known as the PIKEX, with a rotation of Jebel Ali, Khalifa, Karachi, Port Qasim, Colombo, Karachi and Jebel Ali to handle Pakistan cargo relays. “We have undertaken a thorough review of our maritime services to ensure the continued reliability and safety of ... cargo shipments,” CMA CGM said. Contact Bency Mathew at bencyvmathew@gmail.com .

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CMA CGM levies emergency surcharges on Pakistani trade amid India tensions

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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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