<div class="phx-topic abstract-wrapper">Logistics managers that saw their organization's supply chains disrupted and transportation budgets blown out of the water in 2020 will be at the epicenter of make-or-break decisions in the coming year.</div>

Logistics managers that saw their organization's supply chains disrupted and transportation budgets blown out of the water in 2020 will be at the epicenter of make-or-break decisions in the coming year.

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<div>This story appears in the print edition of the Jan. 4, 2021, Journal of Commerce Annual Review and Outlook.Supply chain practitioners looking for a game plan in 2021 find themselves in a difficult position. The handbooks they’ve long used are missing key pages that were torn out and tossed in frustration during one of the most disruptive — and dangerous — years in living memory.<div><img>l</div>The coronavirus disease 2019 (COVID-19) turned expectations for 2020 on their head and ushered in an era of counterintuitive shipping in which logistics managers are being forced to make decisions that sometimes defy long-term supply chain...

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Supply chain

Outlook 2021: Shippers face new twists, risky turns in pandemic-altered market

<div class="phx-topic abstract-wrapper">Carriers have penciled in a return to the Red Sea and Suez Canal for the second half of the year, and some analysts are also using that as a baseline for their market outlooks, but the reality is that no one knows. </div>

Carriers have penciled in a return to the Red Sea and Suez Canal for the second half of the year, and some analysts are also using that as a baseline for their market outlooks, but the reality is that no one knows.

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<div class="phx-topic"><div class="wrapper-narrow float-right-element"><img src="/images/phoenix/5910619_0.1.png"></img></div>The big picture: The Red Sea crisis will continue to impact service levels, rates and shipper-carrier relationships on the Asia–Europe trade for the foreseeable future. While the diversion of vessels away from the Suez Canal starting in late 2023 came as an unpleasant surprise for shippers — and a welcome relief for heavily oversupplied carriers — the industry enters 2025 with the longer voyages firmly established in ocean schedules. A look back: As 2023 drew to a close, carriers were bracing for battle with a familiar foe: overcapacity. The container ship order book had grown to almost 30% of the in-service fleet and new, larger were steadily sailing into service on the Asia–Europe trade. A precipitous rate decline appeared to be virtually guaranteed, and carriers were preparing to blank sailings, slow steam, and idle and scrap ships to manage capacity. But Houthi militant attacks on commercial shipping in the Red Sea completely flipped the supply-demand picture, forcing carriers to divert vessels around southern Africa and sending spot rates through the roof and all prior capacity management plans out the porthole. To offset the longer route adding about two weeks to transit times, carriers deployed everything that could float, which in turn, caused severe port bottlenecks at both ends of the Asia–Europe corridor, further reducing effective capacity. European importers advanced orders from Asia to try to mitigate delays, which led to an early start to the peak season, quickly filled all available capacity and saw carriers slashing agreed volume allocations while charging huge premiums to guarantee loading. The peak season also came to an early end, but even as volumes slowed through September and into the fourth quarter, the longer voyages continued to disrupt schedules and kept short-term rates well above prior-year levels. Through mid-December, spot rates from Asia to North Europe averaged $5,067 per FEU, nearly four times the $1,312 per FEU average recorded for the full year in 2023, according to Platts, a sister product of the Journal of Commerce within S&amp;P Global. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="e07960fd-fb05-486f-9266-38ad6d488c7b"></dynamic-object></div>A look ahead: When carriers can resume Suez Canal transits is the single largest question mark hanging over the Asia–Europe trade going into 2025. It will determine the structure of annual contracts, rate levels, shipper transportation costs, seasonal cargo flows and carrier profitability. Carriers have penciled in a return to the Red Sea for the second half, and some analysts are also using that as a baseline for their market outlooks, but the reality is that no one knows. Should the mid-year prediction be correct, it will immediately see the estimated 10% of excess capacity soaked up by the diversions around Africa returned to the market and rate levels will quickly come under downward pressure. That pressure, however, may not be as severe as initially thought, with cash-rich carriers vowing to pull hard on several levers at their disposal to limit the capacity overhang. In addition, carriers are expected to increase scrapping, with an estimated 3.4 million TEUs of capacity over 20 years old, increased blank sailings that can quickly withdraw capacity and growing numbers of idle vessels. Ship owner association BIMCO projects Asia-Europe head haul volume will grow between 3% and 4% against capacity growth of 6.7% in 2025. The next inflection: While the Red Sea diversions look set to prevail, at least through the first half of 2025, volumes on those ships will be impacted by weak underlying economic growth in Europe. The region’s manufacturing sector is stuck in recession, with the EU’s major economies facing uncertainty over persistent core inflation, policy directions and geopolitical conflicts that are dampening the near-term outlook. Although European consumer confidence is edging higher, it remains significantly below pre-pandemic levels and will have a direct influence on retail sales and freight demand. Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com">greg.knowler@spglobal.com.</a></div>

The big picture: The Red Sea crisis will continue to impact service levels, rates and shipper-carrier relationships on the Asia–Europe trade for the foreseeable future. While the diversion of vessels away from the Suez Canal starting in late 2023 came as an unpleasant surprise for shippers — and a welcome relief for heavily oversupplied carriers — the industry enters 2025 with the longer voyages firmly established in ocean schedules. A look back: As 2023 drew to a close, carriers were bracing for battle with a familiar foe: overcapacity. The container ship order book had grown to almost 30% of the in-service fleet and new, larger were steadily sailing into service on the Asia–Europe trade. A precipitous rate decline appeared to be virtually guaranteed, and carriers were preparing to blank sailings, slow steam, and idle and scrap ships to manage capacity. But Houthi militant attacks on commercial shipping in the Red Sea completely flipped the supply-demand picture, forcing carriers to divert vessels around southern Africa and sending spot rates through the roof and all prior capacity management plans out the porthole. To offset the longer route adding about two weeks to transit times, carriers deployed everything that could float, which in turn, caused severe port bottlenecks at both ends of the Asia–Europe corridor, further reducing effective capacity. European importers advanced orders from Asia to try to mitigate delays, which led to an early start to the peak season, quickly filled all available capacity and saw carriers slashing agreed volume allocations while charging huge premiums to guarantee loading. The peak season also came to an early end, but even as volumes slowed through September and into the fourth quarter, the longer voyages continued to disrupt schedules and kept short-term rates well above prior-year levels. Through mid-December, spot rates from Asia to North Europe averaged $5,067 per FEU, nearly four times the $1,312 per FEU average recorded for the full year in 2023, according to Platts, a sister product of the Journal of Commerce within S&P Global. A look ahead: When carriers can resume Suez Canal transits is the single largest question mark hanging over the Asia–Europe trade going into 2025. It will determine the structure of annual contracts, rate levels, shipper transportation costs, seasonal cargo flows and carrier profitability. Carriers have penciled in a return to the Red Sea for the second half, and some analysts are also using that as a baseline for their market outlooks, but the reality is that no one knows. Should the mid-year prediction be correct, it will immediately see the estimated 10% of excess capacity soaked up by the diversions around Africa returned to the market and rate levels will quickly come under downward pressure. That pressure, however, may not be as severe as initially thought, with cash-rich carriers vowing to pull hard on several levers at their disposal to limit the capacity overhang. In addition, carriers are expected to increase scrapping, with an estimated 3.4 million TEUs of capacity over 20 years old, increased blank sailings that can quickly withdraw capacity and growing numbers of idle vessels. Ship owner association BIMCO projects Asia-Europe head haul volume will grow between 3% and 4% against capacity growth of 6.7% in 2025. The next inflection: While the Red Sea diversions look set to prevail, at least through the first half of 2025, volumes on those ships will be impacted by weak underlying economic growth in Europe. The region’s manufacturing sector is stuck in recession, with the EU’s major economies facing uncertainty over persistent core inflation, policy directions and geopolitical conflicts that are dampening the near-term outlook. Although European consumer confidence is edging higher, it remains significantly below pre-pandemic levels and will have a direct influence on retail sales and freight demand. Contact Greg Knowler at greg.knowler@spglobal.com.

Container Shipping News

Asia-Europe

Red Sea to dominate Asia-Europe ocean trade again in 2025

<div class="phx-topic abstract-wrapper">Whether it be geopolitical crises, labor unrest or the wild card of a second Trump administration, the global supply chain will face no shortage of unknowns in 2025.</div>

Whether it be geopolitical crises, labor unrest or the wild card of a second Trump administration, the global supply chain will face no shortage of unknowns in 2025.

<div class="phx-topic">A strong but slower expanding US economy is signaling strong growth of import volumes at least until spring and no letup of the air cargo boom, while raising hopes of some semblance of a surface freight recovery. <div class="wrapper-narrow float-right-element"><img src="/images/phoenix/5910619_0.1.png"></img></div>The specter of labor strife and new tariffs, along with strong sales, is driving US retailers to keep imports surging through the spring, according to the Global Port Tracker (GPT) report from Hackett Associates and the National Retail Federation (NRF), <a href="https://www.joc.com/article/us-import-surge-to-persist-into-spring-amid-continued-frontloading-retailers-5878711">released in early December</a>. On a year-over-year basis, GPT projects volumes to rocket 12% in January before dipping 4.1% in February due to a difficult prior-year comparison. US imports in March and April will rise 12.7% and 6.6%, respectively, according to the report. Although next year will start strong, based on the polling of NRF members, the rest of the year might be weaker than last year. Journal of Commerce parent company S&amp;P Global in September forecast total US imports to slip 4.4% in 2025, excluding the impact of any new tariffs. US retail sales will inch up next year by 1.8% compared with a 1.1% expansion in 2025, according to Fitch ratings. According to the most recent data available from PIERS, a sister product of the Journal of Commerce within S&amp;P Global, US imports climbed 15.3% in November, the 14th consecutive month of year-over-year gains and the sixth straight month of double-digit percentage increases. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="58cfc092-97d6-4457-b816-89968960ca2a"></dynamic-object></div>November also marked the nineteenth consecutive month that US imports exceeded 2 million TEUs. If NRF forecasts come to fruition, December imports will break the pandemic-era record of 19 straight months. A rush to beat tariffs imposed by President-elect Donald Trump and a strike at US East and Gulf coast ports could sap capacity in the short term, but encouragingly, the overall outlook for vessel capacity is robust. Container lines, for example, are set to deploy a record level of capacity in January — nearly 1.5 million TEUs — between Asia and the US, according to maritime intelligence provider eeSea. “Once we get to January, whether it’s on the political front, the labor front, the alliance shake-up, everything is coming fast,” Sanjay Tejwani, CEO of consulting firm 365 Logistics, told the Journal of Commerce, referring to the launch of the new container carrier alliances starting in February. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="7557390e-95a4-48c8-aaa4-b4f5221b945b"></dynamic-object></div><h3>Rarified air </h3>If shippers do get in a pinch, they’ll likely find it even more difficult and more costly to turn to air cargo transport rather than ocean shipping. More than 12 months of double-digit percentage growth in air cargo demand that has outstripped available capacity, combined with constant waves of disruption, is forcing shippers and their service providers to better plan their use of air freight. Chinese e-commerce giants Temu and Shein have fueled much of the growth even as the US and other countries look at tightening up de minimis levels. Usually regarded by ocean shippers as an emergency option, air cargo is seeing a greater volume of non-essential products to get around container shipping challenges, a move that comes at a substantial cost to shippers. For example, average air cargo rates from Asia to North America hit a 2024 high of $6.61 per kilogram in early December, according to the Baltic Air Index. Shippers are changing their behavior as a result. “The closing months of 2024 could have been very messy again for shippers, but we are not hearing that,” he said. “That’s not because the volumes are not there, or the flights are not full, it is because everything, overall, is being managed better,” said Niall van de Wouw, chief air freight officer at rate benchmarking platform Xeneta. The International Air Transport Association (IATA) <a href="https://www.joc.com/article/capacity-shortage-aging-fleet-to-clip-air-cargo-wings-in-2025-iata-5905147">forecasts air cargo volume growth will decelerate to an expansion of 6% in 2025</a>, approximately half the clip seen in 2024. New capacity will also enter the market at a slow rate, with IATA expecting a 6.4% increase compared with a 9.6% expansion in 2024. <h3>Driving through the doldrums </h3>On land, US truckload demand and rates have been anything but volatile. Total truck volumes for the first 10 months of 2024 were 0.7% below the same period in 2023, according to the trucking ton-mile index produced by Jason Miller, Eli Broad professor of supply chain management at Michigan State University. The American Trucking Associations (ATA) For-Hire Truck Tonnage Index, based on freight volumes hauled by both truckload and less-than-truckload (LTL) members of ATA, was up 3% from January in October, but the index was choppy and volatile throughout 2024. In October, the index was up 1.2% from September but flat year over year, according to ATA data. Comparatively, truck capacity has been plentiful, as reflected by low spot rates and contract pricing. Shippers reported only occasional market tightness — most often in Southern California, where port volumes absorbed some excess capacity — and no real trouble finding trucks. Capacity is tighter in the LTL sector, which saw the number of terminals, trucks and drivers shrink after Yellow, then the third-largest LTL provider, went bankrupt in 2023. That company’s shutdown eliminated about 10% of US LTL capacity. With capacity still tight heading into 2025, LTL carriers are pushing increases in the mid- to upper double-digit percentage range in annual contracts. “We are at a transitionary point in the market,” Ryan Hammett, director of market intelligence and insights at third-party logistics company C.H. Robinson Worldwide, said at the Traffic Club of Chicago Transportation &amp; Logistics Customer Forum in November. “We’ve been stuck at the bottom of this freight cycle for more than two years now, but there are signs things are changing and we’re moving from a period of oversupply into a little bit more balance,” Hammett said of US truckload capacity. <h3>Steady on the rails</h3>International intermodal volumes enjoyed a boost last year because of surging freight to the US West Coast, rising by double-digit percentages. Total inland point intermodal (IPI) volumes will end the year between 8.91 million and 9.1 million units, according to a Journal of Commerce forecast based on data from the Intermodal Association of North America. A potential shift of cargo back to the East and Gulf coasts following a finalized longshore contract would put downward pressure on international intermodal growth. If that were to happen, total international intermodal traffic could be flat to slightly down in 2025 across North America. Assuming a gradual shift back to the East Coast, IPI volumes in 2025 will be between 8.9 million and 9.1 million units, according to the Journal of Commerce forecast. Domestic intermodal volume grew in 2024 as well, although only by mid-single digit percentages year over year. Given the amount of available container capacity available, another single-digit percentage increase in 2025 could be on the horizon. The rise in domestic intermodal volume was a tale of two markets. Demand to move freight out of Southern California was robust in the second half of 2024, but outside the West Coast, growth was minimal or non-existent. Domestic intermodal volumes are set to expand 3% to 4% year over year in 2025, according to the Journal of Commerce analysis. <h3>Fueling a freight recovery </h3>For the past three years, an uptick in US freight demand has often seemed only a few quarters away, but a catalyst for stronger growth has consistently failed to materialize. Ongoing cuts to the US federal funds rate, perhaps coupled with tax cuts, may provide such a catalyst. It’s unclear when or how much the US economy and freight demand — which, as the past two years have demonstrated, are not always closely linked — will strengthen in 2025. The inflation rate has slowed, but consumer prices and home mortgage rates remain comparatively high. Mortgage rates are not linked directly to the US federal funds rate, but to the 10-year US Treasury bonds. Cuts to the funds rate by the US Federal Reserve don’t immediately move those bonds. Still, lower mortgage rates are seen as a much-needed catalyst for freight volumes. Logistics executives hope freight demand may increase even if the overall economy slows, as predicted. The inverse has taken place over the past two and a half years, as the US economy avoided a recession while experiencing a shortfall in freight demand. S&amp;P Global forecasts US real GDP expansion will drop from 2.7% in 2024 to 2.1% in 2025. Encouragingly, shipper sentiment is showing signs of improving, boding well for 2025 volumes, according to the BlueGrace Logistics Confidence Index. The percentage of shippers surveyed by BlueGrace that had a positive view of revenue growth for the next quarter increased from 66% to 68% for the first quarter of 2025. More importantly, the share of respondents with a negative view of revenue growth dropped from 15% in the previous survey to 9%. The data points to a complex environment where “optimism is present, but caution prevails,” BlueGrace said. Aside from a jump in production in December, US manufacturing has been relatively weak in 204, according to the US manufacturing Purchasing Managers’ Index (PMI) report. “To really say that the market is turned, we’re going to have to see manufacturing come back,” said Vince Paperiello, senior vice president of intermodal at STG Logistics. “We’re going to have to see housing starts coming back.” Contact William B. Cassidy at <a href="mailto:bill.cassidy@spglobal.com">bill.cassidy@spglobal.com.</a></div>

A strong but slower expanding US economy is signaling strong growth of import volumes at least until spring and no letup of the air cargo boom, while raising hopes of some semblance of a surface freight recovery. The specter of labor strife and new tariffs, along with strong sales, is driving US retailers to keep imports surging through the spring, according to the Global Port Tracker (GPT) report from Hackett Associates and the National Retail Federation (NRF), released in early December . On a year-over-year basis, GPT projects volumes to rocket 12% in January before dipping 4.1% in February due to a difficult prior-year comparison. US imports in March and April will rise 12.7% and 6.6%, respectively, according to the report. Although next year will start strong, based on the polling of NRF members, the rest of the year might be weaker than last year. Journal of Commerce parent company S&P Global in September forecast total US imports to slip 4.4% in 2025, excluding the impact of any new tariffs. US retail sales will inch up next year by 1.8% compared with a 1.1% expansion in 2025, according to Fitch ratings. According to the most recent data available from PIERS, a sister product of the Journal of Commerce within S&P Global, US imports climbed 15.3% in November, the 14th consecutive month of year-over-year gains and the sixth straight month of double-digit percentage increases. November also marked the nineteenth consecutive month that US imports exceeded 2 million TEUs. If NRF forecasts come to fruition, December imports will break the pandemic-era record of 19 straight months. A rush to beat tariffs imposed by President-elect Donald Trump and a strike at US East and Gulf coast ports could sap capacity in the short term, but encouragingly, the overall outlook for vessel capacity is robust. Container lines, for example, are set to deploy a record level of capacity in January — nearly 1.5 million TEUs — between Asia and the US, according to maritime intelligence provider eeSea. “Once we get to January, whether it’s on the political front, the labor front, the alliance shake-up, everything is coming fast,” Sanjay Tejwani, CEO of consulting firm 365 Logistics, told the Journal of Commerce, referring to the launch of the new container carrier alliances starting in February. Rarified air If shippers do get in a pinch, they’ll likely find it even more difficult and more costly to turn to air cargo transport rather than ocean shipping. More than 12 months of double-digit percentage growth in air cargo demand that has outstripped available capacity, combined with constant waves of disruption, is forcing shippers and their service providers to better plan their use of air freight. Chinese e-commerce giants Temu and Shein have fueled much of the growth even as the US and other countries look at tightening up de minimis levels. Usually regarded by ocean shippers as an emergency option, air cargo is seeing a greater volume of non-essential products to get around container shipping challenges, a move that comes at a substantial cost to shippers. For example, average air cargo rates from Asia to North America hit a 2024 high of $6.61 per kilogram in early December, according to the Baltic Air Index. Shippers are changing their behavior as a result. “The closing months of 2024 could have been very messy again for shippers, but we are not hearing that,” he said. “That’s not because the volumes are not there, or the flights are not full, it is because everything, overall, is being managed better,” said Niall van de Wouw, chief air freight officer at rate benchmarking platform Xeneta. The International Air Transport Association (IATA) forecasts air cargo volume growth will decelerate to an expansion of 6% in 2025 , approximately half the clip seen in 2024. New capacity will also enter the market at a slow rate, with IATA expecting a 6.4% increase compared with a 9.6% expansion in 2024. Driving through the doldrums On land, US truckload demand and rates have been anything but volatile. Total truck volumes for the first 10 months of 2024 were 0.7% below the same period in 2023, according to the trucking ton-mile index produced by Jason Miller, Eli Broad professor of supply chain management at Michigan State University. The American Trucking Associations (ATA) For-Hire Truck Tonnage Index, based on freight volumes hauled by both truckload and less-than-truckload (LTL) members of ATA, was up 3% from January in October, but the index was choppy and volatile throughout 2024. In October, the index was up 1.2% from September but flat year over year, according to ATA data. Comparatively, truck capacity has been plentiful, as reflected by low spot rates and contract pricing. Shippers reported only occasional market tightness — most often in Southern California, where port volumes absorbed some excess capacity — and no real trouble finding trucks. Capacity is tighter in the LTL sector, which saw the number of terminals, trucks and drivers shrink after Yellow, then the third-largest LTL provider, went bankrupt in 2023. That company’s shutdown eliminated about 10% of US LTL capacity. With capacity still tight heading into 2025, LTL carriers are pushing increases in the mid- to upper double-digit percentage range in annual contracts. “We are at a transitionary point in the market,” Ryan Hammett, director of market intelligence and insights at third-party logistics company C.H. Robinson Worldwide, said at the Traffic Club of Chicago Transportation & Logistics Customer Forum in November. “We’ve been stuck at the bottom of this freight cycle for more than two years now, but there are signs things are changing and we’re moving from a period of oversupply into a little bit more balance,” Hammett said of US truckload capacity. Steady on the rails International intermodal volumes enjoyed a boost last year because of surging freight to the US West Coast, rising by double-digit percentages. Total inland point intermodal (IPI) volumes will end the year between 8.91 million and 9.1 million units, according to a Journal of Commerce forecast based on data from the Intermodal Association of North America. A potential shift of cargo back to the East and Gulf coasts following a finalized longshore contract would put downward pressure on international intermodal growth. If that were to happen, total international intermodal traffic could be flat to slightly down in 2025 across North America. Assuming a gradual shift back to the East Coast, IPI volumes in 2025 will be between 8.9 million and 9.1 million units, according to the Journal of Commerce forecast. Domestic intermodal volume grew in 2024 as well, although only by mid-single digit percentages year over year. Given the amount of available container capacity available, another single-digit percentage increase in 2025 could be on the horizon. The rise in domestic intermodal volume was a tale of two markets. Demand to move freight out of Southern California was robust in the second half of 2024, but outside the West Coast, growth was minimal or non-existent. Domestic intermodal volumes are set to expand 3% to 4% year over year in 2025, according to the Journal of Commerce analysis. Fueling a freight recovery For the past three years, an uptick in US freight demand has often seemed only a few quarters away, but a catalyst for stronger growth has consistently failed to materialize. Ongoing cuts to the US federal funds rate, perhaps coupled with tax cuts, may provide such a catalyst. It’s unclear when or how much the US economy and freight demand — which, as the past two years have demonstrated, are not always closely linked — will strengthen in 2025. The inflation rate has slowed, but consumer prices and home mortgage rates remain comparatively high. Mortgage rates are not linked directly to the US federal funds rate, but to the 10-year US Treasury bonds. Cuts to the funds rate by the US Federal Reserve don’t immediately move those bonds. Still, lower mortgage rates are seen as a much-needed catalyst for freight volumes. Logistics executives hope freight demand may increase even if the overall economy slows, as predicted. The inverse has taken place over the past two and a half years, as the US economy avoided a recession while experiencing a shortfall in freight demand. S&P Global forecasts US real GDP expansion will drop from 2.7% in 2024 to 2.1% in 2025. Encouragingly, shipper sentiment is showing signs of improving, boding well for 2025 volumes, according to the BlueGrace Logistics Confidence Index. The percentage of shippers surveyed by BlueGrace that had a positive view of revenue growth for the next quarter increased from 66% to 68% for the first quarter of 2025. More importantly, the share of respondents with a negative view of revenue growth dropped from 15% in the previous survey to 9%. The data points to a complex environment where “optimism is present, but caution prevails,” BlueGrace said. Aside from a jump in production in December, US manufacturing has been relatively weak in 204, according to the US manufacturing Purchasing Managers’ Index (PMI) report. “To really say that the market is turned, we’re going to have to see manufacturing come back,” said Vince Paperiello, senior vice president of intermodal at STG Logistics. “We’re going to have to see housing starts coming back.” Contact William B. Cassidy at bill.cassidy@spglobal.com.

Surface

Risks ‘coming fast’ as global supply chain shifts nervously into new year

<div class="phx-topic abstract-wrapper">Container shipping has become a market where prior patterns of cyclicality must now coexist with non-cyclical forces of external shocks that long-beleaguered carriers have learned to use to their advantage, writes Peter Tirschwell.</div>

Container shipping has become a market where prior patterns of cyclicality must now coexist with non-cyclical forces of external shocks that long-beleaguered carriers have learned to use to their advantage, writes Peter Tirschwell.

<div class="phx-topic">Earlier this year, the commercial director at a congested Asia port apologized to an ocean carrier for the trouble caused. The response from the ocean carrier? “Don’t worry, it’s OK.” It’s OK? What about delays caused to the carrier’s customers and its reputation with those customers as a reliable service provider? Not important. <div class="wrapper-narrow float-right-element"><img src="/images/phoenix/5910619_0.1.png"></img></div>Indeed, the message from the carrier was actually that the congestion was helpful in removing capacity, handing carriers another external shock that sent rates soaring. In a nutshell, that is the new world of ocean container shipping that shippers and forwarders will be dealing with in 2025 and likely well beyond. It’s a world where prior patterns of cyclicality, while still a factor, must now coexist with non-cyclical forces of external shocks combined with a long-beleaguered set of carriers that learned valuable lessons in assertiveness from the pandemic that they are putting to use. “Carriers have transformed from being weak and ready to be beaten up all the time [pre-2018] to becoming bold and assertive,” said veteran forwarder and carrier executive Sanjay Tejwani, now heading consultant 365 Logistics. “Carriers feel they have been at the receiving end for many years and now it is time to level the playing field between them and their customers.” Chief among the lessons carriers learned, well-reflected in the carrier’s reaction to the congested terminal in Asia, is that disruption is okay. Although external shocks such as COVID-19 and the diversions away from the Red Sea and Suez Canal were gifts that fell into carriers’ laps — things they were not responsible for but reaped the benefits from — they had started down this road well before the pandemic by ramping up blank sailings within alliances, Tejwani said. “Carriers became emboldened by the fact that a few of them controlled a large amount of global capacity and we started to see better capacity management from 2018 onwards,” he said. And as <a href="https://www.joc.com/article/scrapping-slow-steaming-demand-will-limit-capacity-overhang-clerc-5785020">Maersk CEO Vincent Clerc told investors Oct. 31</a>, carriers still have other cards to play if the market weakens in 2025, including ramping up blank sailings, scrapping vessels and returning chartered tonnage to owners. His message challenged the theory that overcapacity is looming in 2025. <h3>How sustainable is ‘newly lopsided paradigm?’ </h3>All of this amounts to a dramatic, indeed historic, paradigm shift: carriers benefiting, on what increasingly seems to be a sustained basis, at the expense of their customers. But that begs the question: How sustainable is this newly lopsided paradigm where carriers benefit from external disruption while flexing their muscles at every opportunity and customers suffer the consequences? The Ocean Shipping Reform Act of 2022 (OSRA-22), although limited in scope, showed the ability of shippers to push back via government action. And some carriers are themselves recognizing that things may have gone too far. Could it be that the zero-sum gain within containers, where one party’s gain is the other’s loss with no mutual value creation occurring, is reaching its limits? “Going into 2025, transit times and schedule reliability will become even more important,” Yael D’Angeli, Zim’s global head of strategic accounts, wrote recently on LinkedIn. “It will be taken into account more heavily during the tender process, along with rates and other criteria.” Such is the sorry state of schedule reliability — which has never really recovered post-COVID-19, according to Sea-Intelligence Maritime Analysis — that Maersk and Hapag-Lloyd saw an opportunity to fix the problem via the hub-and-spoke Gemini alliance. This approach flips the script on the status quo, <a href="https://www.joc.com/article/gemini-faces-13-week-phase-in-before-90-reliability-promise-is-tested-clerc-5783839">with the Gemini pact aiming to consistently deliver 90%-plus schedule reliability</a> by deconstructing lengthy, delay-prone loops into interconnected component services transiting through carrier-controlled hub ports. That level of reliability isn’t just a talking point or press release. If achieved on a sustained basis to the point that it comes to be trusted by shippers, it will rise to the level of shipper value creation by allowing them to take out inventory. “For a supply chain to take out meaningful inventory costs, the reliability of the ocean leg … should be at least 95%, because below 95% the retailers will not trust the supply chain enough to take inventory cost out,” a former Maersk executive told the Journal of Commerce. “Why is that so important? When the client says if I only ship with Maersk I can reduce my global inventory cost by half, it’s a half a billion in savings. So, Maersk says that comes at a cost,” the source added. “Thus, the aim for 95% reliability is not casual or by coincidence. Rather, it links directly to what everyone says they need to deliver to take out buffer stock.” Contact Peter Tirschwell at <a href="mailto:peter.tirschwell@spglobal.com">peter.tirschwell@spglobal.com.</a></div>

Earlier this year, the commercial director at a congested Asia port apologized to an ocean carrier for the trouble caused. The response from the ocean carrier? “Don’t worry, it’s OK.” It’s OK? What about delays caused to the carrier’s customers and its reputation with those customers as a reliable service provider? Not important. Indeed, the message from the carrier was actually that the congestion was helpful in removing capacity, handing carriers another external shock that sent rates soaring. In a nutshell, that is the new world of ocean container shipping that shippers and forwarders will be dealing with in 2025 and likely well beyond. It’s a world where prior patterns of cyclicality, while still a factor, must now coexist with non-cyclical forces of external shocks combined with a long-beleaguered set of carriers that learned valuable lessons in assertiveness from the pandemic that they are putting to use. “Carriers have transformed from being weak and ready to be beaten up all the time [pre-2018] to becoming bold and assertive,” said veteran forwarder and carrier executive Sanjay Tejwani, now heading consultant 365 Logistics. “Carriers feel they have been at the receiving end for many years and now it is time to level the playing field between them and their customers.” Chief among the lessons carriers learned, well-reflected in the carrier’s reaction to the congested terminal in Asia, is that disruption is okay. Although external shocks such as COVID-19 and the diversions away from the Red Sea and Suez Canal were gifts that fell into carriers’ laps — things they were not responsible for but reaped the benefits from — they had started down this road well before the pandemic by ramping up blank sailings within alliances, Tejwani said. “Carriers became emboldened by the fact that a few of them controlled a large amount of global capacity and we started to see better capacity management from 2018 onwards,” he said. And as Maersk CEO Vincent Clerc told investors Oct. 31 , carriers still have other cards to play if the market weakens in 2025, including ramping up blank sailings, scrapping vessels and returning chartered tonnage to owners. His message challenged the theory that overcapacity is looming in 2025. How sustainable is ‘newly lopsided paradigm?’ All of this amounts to a dramatic, indeed historic, paradigm shift: carriers benefiting, on what increasingly seems to be a sustained basis, at the expense of their customers. But that begs the question: How sustainable is this newly lopsided paradigm where carriers benefit from external disruption while flexing their muscles at every opportunity and customers suffer the consequences? The Ocean Shipping Reform Act of 2022 (OSRA-22), although limited in scope, showed the ability of shippers to push back via government action. And some carriers are themselves recognizing that things may have gone too far. Could it be that the zero-sum gain within containers, where one party’s gain is the other’s loss with no mutual value creation occurring, is reaching its limits? “Going into 2025, transit times and schedule reliability will become even more important,” Yael D’Angeli, Zim’s global head of strategic accounts, wrote recently on LinkedIn. “It will be taken into account more heavily during the tender process, along with rates and other criteria.” Such is the sorry state of schedule reliability — which has never really recovered post-COVID-19, according to Sea-Intelligence Maritime Analysis — that Maersk and Hapag-Lloyd saw an opportunity to fix the problem via the hub-and-spoke Gemini alliance. This approach flips the script on the status quo, with the Gemini pact aiming to consistently deliver 90%-plus schedule reliability by deconstructing lengthy, delay-prone loops into interconnected component services transiting through carrier-controlled hub ports. That level of reliability isn’t just a talking point or press release. If achieved on a sustained basis to the point that it comes to be trusted by shippers, it will rise to the level of shipper value creation by allowing them to take out inventory. “For a supply chain to take out meaningful inventory costs, the reliability of the ocean leg … should be at least 95%, because below 95% the retailers will not trust the supply chain enough to take inventory cost out,” a former Maersk executive told the Journal of Commerce. “Why is that so important? When the client says if I only ship with Maersk I can reduce my global inventory cost by half, it’s a half a billion in savings. So, Maersk says that comes at a cost,” the source added. “Thus, the aim for 95% reliability is not casual or by coincidence. Rather, it links directly to what everyone says they need to deliver to take out buffer stock.” Contact Peter Tirschwell at peter.tirschwell@spglobal.com.

Shippers, forwarders face a new, harsher world in ocean shipping

<div class="phx-topic abstract-wrapper">The vessels will vary in size between 8,000 TEUs and 15,000 TEUs and are likely meant for deployment on the carrier’s longer-haul intra-Asia and mainline east-west services.</div>

The vessels will vary in size between 8,000 TEUs and 15,000 TEUs and are likely meant for deployment on the carrier’s longer-haul intra-Asia and mainline east-west services.

<div class="phx-topic">Taiwan’s Yang Ming Marine Transport will order up to 13 container ships as part of fleet optimization plans approved by the carrier’s directors Friday to replace aging vessels and expand the fleet of owned ships. The new ships will vary in size between 8,000 TEUs and 15,000 TEUs and are likely meant for deployment on longer-haul intra-Asia and mainline east-west services. The newbuilds are part of Yang Ming’s efforts to “optimize [our] service network and enhance fleet competitiveness,” the carrier said in a statement. The vessels will replace 5,500- and 6,500-TEU ships that are more than 20 years old, the carrier said. Yang Ming currently operates six of that class that are 20 years and older, with a further five ships that will reach that milestone when the new vessels are likely delivered. Yang Ming said it will evaluate energy-saving technologies and study clean energy fuel options for likely use in the new ships before orders are placed with shipyards. The ships will allow the carrier to “provide customers worldwide with more environmentally friendly transportation solutions,” it said. The carrier gave no details of the cost or likely delivery dates of the new ships. But the fleet renewal plan comes as Yang Ming is expecting an increase both in the number of services and frequency of sailings once its <a href="https://www.joc.com/article/north-america-trade-to-dominate-premier-alliances-network-launch-in-february-5877233">Premier Alliance partnership is launched with Ocean Network Express (ONE) and HMM in February</a>. Yang Ming said the number of services will increase by three to 28 with new loops from Asia to Europe, Mediterranean and Pacific Southwest, while the frequency will also increase on those trades. The carrier has also announced a raft of new services in the last few weeks. These include an India Ocean Express (ISE) service announced Friday connecting western India, Sri Lanka and Pakistan to North Europe. It will be operated in partnership with HMM and inaugurated on Feb. 5. Yang Ming said last week it would begin a China-Thailand Express (CTE) service with OOCL from early January to strengthen their competitiveness in the intra-Asia market. Contact Keith Wallis at <a href="mailto:keithwallis@hotmail.com">keithwallis@hotmail.com.</a></div>

Taiwan’s Yang Ming Marine Transport will order up to 13 container ships as part of fleet optimization plans approved by the carrier’s directors Friday to replace aging vessels and expand the fleet of owned ships. The new ships will vary in size between 8,000 TEUs and 15,000 TEUs and are likely meant for deployment on longer-haul intra-Asia and mainline east-west services. The newbuilds are part of Yang Ming’s efforts to “optimize [our] service network and enhance fleet competitiveness,” the carrier said in a statement. The vessels will replace 5,500- and 6,500-TEU ships that are more than 20 years old, the carrier said. Yang Ming currently operates six of that class that are 20 years and older, with a further five ships that will reach that milestone when the new vessels are likely delivered. Yang Ming said it will evaluate energy-saving technologies and study clean energy fuel options for likely use in the new ships before orders are placed with shipyards. The ships will allow the carrier to “provide customers worldwide with more environmentally friendly transportation solutions,” it said. The carrier gave no details of the cost or likely delivery dates of the new ships. But the fleet renewal plan comes as Yang Ming is expecting an increase both in the number of services and frequency of sailings once its Premier Alliance partnership is launched with Ocean Network Express (ONE) and HMM in February . Yang Ming said the number of services will increase by three to 28 with new loops from Asia to Europe, Mediterranean and Pacific Southwest, while the frequency will also increase on those trades. The carrier has also announced a raft of new services in the last few weeks. These include an India Ocean Express (ISE) service announced Friday connecting western India, Sri Lanka and Pakistan to North Europe. It will be operated in partnership with HMM and inaugurated on Feb. 5. Yang Ming said last week it would begin a China-Thailand Express (CTE) service with OOCL from early January to strengthen their competitiveness in the intra-Asia market. Contact Keith Wallis at keithwallis@hotmail.com.

Yang Ming to order slate of new container ships in move to upgrade fleet

<div class="phx-topic abstract-wrapper">Bills introduced in the House and Senate seek to expand the US-flag international fleet from the current level of about 80 ships to 250 in 10 years and would require all government cargoes to be carried on US-flag vessels. </div>

Bills introduced in the House and Senate seek to expand the US-flag international fleet from the current level of about 80 ships to 250 in 10 years and would require all government cargoes to be carried on US-flag vessels.

<div class="phx-topic">Bipartisan legislation in Congress seeking to supercharge the expansion of the US-flag commercial shipping fleet in the name of national security would require US-owned, built and crewed vessels to carry up to 10% of Chinese imports landing in the country. Two bills, introduced in both the House and Senate Thursday amid rising tensions with China, want to expand a US-flag international fleet that’s been shrinking since the heyday of the 1950s. If passed, the bills would require US-flag vessels to ultimately handle up to 10% of US imports from China, with the share rising one percentage point annually over a decade. “For far too long, the United States neglected our maritime industries and the critical role they play in our national and economic security — this ends with the SHIPS for America Act,” said one of the co-authors of the House bill, Rep. John Garamendi, D-Calif., adding in a statement it was the “most substantial and comprehensive” effort to date to boost the US-flag commercial fleet. The legislation would make it a goal to expand the US-flag international fleet from the current level of about 80 ships to 250 in 10 years and require all government cargoes to be carried on US-flag vessels rather than just the loosely enforced 50% share. Comparatively, China has more than 5,500 vessels flagged, according to Garamendi’s statement. Rep. Trent Kelly, R-Miss., was another co-author in the House, with Senators Todd Young, R-Indiana, and Mark Kelly, D-Ariz., authoring the Senate’s bill. The legislation comes after repeated Congressional attempts to expand the US-flag fleet and ensure federal agencies utilized the ships. But few such bills moved out of committee due to a lack of urgency and knowing appropriators would have to agree to sustained funding. That both chambers introduced comprehensive legislation from members of both parties suggests the political mood is changing. Support for expanding US shipbuilding capabilities is “getting a lot of support from Congress,” Ryan Libhart Pereyda, principal and CEO of Patriot Maritime, a California-based federal contractor that owns and operates US-flag ships, <a href="https://www.joc.com/article/us-flag-vessel-owners-investors-tout-wave-of-support-for-expanding-fleet-5819921">said at an investor event</a> in mid-November. “We’re getting a ton of support from the military — stuff we haven’t seen in a very long time,” he said. “It’s generational.” APL, part of CMA CGM Group, and Maersk Ltd., part of A.P. Moeller-Maersk, handle US-government cargoes moving internationally. Contact Mark Szakonyi at <a href="mark.szakonyi@spglobal.com">mark.szakonyi@spglobal.com</a>. </div>

Bipartisan legislation in Congress seeking to supercharge the expansion of the US-flag commercial shipping fleet in the name of national security would require US-owned, built and crewed vessels to carry up to 10% of Chinese imports landing in the country. Two bills, introduced in both the House and Senate Thursday amid rising tensions with China, want to expand a US-flag international fleet that’s been shrinking since the heyday of the 1950s. If passed, the bills would require US-flag vessels to ultimately handle up to 10% of US imports from China, with the share rising one percentage point annually over a decade. “For far too long, the United States neglected our maritime industries and the critical role they play in our national and economic security — this ends with the SHIPS for America Act,” said one of the co-authors of the House bill, Rep. John Garamendi, D-Calif., adding in a statement it was the “most substantial and comprehensive” effort to date to boost the US-flag commercial fleet. The legislation would make it a goal to expand the US-flag international fleet from the current level of about 80 ships to 250 in 10 years and require all government cargoes to be carried on US-flag vessels rather than just the loosely enforced 50% share. Comparatively, China has more than 5,500 vessels flagged, according to Garamendi’s statement. Rep. Trent Kelly, R-Miss., was another co-author in the House, with Senators Todd Young, R-Indiana, and Mark Kelly, D-Ariz., authoring the Senate’s bill. The legislation comes after repeated Congressional attempts to expand the US-flag fleet and ensure federal agencies utilized the ships. But few such bills moved out of committee due to a lack of urgency and knowing appropriators would have to agree to sustained funding. That both chambers introduced comprehensive legislation from members of both parties suggests the political mood is changing. Support for expanding US shipbuilding capabilities is “getting a lot of support from Congress,” Ryan Libhart Pereyda, principal and CEO of Patriot Maritime, a California-based federal contractor that owns and operates US-flag ships, said at an investor event in mid-November. “We’re getting a ton of support from the military — stuff we haven’t seen in a very long time,” he said. “It’s generational.” APL, part of CMA CGM Group, and Maersk Ltd., part of A.P. Moeller-Maersk, handle US-government cargoes moving internationally. Contact Mark Szakonyi at mark.szakonyi@spglobal.com .

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Legislation aims to mandate rising share of China imports on expanded US-flag fleet

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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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