<div class="phx-topic abstract-wrapper">An acceleration of US imports from Europe in June suggests there will be no relief through the summer for overwhelmed US East Coast terminals. </div>

An acceleration of US imports from Europe in June suggests there will be no relief through the summer for overwhelmed US East Coast terminals.

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<div>Correction: A previous version of this story referred to US imports from North Europe to the US East Coast; figures have been updated to reflect all US imports from North Europe and the Mediterranean.Westbound trans-Atlantic cargo demand surged to a record high in June, building on a sequential volume gain in May as strong demand from consumers and manufacturing industries continues to shrug off fast-rising inflation.<div><img><a>Click to enlarge</a></div>US imports from North Europe and the Mediterranean rose 13.8 percent from the previous month and 8.9 percent year over year to an all-time high of 343,651 TEU in June following a 5.7...

Correction: A previous version of this story referred to US imports from North Europe to the US East Coast; figures have been updated to reflect all US imports from North Europe and the Mediterranean. Westbound trans-Atlantic cargo demand surged to a record high in June, building on a sequential volume gain in May as strong demand from consumers and manufacturing industries continues to shrug off fast-rising inflation. Click to enlarge US imports from North Europe and the Mediterranean rose 13.8 percent from the previous month and 8.9 percent year over year to an all-time high of 343,651 TEU in June following a 5.7 percent month-over-month increase in May, according to PIERS, a sister product of JOC.com within IHS Markit, now part of S&P Global. In the first half of 2022, however, westbound shipments slipped 0.6 percent from 2021 levels to just under 1.77 million TEU. That rapid acceleration in growth has been accompanied by heavily disrupted carrier schedules, full terminals unable to handle the growing imports, and overwhelmed inland logistics networks in the US that cannot clear boxes fast enough. Carriers have already warned shippers to expect no improvement in the poor vessel schedule reliability this year as the inbound flood of containerized imports from Europe meets volume diverted from the US West Coast ports by shippers trying to avoid both congestion and potential disruption related to West Coast longshore labor contract negotiations , which began in May. “There are not many carrier options, space is tight, and the situation in European and US East Coast ports and inland is not getting any better,” an ocean freight executive at a European forwarder told JOC.com. “I think we will continue to see challenges and a good demand at least until the first quarter of 2023, but it is hard to predict anything on this trade right now, and if you ask five people, you will get five different answers,” the source added. Reset for delayed services Growing delays on the trans-Atlantic saw Maersk “resetting” three of its services on the trade lane, the carrier noted in a July 18 customer advisory. Maersk said it resets a string when a vessel cannot make up for lost time; if the cargo is already gated in for export, a new vessel is found. “In connection with the delays on our Europe and Mediterranean to/from North America network caused by continuous disruption in North Europe and US ports and the knock-on effect thereof, we have decided to reset the schedule for the TA1, TA5, and TA6 services to bring vessels closer to actual sailing weeks,” the advisory said. Five trans-Atlantic sailings were blanked in July and four sailings are scheduled to be canceled in August, according to maritime consultant Drewry, as carriers struggle to manage the delays. One in five ships on westbound North Europe–North America routes arrived more than one day later than scheduled, according to the latest on-time performance data from Sea-Intelligence Maritime Analysis. Average schedule reliability for the first five months of the year was 18.7 percent, compared to 19 percent in the same period last year. The poor on-time performance of fully laden vessels arriving far outside their scheduled windows creates surges in volume that are difficult for terminals to handle. Europe’s terminal yards have been persistently full for months as shippers delay the collection of imports because of the high levels of inventory they are already carrying. With import containers stacking up, there is little room for storage of export boxes and empties. At the North American end of the trade, terminals on the US East Coast continue to battle waves of congestion, with rising dwell times a key contributor to the bottlenecks . In New York and New Jersey terminals, dwell times ranged from eight to 14 days during the second quarter, up from five to seven days in the same three-month period last year. In Savannah, average import dwell times reached 8.8 days in June, up from 8.5 days in May and 8.4 days in June 2021 and double the pre-pandemic average of four to five days. There were 42 ships at anchor waiting to enter the port of Savannah as of July 18 and 15 vessels waiting to berth at New York and New Jersey, according to the ports. Food tops import volume The largest commodity from Europe is foodstuffs, with 410,930 TEU imported into the US in the first half, which was almost flat compared to the same period last year, PIERS data shows. Machinery and mechanical product imports rose 3.4 percent to 228,521 TEU, while vehicles, aircraft, and vessel imports ticked up 2 percent to 107,526 TEU. Volumes of “Miscellaneous manufactured articles,” including furniture, bedding, mattresses, and light fittings, climbed 5.3 percent to 132,979 TEU. According to the latest forecast from the National Retail Federation, low- to mid-single-digit year-over-year percentage growth in overall US import volumes will continue through the 2022 peak shipping season, which means the accompanying port and inland congestion will likely persist through at least the end of the year. Sea-Intelligence Maritime Analysis noted in a recent Sunday Spotlight newsletter that although vessel utilization on the trans-Atlantic is decreasing — similar to what is happening on the Asia–Europe and trans-Pacific trades — demand is holding utilization above the “magic level” of 80 to 85 percent that supports elevated rates. Short-term rates on the westbound trans-Atlantic trade valid for 88 days or less were $7,859 per FEU as of July 18, up almost 60 percent from the same day last year, according to rate benchmarking platform Xeneta. Since Jan. 1, the short-term rate has risen 37 percent. The long-term contract rate of $6,214 per FEU was up 135 percent year over year and has risen 22 percent since the beginning of the year. Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler .

Trans-Atlantic

International ports

Rising US imports keep pressure on trans-Atlantic

<div class="phx-topic abstract-wrapper">The market’s normal tranquility is threatened by President-elect Donald Trump’s promise to raise imports tariffs, as well as a potential second strike by the International Longshoremen's Association.</div>

The market’s normal tranquility is threatened by President-elect Donald Trump’s promise to raise imports tariffs, as well as a potential second strike by the International Longshoremen's Association.

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<div class="phx-topic">The big picture: After a steep decline in 2023, westbound trans-Atlantic trade volumes came roaring back in 2024. Still, the accompanying rise in rates was marginal compared to the huge increases seen in the main trades out of Asia, as excess capacity depressed prices until carriers began shifting vessels to the more lucrative ex-Asia lanes. Going into 2025, the supply-demand balance appears to have been reasserted, and cargo owners can expect greater rate stability, with more predictable disruption-driven price hikes. <div class="wrapper-narrow float-right-element"><img src="/images/phoenix/5910620_0.1.png"></img></div>A look back: By the time Auld Lang Syne heralded the start of 2024, average spot rates from Europe to North America had sunk to record lows of close to $500 per FEU, according to rate benchmarking platform Xeneta. But after a weak January, US import demand began to pick up, with year-over-year growth recorded in eight of the following nine months on the North Europe–US trade and Mediterranean–US volumes rising in every month of 2024. Through November, imports from North Europe and the Mediterranean rose 7.7% and 13.6%, respectively, from the 2023 period, according to PIERS, a sister product of the Journal of Commerce within S&amp;P Global. The rising volume lifted average North Europe–US East Coast spot rates through April, but even with steady demand during the historically slow summer months, excess capacity dragged down pricing. It was only when carriers closed several services and transferred capacity to the more lucrative trades out of Asia and shippers began frontloading cargo in the buildup to the International Longshoremen’s Association (ILA) strike on the US East and Gulf coasts that rates began to rise again, reaching a 2024 peak of around $2,700 per FEU in early October, according to Platts. But even with the removal of 91,100 TEUs in capacity from the trade in the first 10 months of 2024, an 8.2% year-over-year drop, according to Alphaliner, that peak was short-lived. By mid-November, average short-term pricing had fallen to $2,200 per FEU. A look ahead: With supply and demand largely in balance, the westbound trans-Atlantic trade lane has returned to its traditionally stable state. But that tranquility is threatened by US President-elect Donald Trump’s promise to raise imports tariffs, as well as a potential second strike by the ILA. The products moved on the trans-Atlantic are dominated by industrial equipment, vehicles, pharmaceuticals and wine and spirits, limiting the ability for US importers to frontload on a large scale. But with the removal of capacity by the carriers, any advancement of orders to avoid disruption will quickly fill all available space and raise rate levels. And if rising volume meets labor action at US East and Gulf coast terminals, bottlenecks will soon build at the busy import gateways, tying up capacity, extending transit times and exerting additional upward pressure on pricing. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="42a85896-984c-42cb-aa81-dc67689a6055"></dynamic-object></div>The next inflection: The trans-Atlantic trade over the past few years has seen a disconnect in the traditional supply-demand balance, with excess capacity offsetting rising volume and curbing rates. But carriers have grown cannier at flexing capacity to cater to volatility in demand, and with the shifting of vessels to the trades out of Asia and replacement of larger ships with smaller units, cargo owners can expect their fixed-rate commitments to go up in annual contract talks and any disruption on the westbound trade to be quickly reflected on the spot market. Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com">greg.knowler@spglobal.com.</a></div>

The big picture: After a steep decline in 2023, westbound trans-Atlantic trade volumes came roaring back in 2024. Still, the accompanying rise in rates was marginal compared to the huge increases seen in the main trades out of Asia, as excess capacity depressed prices until carriers began shifting vessels to the more lucrative ex-Asia lanes. Going into 2025, the supply-demand balance appears to have been reasserted, and cargo owners can expect greater rate stability, with more predictable disruption-driven price hikes. A look back: By the time Auld Lang Syne heralded the start of 2024, average spot rates from Europe to North America had sunk to record lows of close to $500 per FEU, according to rate benchmarking platform Xeneta. But after a weak January, US import demand began to pick up, with year-over-year growth recorded in eight of the following nine months on the North Europe–US trade and Mediterranean–US volumes rising in every month of 2024. Through November, imports from North Europe and the Mediterranean rose 7.7% and 13.6%, respectively, from the 2023 period, according to PIERS, a sister product of the Journal of Commerce within S&P Global. The rising volume lifted average North Europe–US East Coast spot rates through April, but even with steady demand during the historically slow summer months, excess capacity dragged down pricing. It was only when carriers closed several services and transferred capacity to the more lucrative trades out of Asia and shippers began frontloading cargo in the buildup to the International Longshoremen’s Association (ILA) strike on the US East and Gulf coasts that rates began to rise again, reaching a 2024 peak of around $2,700 per FEU in early October, according to Platts. But even with the removal of 91,100 TEUs in capacity from the trade in the first 10 months of 2024, an 8.2% year-over-year drop, according to Alphaliner, that peak was short-lived. By mid-November, average short-term pricing had fallen to $2,200 per FEU. A look ahead: With supply and demand largely in balance, the westbound trans-Atlantic trade lane has returned to its traditionally stable state. But that tranquility is threatened by US President-elect Donald Trump’s promise to raise imports tariffs, as well as a potential second strike by the ILA. The products moved on the trans-Atlantic are dominated by industrial equipment, vehicles, pharmaceuticals and wine and spirits, limiting the ability for US importers to frontload on a large scale. But with the removal of capacity by the carriers, any advancement of orders to avoid disruption will quickly fill all available space and raise rate levels. And if rising volume meets labor action at US East and Gulf coast terminals, bottlenecks will soon build at the busy import gateways, tying up capacity, extending transit times and exerting additional upward pressure on pricing. The next inflection: The trans-Atlantic trade over the past few years has seen a disconnect in the traditional supply-demand balance, with excess capacity offsetting rising volume and curbing rates. But carriers have grown cannier at flexing capacity to cater to volatility in demand, and with the shifting of vessels to the trades out of Asia and replacement of larger ships with smaller units, cargo owners can expect their fixed-rate commitments to go up in annual contract talks and any disruption on the westbound trade to be quickly reflected on the spot market. Contact Greg Knowler at greg.knowler@spglobal.com.

Container Shipping News

Container lines

Maritime

Restabilized trans-Atlantic facing dual strike, tariff threats

<div class="phx-topic abstract-wrapper">Industry observers believe carriers on the trade lane could struggle to manage the huge influx of capacity, thus forcing them to undercut each other on pricing to maximize loadings.</div>

Industry observers believe carriers on the trade lane could struggle to manage the huge influx of capacity, thus forcing them to undercut each other on pricing to maximize loadings.

<div class="phx-topic">Indian shippers moving goods to Europe could soon find more ocean connections and vessel space with the Gemini alliance between Maersk and Hapag-Lloyd going live from early February. According to new service updates obtained by the Journal of Commerce, India's largest export trade lane by volume will have three direct premium services -- two out of the West Coast (Nhava Sheva and Mundra), named the ME1 and ME11 by Maersk, and one out of the East (Ennore/Chennai), named the ME2, under the collaborative network framework. Hapag-Lloyd has branded the joint loops as the IOS, IMX and IEX, respectively. Riding on the so-called <a href="https://www.joc.com/article/hapag-lloyd-says-gemini-alliance-cargo-bookings-to-open-dec-3-5846853">hub-and-spoke operational model</a>, these services have fewer direct port calls: featuring Jebel Ali, Mundra, Nhava Sheva, Salalah, Port Tangier, Rotterdam, Hamburg and London Gateway on the ME1/IOS; Jebel Ali, Mundra, Nhava Sheva, Salalah, Port Tangier, Valencia and Port Said on the ME11/IMX; and Ennore, Colombo, Algeciras, Rotterdam, London Gateway, Bremerhaven and Port Tangier on the ME2/IEX. It is estimated that combined operations will inject significant additional capacity into the market for westbound loading due to enhanced network strengths, larger vessel deployments and greater transshipment opportunities. As a product differentiator, Maersk is touting faster transits for Indian loads to Spain and Italy via its hubs of Port Tangier and Algeciras, as well as the East Mediterranean through Port Said, which it believes will be a boost for Indian exporters/importers in the lifestyle, retail, automobile and reefer sectors. Indian capacity allocations have been structured in terms of historical market share dynamics -- 60% for Hapag-Lloyd and 40% for Maersk in West India, with the split in the opposite way for the South India routing. “We believe Maersk will also connect Europe loads via Port Tangier on the ME11,” a Mumbai-based liner executive who didn’t want to be identified told the Journal of Commerce. <h3>‘Major oversupply situation’</h3>Gemini’s India-Europe network will compete with CMA CGM's longtime flagship "Epic" routing and a new vessel-sharing deal led by Ocean Network Express (ONE), HMM and Yang Ming known as the IOX. Following Hapag-Lloyd’s exit from the Epic loop, CMA CGM now has higher allocations to fill at Nhava Sheva/Mundra, reportedly an additional 1,500 TEUs a week. At the same time, industry observers believe all carriers could struggle to manage the huge influx of capacity, thus forcing them to undercut each other on pricing to maximize loadings, and in the process, inevitably jeopardize profitability. “The westbound trade seems to be moving into a major oversupply situation without enough demand building in the market,” a freight forwarder told the Journal of Commerce. “This will keep rates under tremendous pressure, for sure.” Local freight industry circles are already abuzz amid talk of heightened competition, with forwarders reporting frenzied sales calls from carrier executives seeking long-term volume commitments with special rate offers. “Carriers are willing to sign contracts at $1,200 per TEU and $1,400 per FEU for Nhava Sheva-London Gateway bookings, after some steady spot pricing signals in early December with quotes settled in the range of $1,600 and $1,800, respectively,” a second forwarder noted. Contact Bency Mathew at <a href="mailto:bencyvmathew@gmail.com">bencyvmathew@gmail.com.</a></div>

Indian shippers moving goods to Europe could soon find more ocean connections and vessel space with the Gemini alliance between Maersk and Hapag-Lloyd going live from early February. According to new service updates obtained by the Journal of Commerce, India's largest export trade lane by volume will have three direct premium services -- two out of the West Coast (Nhava Sheva and Mundra), named the ME1 and ME11 by Maersk, and one out of the East (Ennore/Chennai), named the ME2, under the collaborative network framework. Hapag-Lloyd has branded the joint loops as the IOS, IMX and IEX, respectively. Riding on the so-called hub-and-spoke operational model , these services have fewer direct port calls: featuring Jebel Ali, Mundra, Nhava Sheva, Salalah, Port Tangier, Rotterdam, Hamburg and London Gateway on the ME1/IOS; Jebel Ali, Mundra, Nhava Sheva, Salalah, Port Tangier, Valencia and Port Said on the ME11/IMX; and Ennore, Colombo, Algeciras, Rotterdam, London Gateway, Bremerhaven and Port Tangier on the ME2/IEX. It is estimated that combined operations will inject significant additional capacity into the market for westbound loading due to enhanced network strengths, larger vessel deployments and greater transshipment opportunities. As a product differentiator, Maersk is touting faster transits for Indian loads to Spain and Italy via its hubs of Port Tangier and Algeciras, as well as the East Mediterranean through Port Said, which it believes will be a boost for Indian exporters/importers in the lifestyle, retail, automobile and reefer sectors. Indian capacity allocations have been structured in terms of historical market share dynamics -- 60% for Hapag-Lloyd and 40% for Maersk in West India, with the split in the opposite way for the South India routing. “We believe Maersk will also connect Europe loads via Port Tangier on the ME11,” a Mumbai-based liner executive who didn’t want to be identified told the Journal of Commerce. ‘Major oversupply situation’ Gemini’s India-Europe network will compete with CMA CGM's longtime flagship "Epic" routing and a new vessel-sharing deal led by Ocean Network Express (ONE), HMM and Yang Ming known as the IOX. Following Hapag-Lloyd’s exit from the Epic loop, CMA CGM now has higher allocations to fill at Nhava Sheva/Mundra, reportedly an additional 1,500 TEUs a week. At the same time, industry observers believe all carriers could struggle to manage the huge influx of capacity, thus forcing them to undercut each other on pricing to maximize loadings, and in the process, inevitably jeopardize profitability. “The westbound trade seems to be moving into a major oversupply situation without enough demand building in the market,” a freight forwarder told the Journal of Commerce. “This will keep rates under tremendous pressure, for sure.” Local freight industry circles are already abuzz amid talk of heightened competition, with forwarders reporting frenzied sales calls from carrier executives seeking long-term volume commitments with special rate offers. “Carriers are willing to sign contracts at $1,200 per TEU and $1,400 per FEU for Nhava Sheva-London Gateway bookings, after some steady spot pricing signals in early December with quotes settled in the range of $1,600 and $1,800, respectively,” a second forwarder noted. Contact Bency Mathew at bencyvmathew@gmail.com.

Port News

Gemini to bulk up capacity on India-Europe trade amid rate push pressure

<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.

<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 vessels 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 headhaul 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 vessels 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 headhaul 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.

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

Air Cargo

Supply chain

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

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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

SMC3rates_shutterstock_5247046.jpg

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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