<div class="phx-topic abstract-wrapper">Before May 5, when President Donald Trump announced that tariffs on $200 billion of Chinese imports would rise from 10 percent to 25 percent, carriers were relatively sanguine about 2019 and for good reasons.</div>

Before May 5, when President Donald Trump announced that tariffs on $200 billion of Chinese imports would rise from 10 percent to 25 percent, carriers were relatively sanguine about 2019 and for good reasons.

3606491_FI.png

<div>The sharp and sudden escalation of trade tensions between the United States and China, after a deal seemed imminent, casts a shadow on trans-Pacific containerized supply chains, elevating risk for carriers after exhibiting newfound strength in recently <a>concluded service contracting</a>.Before May 5, when President Donald Trump announced that tariffs on $200 billion of Chinese imports would rise from 10 to 25 percent, carriers were relatively sanguine about 2019 and for good reasons. The contract season was well-timed for carriers, coming in the aftermath of the front-loading of volumes and resulting market tightness ahead of threatened Dec. 31 tariffs on China.Hapag-Lloyd’s...

The sharp and sudden escalation of trade tensions between the United States and China, after a deal seemed imminent, casts a shadow on trans-Pacific containerized supply chains, elevating risk for carriers after exhibiting newfound strength in recently concluded service contracting . Before May 5, when President Donald Trump announced that tariffs on $200 billion of Chinese imports would rise from 10 to 25 percent, carriers were relatively sanguine about 2019 and for good reasons. The contract season was well-timed for carriers, coming in the aftermath of the front-loading of volumes and resulting market tightness ahead of threatened Dec. 31 tariffs on China. Hapag-Lloyd’s trans-Pacific rates were up 7 percent in the first quarter, the highest increase among any of the regions in which it operates, according to its first-quarter earnings report issued on May 9. That rare instance of trade policy impacting logistics, plus the continuing strong US economy this year, kept the trans-Pacific market relatively tight in the first quarter, raising the specter for shippers that capacity could remain tight deeper into 2019 and contributing to what amounted to a minor victory for carriers in the just-completed negotiations. It's possible some early effects of consolidation in driving solidarity among carriers enabled them to secure approximately $200 to $300 per container increases in annual contracts and importantly helped them lock in guarantees on reimbursement from shippers for the higher anticipated costs of low-sulfur fuel as of Jan. 1, 2020, when the International Maritime Organization’s stronger ban on sulfur emissions takes effect. Hapag-Lloyd in its first-quarter earnings report noted that global supply growth is estimated by Drewry to be 3.1 percent while global demand as forecast by IHS Markit is 4.7 percent, thus, at least on a global level, this points to tightening capacity. Also citing Transmodal data from April, Hapag-Lloyd noted that the container ship order book stands at just 11 percent of existing capacity, down from 61 percent in 2007 and an average figure of 16 percent over the past five years. Speaking of the first quarter, Hapag-Lloyd CEO Rolf Habben-Jansen said, “We achieved a good result and got the year off to a very decent start.” Looking further down the road in 2019, another factor in carriers’ favor, which surely will be to shippers’ disadvantage, will be a large number of ships temporarily removed from service for installation of scrubbers, which will allow the ships to continue burning high-sulfur bunker fuel and still comply with the IMO 2020 rule. But the US tariffs and the swift retaliation by China is a new dark cloud. The tariffs seem very likely to impact trade and economic growth. IHS Markit chief economist Nariman Behravesh said, “We estimate that the impact of the announced tariffs by the US and China will cut global growth by 0.2 to 0.3 percentage points. If the threatened tariffs [25 percent on an additional $300 billion in Chinese imports] are also implemented, then these estimates would be doubled. “The trade impacts are typically bigger. I would estimate a 0.5 percentage point hit to growth from the announced tariffs and double that if the threats are implemented,” he said. Because of the trade war, container volume growth this year could come in as little as 2 percent, according to London-based ship broker Braemar ACM, as quoted by The Wall Street Journal. If Trump goes through with his newest threat, Alphaliner warns eastbound trans-Pacific volume will fall at least 8 percent in 2019 after rising 8.3 percent in 2018. Increased sourcing from other Asian countries won’t make up for the shortfall, the maritime analyst said in its weekly newsletter. The newest tariff shock hits the trans-Pacific before the traditional summer peak season and threatens carriers with downward pressure on spot rates. The escalating trade war comes on the heels of 2019 global trade estimates already downgraded. Hapag-Lloyd noted that the International Monetary Fund forecasts that global trade, not just container trade, will expand 3.4 percent in 2019, a forecast down from its 4 percent growth expectation in January. IHS Markit, parent of JOC.com, observed a “mild strengthening of momentum” in global growth in the first quarter, but notes, “The downside risks have once again risen … in particular, the raising of US tariffs on Chinese imports on May 10 — and Chinese retaliation [announced May 13] — could lead to a damaging upward spiral of trade hostilities and seriously hurt growth.” From a carrier standpoint, further risks remain. The IMO 2020 rule, despite the benefits in temporary capacity withdrawals, will be a huge and abrupt change to the market overall, and the success carriers had ensuring reimbursement for higher costs in the trans-Pacific only covers 13 percent of global volumes and doesn’t guarantee similar success in other trade lanes. With volume pressures mounting and a minimum $10 billion low-sulfur fuel bill hanging over the industry, 2019 is a year that will test carriers' resolve. Contact Peter Tirschwell at peter.tirschwell@ihsmarkit.com and follow him on Twitter: @petertirschwell .

Container lines

New tariffs and threats cast shadow on trans-Pacific

<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.

Feature image

<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.

Container Shipping News

Maritime

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, said at an investor event in mid-ills 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-flagged vessels. 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-ills 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-flagged vessels. 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 .

Trans-Pacific

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

<div class="phx-topic abstract-wrapper">Disentangling FedEx’s LTL and parcel units will take time, but it will rearrange the less-than-truckload market — and most likely raise LTL shipping costs.</div>

Disentangling FedEx’s LTL and parcel units will take time, but it will rearrange the less-than-truckload market — and most likely raise LTL shipping costs.

<div class="phx-topic">The US less-than-truckload (LTL) market is about to undergo another convulsion, this time caused not by a bankruptcy or merger but the emergence of a “new” LTL provider. The creation of a standalone FedEx Freight will upend a strategic LTL puzzle that competing carriers have been vying to complete since the demise of Yellow in 2023. Among the likely results are increased consolidation across the LTL landscape, an accelerated drive toward dimensional pricing and higher LTL shipping costs. With $10.2 billion in revenue in 2023, FedEx Freight is already the largest LTL provider in North America by far. The <a href="https://www.joc.com/article/fedex-to-spin-off-industry-leading-fedex-freight-ltl-division-5909135">spinoff by FedEx</a>, announced Thursday, will make it even bigger. The new FedEx Freight will be an independent, public company. As a division of FedEx, it has increased operating profit on average 25% each year for the past five years. The standalone carrier could have a market cap as high as $40 billion to $50 billion on Wall Street, various sources estimate. Its next-largest competitor, Old Dominion Freight Line (ODFL) has a market cap of $38 billion with about $6 billion in annual revenue. Shippers will benefit from service improvements and pricing innovation, according to Satish Jindel, president of SJ Consulting Group. But he expects a harder push for “price correction” from an independent FedEx Freight. That means shippers who are “underpaying” — perhaps because of the bundling of LTL and parcel services or incorrect classification of freight — will have to pony up and pay more. The spinoff is the latest development reshaping LTL networks while helping to broaden the LTL sector’s role in supply chains from ports to last-mile delivery. LTL carriers are adding more <a href="https://www.joc.com/article/estes-express-plans-near-port-expansion-as-new-generation-takes-charge-5220656">port transloading business</a> to their portfolios, but also are broadening their retail, warehousing and specialized services. As shippers work to shorten distances between distribution centers, suppliers and end-customers, LTL carriers see more opportunity to expand beyond their industrial base. Carriers and shippers will have time to adjust to Thursday’s news. Unraveling FedEx Freight from parcel carriers FedEx Express and FedEx Ground will take until mid-2026. And FedEx plans to continue to invest in its LTL arm over the next 18 months, Raj Subramaniam, FedEx president and CEO, told Wall Street analysts Thursday. The spinoff news came as FedEx released its earnings for the fiscal quarter that ended Nov. 30. “We expect to add more than 300 LTL [sales] specialists by the time of separation,” Subramaniam said. Also on his list are an enhanced, LTL-specific pricing and invoicing system and LTL-focused automation that will improve operational efficiency and reduce costs. “We’re excited to create a leading LTL pure-play, the largest carrier by revenue with the broadest network and the fastest transit times,” Subramaniam said. At the same time, “it’s very important to note that FedEx Freight benefits a lot from the association with FedEx,” he added. <h3>Ties that bind </h3>The new “pure-play” carrier won’t cut all ties to its former parent, Subramaniam said. For one, it will still be known as FedEx Freight and remain connected through technology. And FedEx Freight will continue to support its package delivery sister divisions, providing linehaul runs, peak season service and drayage hauls to the parcel operation. “This requires minimal change as [FedEx] Freight already receives a direct financial benefit from supporting Federal Express via intercompany agreements,” the CEO told analysts. Lance Moll will continue as CEO of FedEx Freight through the separation process, the company said. FedEx veteran Thomas Connolly will be vice president of LTL sales. “Business continuity” for customers is the goal, Subramaniam said. “[But] no one knows the specifics about how FedEx Freight’s network is impacted by the requirements of FedEx,” shipper consultant Mike Regan told the Journal of Commerce. “I think no one understands how intertwined FedEx Freight is in supporting the operations of FedEx,” said Regan, who is chief relationship officer of TranzAct Technologies. The majority of FedEx Freight volume is negotiated through independent contracts, Brie Carere, FedEx’s chief customer officer, said during Thursday’s call. Most small shippers access FedEx Freight through bundling with parcel services, however. <h3>A new order </h3>The spinoff will force FedEx’s LTL competitors to respond, likely by hastening consolidation within the LTL market in 2025 and 2026. That consolidation is already under way, as the largest LTL providers rush to acquire terminals and build out freight networks. <a href="https://www.joc.com/article/transportation-ma-activity-seen-ready-to-rebound-as-value-of-deals-rises-5905255">Mergers and acquisitions</a>, large and <a href="https://www.joc.com/article/smaller-us-ltl-carriers-increasingly-merging-in-sink-or-swim-market-5783875">small</a>, are driving a new wave of consolidation. The 10 largest US LTL providers have been pursuing a land rush since late 2023, following the Yellow bankruptcy. Estes Express Lines, the fourth-largest LTL provider, recently <a href="https://www.joc.com/article/new-terminal-sales-by-yellow-raising-stakes-for-us-ltl-carriers-5903607">acquired 11 terminals with 1,310 doors</a> from Yellow. The wave of terminal acquisitions helps carriers build denser freight networks but also positions them to compete against an independent and bigger FedEx Freight. The addition of LTL doors is considered a “long-term” investment in capacity, as doors once purchased may be opened or closed as demand rises and falls. When FedEx Freight finally stands on its own, it will still be at the top of the Journal of Commerce / SJ Consulting Group rankings of largest LTL trucking companies. But there may be changes in the rankings below. The 10 largest carriers in 2023 controlled 62% of total LTL revenue of $62.2 billion. As FedEx Freight and its competitors battle for more revenue, that share is expected to grow. Contact William B. Cassidy at <a href="mailto:bill.cassidy@spglobal.com">bill.cassidy@spglobal.com</a>.</div>

The US less-than-truckload (LTL) market is about to undergo another convulsion, this time caused not by a bankruptcy or merger but the emergence of a “new” LTL provider. The creation of a standalone FedEx Freight will upend a strategic LTL puzzle that competing carriers have been vying to complete since the demise of Yellow in 2023. Among the likely results are increased consolidation across the LTL landscape, an accelerated drive toward dimensional pricing and higher LTL shipping costs. With $10.2 billion in revenue in 2023, FedEx Freight is already the largest LTL provider in North America by far. The spinoff by FedEx , announced Thursday, will make it even bigger. The new FedEx Freight will be an independent, public company. As a division of FedEx, it has increased operating profit on average 25% each year for the past five years. The standalone carrier could have a market cap as high as $40 billion to $50 billion on Wall Street, various sources estimate. Its next-largest competitor, Old Dominion Freight Line (ODFL) has a market cap of $38 billion with about $6 billion in annual revenue. Shippers will benefit from service improvements and pricing innovation, according to Satish Jindel, president of SJ Consulting Group. But he expects a harder push for “price correction” from an independent FedEx Freight. That means shippers who are “underpaying” — perhaps because of the bundling of LTL and parcel services or incorrect classification of freight — will have to pony up and pay more. The spinoff is the latest development reshaping LTL networks while helping to broaden the LTL sector’s role in supply chains from ports to last-mile delivery. LTL carriers are adding more port transloading business to their portfolios, but also are broadening their retail, warehousing and specialized services. As shippers work to shorten distances between distribution centers, suppliers and end-customers, LTL carriers see more opportunity to expand beyond their industrial base. Carriers and shippers will have time to adjust to Thursday’s news. Unraveling FedEx Freight from parcel carriers FedEx Express and FedEx Ground will take until mid-2026. And FedEx plans to continue to invest in its LTL arm over the next 18 months, Raj Subramaniam, FedEx president and CEO, told Wall Street analysts Thursday. The spinoff news came as FedEx released its earnings for the fiscal quarter that ended Nov. 30. “We expect to add more than 300 LTL [sales] specialists by the time of separation,” Subramaniam said. Also on his list are an enhanced, LTL-specific pricing and invoicing system and LTL-focused automation that will improve operational efficiency and reduce costs. “We’re excited to create a leading LTL pure-play, the largest carrier by revenue with the broadest network and the fastest transit times,” Subramaniam said. At the same time, “it’s very important to note that FedEx Freight benefits a lot from the association with FedEx,” he added. Ties that bind The new “pure-play” carrier won’t cut all ties to its former parent, Subramaniam said. For one, it will still be known as FedEx Freight and remain connected through technology. And FedEx Freight will continue to support its package delivery sister divisions, providing linehaul runs, peak season service and drayage hauls to the parcel operation. “This requires minimal change as [FedEx] Freight already receives a direct financial benefit from supporting Federal Express via intercompany agreements,” the CEO told analysts. Lance Moll will continue as CEO of FedEx Freight through the separation process, the company said. FedEx veteran Thomas Connolly will be vice president of LTL sales. “Business continuity” for customers is the goal, Subramaniam said. “[But] no one knows the specifics about how FedEx Freight’s network is impacted by the requirements of FedEx,” shipper consultant Mike Regan told the Journal of Commerce. “I think no one understands how intertwined FedEx Freight is in supporting the operations of FedEx,” said Regan, who is chief relationship officer of TranzAct Technologies. The majority of FedEx Freight volume is negotiated through independent contracts, Brie Carere, FedEx’s chief customer officer, said during Thursday’s call. Most small shippers access FedEx Freight through bundling with parcel services, however. A new order The spinoff will force FedEx’s LTL competitors to respond, likely by hastening consolidation within the LTL market in 2025 and 2026. That consolidation is already under way, as the largest LTL providers rush to acquire terminals and build out freight networks. Mergers and acquisitions , large and small , are driving a new wave of consolidation. The 10 largest US LTL providers have been pursuing a land rush since late 2023, following the Yellow bankruptcy. Estes Express Lines, the fourth-largest LTL provider, recently acquired 11 terminals with 1,310 doors from Yellow. The wave of terminal acquisitions helps carriers build denser freight networks but also positions them to compete against an independent and bigger FedEx Freight. The addition of LTL doors is considered a “long-term” investment in capacity, as doors once purchased may be opened or closed as demand rises and falls. When FedEx Freight finally stands on its own, it will still be at the top of the Journal of Commerce / SJ Consulting Group rankings of largest LTL trucking companies. But there may be changes in the rankings below. The 10 largest carriers in 2023 controlled 62% of total LTL revenue of $62.2 billion. As FedEx Freight and its competitors battle for more revenue, that share is expected to grow. Contact William B. Cassidy at bill.cassidy@spglobal.com .

Trucking News

Surface

FedEx Freight spinoff is latest move to reshape US LTL market

<div class="phx-topic abstract-wrapper">Imports are likely to remain robust into January as shippers attempt to beat new tariffs expected to be imposed by the incoming Trump administration while also navigating an early Lunar New Year that begins Jan. 29.</div>

Imports are likely to remain robust into January as shippers attempt to beat new tariffs expected to be imposed by the incoming Trump administration while also navigating an early Lunar New Year that begins Jan. 29.

<div class="phx-topic">Average dwell times for import containers leaving marine terminals in Southern California by rail have fallen markedly in recent weeks, although that improvement could be challenged by an expected surge in imports in the coming weeks. Terminal managers at the ports of Los Angeles and Long Beach say dwell times averaged about 4.5 days this week. “We’re operating as we should be,” said Anthony Otto, president of the automated Long Beach Container Terminal. “Our dwell is now 2.5 days.” The container backlog at Yusen Terminals in Los Angeles began to dissipate in mid-November and is not an issue today, according to terminal management. “The bottom line is we’re cleared up,” Yusen President Alan McCorkle told the Journal of Commerce. The improvement in rail dwells began in November, with average dwells for the month falling to 7.67 days from the 9.86 days seen in October, a two-year high, according to data from the Pacific Merchant Shipping Association (PMSA). Still, November’s figure is essentially double the rail dwell of 3.9 days for the same month last year. “Cargo today is flowing well. I think a four- to six-day dwell is likely soon,” Michele Grubbs, PMSA’s vice president, said. “The railroads are really working to get those numbers down.” <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="155dedc1-99f2-4adf-a449-1c9ab2510f95"></dynamic-object></div><h3>Import bump coming </h3>Further improving the dwell number will not be easy. The ports of Los Angeles and Long Beach expect to handle a combined 272,354 TEUs in imports next week, up from the 200,000 to 210,000 TEUs they have averaged in recent weeks. And imports are likely to remain robust into January as shippers attempt to beat <a href="https://www.joc.com/article/new-year-heralds-triple-threat-to-us-container-shipping-5908327">new tariffs expected to be imposed by the incoming Trump administration while also navigating an early Lunar New Year that begins Jan. 29.</a> That makes some forwarders uneasy about where rail dwells could be headed, particularly those who aren’t personally experiencing the gains that have been documented. “What we’re seeing is closer to a seven- to nine-day dwell,” said one forwarder who did not want to be identified. Rail container dwell times in Southern California can vary considerably from terminal to terminal. Terminal operators say they can manage their rail container volumes if inland point intermodal (IPI) containers are about 20% to 30% of their total cargo mix. If that mix varies widely, so too can the rail dwell times at individual terminals. Especially important factors that must be considered are the size and configuration of a terminal’s on-dock railyard, said Dan Smith, a partner in the consulting firm Tioga Group. Smith said on-dock rail yards that were added to older terminals oftentimes are more difficult for the terminal operator to manage than new terminals with the on-dock railyard included in the original design “If it was not developed with a purpose-built on-dock railyard, [the terminal] is inevitably less efficient,” Smith said. Contact Bill Mongelluzzo at <a href="mailto:bill.mongelluzzo@spglobal.com">bill.mongelluzzo@spglobal.com</a>.</div>

Average dwell times for import containers leaving marine terminals in Southern California by rail have fallen markedly in recent weeks, although that improvement could be challenged by an expected surge in imports in the coming weeks. Terminal managers at the ports of Los Angeles and Long Beach say dwell times averaged about 4.5 days this week. “We’re operating as we should be,” said Anthony Otto, president of the automated Long Beach Container Terminal. “Our dwell is now 2.5 days.” The container backlog at Yusen Terminals in Los Angeles began to dissipate in mid-November and is not an issue today, according to terminal management. “The bottom line is we’re cleared up,” Yusen President Alan McCorkle told the Journal of Commerce. The improvement in rail dwells began in November, with average dwells for the month falling to 7.67 days from the 9.86 days seen in October, a two-year high, according to data from the Pacific Merchant Shipping Association (PMSA). Still, November’s figure is essentially double the rail dwell of 3.9 days for the same month last year. “Cargo today is flowing well. I think a four- to six-day dwell is likely soon,” Michele Grubbs, PMSA’s vice president, said. “The railroads are really working to get those numbers down.” Import bump coming Further improving the dwell number will not be easy. The ports of Los Angeles and Long Beach expect to handle a combined 272,354 TEUs in imports next week, up from the 200,000 to 210,000 TEUs they have averaged in recent weeks. And imports are likely to remain robust into January as shippers attempt to beat new tariffs expected to be imposed by the incoming Trump administration while also navigating an early Lunar New Year that begins Jan. 29. That makes some forwarders uneasy about where rail dwells could be headed, particularly those who aren’t personally experiencing the gains that have been documented. “What we’re seeing is closer to a seven- to nine-day dwell,” said one forwarder who did not want to be identified. Rail container dwell times in Southern California can vary considerably from terminal to terminal. Terminal operators say they can manage their rail container volumes if inland point intermodal (IPI) containers are about 20% to 30% of their total cargo mix. If that mix varies widely, so too can the rail dwell times at individual terminals. Especially important factors that must be considered are the size and configuration of a terminal’s on-dock railyard, said Dan Smith, a partner in the consulting firm Tioga Group. Smith said on-dock rail yards that were added to older terminals oftentimes are more difficult for the terminal operator to manage than new terminals with the on-dock railyard included in the original design “If it was not developed with a purpose-built on-dock railyard, [the terminal] is inevitably less efficient,” Smith said. Contact Bill Mongelluzzo at bill.mongelluzzo@spglobal.com .

Port News

North American ports

Marine terminals

LA-LB rail dwells show improvement, but import bump could reverse gains

<div class="phx-topic abstract-wrapper">Continuing the steady slide from a late-July peak, average spot rates from West India to the US East Coast have dropped about 20% from the end of November.</div>

Continuing the steady slide from a late-July peak, average spot rates from West India to the US East Coast have dropped about 20% from the end of November.

<div class="phx-topic">While volume declines typically leave ocean carriers adjusting rates to retain customer support, the huge capacity injection into the India-US trades since the pandemic era is seriously undermining their ability to hold prices up, let alone attempt moderate hikes. Continuing the steady slide from a late-July peak, average spot rates from West India to the US East Coast have dropped about 20% from end-November levels, according to new data obtained by the Journal of Commerce from local freight forwarders. Sources reported quotes of $1,500 per FEU from some carriers for bookings from Nhava Sheva to New York. Platts, a sister company of the Journal of Commerce within S&amp;P Global, pegged the market at $1,700 per FEU as of Dec. 19, down from $2,140 at the end of November. “Even the big mainliners are willing to align rates with co-loaders, who have been overly aggressive in managing their slot allocations,” a Mumbai-based forwarder who didn’t want to be identified told the Journal of Commerce. “There is no sign of pricing discipline.” <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="893ffa5c-0a69-45c7-a555-425e44318711"></dynamic-object></div>Most carriers on the trade lane have put all rate hike efforts on the backburner through the end of the year after they kept rescheduling peak season surcharges and general rate increases. “If the rate pressure persists with no significant demand improvements in the foreseeable future, one of the services may be forced to exit the market or regroup itself with another one,” said a container shipping industry observer. In the normal course of events, the West India-North America trade has six weekly sailings. Still, available capacity remains “a moving thing” because of sporadic void calls and unsettled schedules linked to the longer transits around the Cape of Good Hope. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="e4740cee-e00c-4254-8216-5ed1bb48d192"></dynamic-object></div>There are indications that 2025 will see a further influx of capacity on the larger headhaul trades out of India as major carriers settle into new alliance networks. Maersk is reportedly set to increase space out of West India on its MECL1 service (India-Middle East-North America) from March as part of a broader schedule resetting plan by dropping an existing call at Algeciras in Spain. “The wild card is demand,” said a carrier source. “It’s reasonable to predict that demand will indeed pick up to cover enhanced supply, but the question making the industry rounds is how soon?” Contact Bency Mathew at <a href="mailto:bencyvmathew@gmail.com">bencyvmathew@gmail.com</a>.</div>

While volume declines typically leave ocean carriers adjusting rates to retain customer support, the huge capacity injection into the India-US trades since the pandemic era is seriously undermining their ability to hold prices up, let alone attempt moderate hikes. Continuing the steady slide from a late-July peak, average spot rates from West India to the US East Coast have dropped about 20% from end-November levels, according to new data obtained by the Journal of Commerce from local freight forwarders. Sources reported quotes of $1,500 per FEU from some carriers for bookings from Nhava Sheva to New York. Platts, a sister company of the Journal of Commerce within S&P Global, pegged the market at $1,700 per FEU as of Dec. 19, down from $2,140 at the end of November. “Even the big mainliners are willing to align rates with co-loaders, who have been overly aggressive in managing their slot allocations,” a Mumbai-based forwarder who didn’t want to be identified told the Journal of Commerce. “There is no sign of pricing discipline.” Most carriers on the trade lane have put all rate hike efforts on the backburner through the end of the year after they kept rescheduling peak season surcharges and general rate increases. “If the rate pressure persists with no significant demand improvements in the foreseeable future, one of the services may be forced to exit the market or regroup itself with another one,” said a container shipping industry observer. In the normal course of events, the West India-North America trade has six weekly sailings. Still, available capacity remains “a moving thing” because of sporadic void calls and unsettled schedules linked to the longer transits around the Cape of Good Hope. There are indications that 2025 will see a further influx of capacity on the larger headhaul trades out of India as major carriers settle into new alliance networks. Maersk is reportedly set to increase space out of West India on its MECL1 service (India-Middle East-North America) from March as part of a broader schedule resetting plan by dropping an existing call at Algeciras in Spain. “The wild card is demand,” said a carrier source. “It’s reasonable to predict that demand will indeed pick up to cover enhanced supply, but the question making the industry rounds is how soon?” Contact Bency Mathew at bencyvmathew@gmail.com .

International ports

Capacity glut drives further rate declines on India-US trade

Register today to redeem your Gold subscriber discount!

TPM Discount - Gold

Save 20% on TPM25

Use code HSW25 at checkout and save 25% on first year of any annual subscription plan. Offer ends December 29.

Subscribe Now - Free Trials - Wide Box

HOLIDAY SALE

Use code HSW25 at checkout and save 25% on first year of any annual plan. Offer ends December 29.

Subscribe Now - Anonymous - Wide Box

Use code HSW695 at checkout and upgrade to Gold for just $695! Valid for first year of subscription. Offer ends December 29.

Upgrade Subscription - Wide Box

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>

SMC3rates_shutterstock_5247046 (1).jpg

Filling the Supply Chain Education Gap with LTL Education Courses

HOLIDAY SALE: Use code HSW25 at checkout and save 25% on first year of any annual plan. Offer ends December 29.

Subscribe Now - Anonymous - Offer Box

Subscribe Today

HOLIDAY SALE: Use code HSW695 at checkout and save $800 on first year of a Gold subscription. Offer ends December 29.

Upgrade Subscription - Offer Box

Upgrade Subscription

20% OFF ON TPM25: Register today and redeem your Gold subscriber discount!

TPM Discount - Gold 

20% OFF ON TPM25

HOLIDAY SALE: Use code HSW25 at checkout to save 25% on first year of any subscription plan. Offer ends December 29.


Subscribe Now - Free Trials - Offer Box

An in-depth analysis of transport trends in the multipurpose and heavy-lift fleet segment

Breakbulk Report - Rectangle Box

Breakbulk Quarterly

A premium access index of savings using domestic intermodal vs. OTR 

ISI Report - Rectangle Box

Intermodal Savings Index

Customers scoring their intermodal partners to identify the best service providers

Intermodal Service Scorecard - Rectangle Box

Intermodal Service Scorecard

A premium access outlook critical to shippers and transportation providers

QI Report - Rectangle Box

Quarterly Intelligence

The only editorially independent conference for the breakbulk & project cargo industry

Breakbulk Conference - Rectangle Box

Attend Breakbulk25

The premier conference for the global container shipping and supply chain community

TPM Conference - Rectangle Box

Attend TPM25

An extensive dashboard of charts organized by trade lane, mode, and topic

Gateway - Rectangle Box

Gateway

The latest container shipping news and analysis of ocean container shipping, logistics, supply chains, technology solutions and end-to-end connectivity. Coverage includes the movement of containerized cargo handled by marine terminals and container ports, depots, container lines, drayage, consignees, importers and shippers, forwarders, non-vessel operating common carriers (NVOs) and off-dock warehousing providers. The Journal of Commerce's container shipping news includes news from the trans-Pacific, Asia–Europe, North America–Caribbean, Central and South America trades, and intra-Asia trades.

Trans-Atlantic

Forwarding

Asia-Europe

Container shipping news and analysis of ocean container shipping, logistics, supply chains, technology and end-to-end connectivity.

Container Shipping News | Journal of Commerce

Breakbulk News shipping | Journal of Commerce

Breakbulk News

Stay informed on port news worldwide with Journal of Commerce. From decarbonization to labor updates, get insights on global developments.

Port News | Journal of Commerce

News and analysis of ocean containerized cargo movement, logistics, supply chains, technology, and end-to-end connectivity. Maritime news and analysis of containerized ocean cargo movement, breakbulk and roll-on and roll-off shipping from origin to destination.

Latest News

More News & Analysis

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

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

FedEx Freight spinoff is latest move to reshape US LTL market