<div class="phx-topic abstract-wrapper">This stark rates dichotomy within the truckload industry is directly tied to shipping patterns.</div>

This stark rates dichotomy within the truckload industry is directly tied to shipping patterns.

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<div>As 2019 begins, the truckload market is a story of polar opposites with spot demand cooling off significantly since last summer while contract business continues to be strong.Small carriers — giddy as recently as last summer — are struggling today as brokers have regained pricing power. For midsized to large-sized carriers, frustrating times in 2016 and 2017 have given way to better fortunes since last spring.This stark dichotomy within the truckload industry is directly tied to shipping patterns. The impact of the electronic logging device (ELD) mandate in tandem with a strong US economy translated into a market in which...

As 2019 begins, the truckload market is a story of polar opposites with spot demand cooling off significantly since last summer while contract business continues to be strong. Small carriers — giddy as recently as last summer — are struggling today as brokers have regained pricing power. For midsized to large-sized carriers, frustrating times in 2016 and 2017 have given way to better fortunes since last spring. This stark dichotomy within the truckload industry is directly tied to shipping patterns. The impact of the electronic logging device (ELD) mandate in tandem with a strong US economy translated into a market in which shippers scrambled to find trucks. By applying strict enforcement of hours-of-service (HOS) regulations, drivers log fewer miles per day. The spot market felt the brunt of ELDs because smaller fleets were much less likely to have these devices beforehand, whereas large fleets were using the technology for years. With a sudden shift in capacity, dry van spot rates ballooned into $2.30 to $2.70 per mile, according to DAT Solutions and Truckstop.com. Sky high rates covered up fewer daily miles, so drivers didn’t see lower paychecks. Today drivers no longer can command the rates to maintain their income. Click to enlarge Shippers are the catalyst because they accepted double-digit rate hikes on contracts to hedge against spot market volatility. The deals were under the condition that carriers would have capacity without any excuses. Upon signing these agreements, shippers reduced their spot market exposure and shifted loads to contract carriers. This is a trend that should continue for much of 2019. The market will eventually flip when spot market rates drop so much that contract prices become too steep, but when this will happen is anyone’s guess. Contract markets decelerate, but still positive Truck tonnage increased 6.6 percent in 2018, according to American Trucking Associations (ATA). It was the largest year-over-year gain since 1998 and much stronger than the 3.8 percent increase in 2017. The index is heavily weighted towards contract freight, according to ATA economist Bob Costello. While spot rates are negative on a year-over-year basis, contract rates rose 8.7 percent in December, according to DAT. The Cass Truckload Linehaul Index was up 7.2 percent in December. J.B. Hunt Transportation Services, Covenant Transportation Group, and Knight-Swift Transportation Holdings forecast contract rates to rise in the mid-single digits in 2019. The bullish outlook is 5 percent to 7 percent, while the bearish analysts say it will be less than 5 percent. “From a customer perspective, there is more stabilization happening from a bid award. And so, if you look at what happened in 2018 and in 2017, the freight market was very volatile,” said Shelley Simpson, president of highway services for J.B. Hunt. Covenant Transportation estimated the US economy will expand between 2 percent and 2.5 percent in 2019, which is also not as strong as 2018 but is growth nonetheless. The company said January 2019 freight has been strong but not nearly as robust as January 2018. “We’re going from a 4 percent GDP to 2.5 percent. And is 2.5 percent bad? Let me tell you, for eight years [if we got] the 2.5 percent, we'd all been thrilled ... But when you get to a 4 and [then] you go to 2.5, it's going to be a slowdown,” said CEO David Parker. “[The] business environment is not bad. I'm happy about the freight environment, and we're bringing on new freight. We're getting rate increases, and I'm still a pretty happy camper.” Simpson and Parker spoke on fourth-quarter earnings calls with industry analysts. Noël Perry, chief economist of Truckstop.com, outlines two possibilities on contract freight in 2019. One scenario uses 2004 as a model and the other uses 2014. “The 2004 example says not until the first quarter of 2021! The 2014 data chronicles a lag of half that, suggesting a [first-quarter] 2019 slump, seasonally corrected. In a market that appears to be accelerating its responses, I vote for the more recent precedent, expecting a peak somewhere late this year. That would be roughly halfway between the 2004 and 2014 precedents,” Perry wrote in a note from investment bank Cowen & Co. If true, shippers will eventually jump for joy but not until the end of 2019 or 2020. Spot trucker frustration As happy as large carriers are today, smaller carriers depending upon the spot market are displeased with how the market turned. Volatility breeds higher spot rates, while stabilization translates into lower spot rates. “The significant price increases of 2018 have moderated, and while it is uncertain what the remainder of 2019 will bring, we are in a more balanced situation today,” said John Wiehoff, CEO of C.H. Robinson Worldwide. Click to enlarge Dry van spot rates are down 21 percent in the first four weeks of 2019, according to Truckstop.com. DAT’s data also show receding rates but at a slower clip. “The best way to look at these two segments of pricing is to consider spot prices as a flagman telling the approaching locomotive engineer what is around the next bend. Moreover, the brakeman waves the spot market flag very vigorously to get the approaching engineer’s attention,” Perry said. Because of the loose capacity, smaller fleets are no longer in a strong position to dictate rates to brokers. For shippers, this is not necessarily a bad thing. After a year in which transportation budgets were blown, pressure is on supply chain managers to keep freight costs manageable in 2019 . Negotiating reasonable rates and keeping an eye on spot market pricing are vital to meeting those goals. Contact Ari Ashe at ari.ashe@ihsmarkit.com and follow him on Twitter: @arijashe .

Truckload

US truckload contract and spot rates diverge

<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.

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<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

Container Shipping News

Container lines

North American ports

International ports

Maritime

Capacity glut drives further rate declines on India-US trade

<div class="phx-topic abstract-wrapper">As the supply-demand imbalance drives air freight rates to levels not seen in two years, forwarders are trying to balance the contractual requirements of airlines while securing capacity at reasonable rates for customers.</div>

As the supply-demand imbalance drives air freight rates to levels not seen in two years, forwarders are trying to balance the contractual requirements of airlines while securing capacity at reasonable rates for customers.

<div class="phx-topic">The role of freight forwarders in air cargo is becoming more complex as ongoing capacity constraints and high demand challenges their ability to access space out of Asia, especially on spot market-heavy trade lanes such as Asia-Europe. As the supply-demand imbalance drives rates to levels not seen in two years, forwarders are trying to <a href="https://www.joc.com/article/air-freight-users-forced-to-better-manage-heavily-imbalanced-market-5877101">balance the contractual requirements of their airline partners while securing capacity</a> at reasonable rates for their cargo-owning customers. With no sign of a slowdown in demand heading into 2025, shippers already taxed by soaring prices should be prepared to pay even more for their air freight next year, according to Niall van de Wouw, chief air freight officer at rate benchmarking platform Xeneta. “If I was a shipper, I would start managing expectations of the CFO that the spend on air will be higher in 2025 than it was in 2024,” van de Wouw said during an industry outlook webinar this week. Also on the Xeneta-organized webinar was Glyn Hughes, director-general of The International Air Cargo Association (Tiaca). Hughes said the scenario now playing out was the opposite of what was seen in 2023 when the excess capacity in the market meant forwarders could get access to space at good prices. “For the past 13 months, the capacity gap between what has been pre-booked, pre-sold (or) secured for a block space agreement and <a href="https://www.joc.com/article/trans-atlantic-carriers-cue-fresh-surcharges-for-early-2025-risks-5908990">what is available on the spot market has become smaller</a>,” Hughes said. "But as load factors get even higher, it will be challenging for forwarders to access short term rates at reasonable levels versus the longer-term commitment with the shippers.” That was reflected globally in the contractual agreements between forwarders and airlines, with the global load factor of 63% in November at a two-year high, according to Xeneta. The analyst’s data shows shorter-term deals of three months or less fell from 29% of the market in the first quarter to 19% in Q4, while contracts with 12-month validity increased from 37% of the market in Q1 to 50% in Q4. <h3>Rates at two-year high </h3>Air freight demand rose 10% year over year in November, fueled by the continued boom in e-commerce, while capacity increased by a marginal 2%. That pushed spot rates in November to their highest level in almost two years, Xeneta noted. The average Shanghai-North Europe spot rate in the first three weeks of December was $5.2 per kilogram, a level that has not been seen since late 2022, according to the Baltic Air Index (BAI). Kathy Liu, vice president of global sales and marketing at Taiwan-based Dimerco Express Group, said there was <a href="https://www.joc.com/article/peak-of-peak-season-lifts-rates-demand-in-global-air-freight-market-5874197">no sign of a slowdown in the solid growth in volume out of Asia</a> as the end of the year neared. “Starting mid-December, we’ve seen a significant uptick in cargo volumes, particularly for consumer electronics,” she wrote in an air freight outlook. “This is unusual, as the market typically slows down after Dec. 5. However, this year, the peak is expected to extend all the way to late January, just ahead of Chinese New Year.” One of the Asia-based airlines benefiting from high demand is Cathay Pacific, which has the added advantage of being based at Hong Kong, the world’s largest air freight airport. In November, Cathay Cargo carried 142,601 kilograms, a 15% increase in volume compared to the same month last year, with the 11-month volume of 1.4 million kilograms up 11% year over year. Several Asian airlines have announced a 10% increase in 2025 contract rates for both long-haul and intra-Asia routes, according to Dimerco. <h3>Tariff-driven bonus for Asian airlines </h3>While no slowdown is expected in the e-commerce-driven boom on trade lanes out of Asia, another air freight-friendly factor for airlines in 2025 will be the tariffs the incoming Trump administration has promised to impose on Chinese imports. Liu noted that many shippers were rushing to move stock via air freight from China to the US, hoping to beat potential tariff increases before Jan. 20 when Donald Trump takes office. She predicted this would lead to significant growth on the China-Taiwan trade lane as more semiconductors and consumer electronics are shipped from China to Taiwan for assembly, then on to the US to avoid potential tariffs. Hughes also highlighted the potential upside for air cargo from <a href="https://www.joc.com/article/new-year-heralds-triple-threat-to-us-container-shipping-5908327">an increase in US tariffs on products made in China</a>. “If President Trump is putting in 60% or 70% tariffs on a lot more Chinese products, two things will happen. We might see retaliatory measures, which would have an inflationary impact, but we also may see an acceleration of the China-plus-one manufacturing strategy,” Hughes told the webinar. “If Chinese manufacturers shift more of their final assembly to Vietnam, Malaysia or other parts of Southeast Asia, that could create even more air cargo volumes as production sites are proliferated across Asia,” he added. Contact Greg Knowler at <a href="mailto:greg.knowler@spglobal.com">greg.knowler@spglobal.com</a>. </div>

The role of freight forwarders in air cargo is becoming more complex as ongoing capacity constraints and high demand challenges their ability to access space out of Asia, especially on spot market-heavy trade lanes such as Asia-Europe. As the supply-demand imbalance drives rates to levels not seen in two years, forwarders are trying to balance the contractual requirements of their airline partners while securing capacity at reasonable rates for their cargo-owning customers. With no sign of a slowdown in demand heading into 2025, shippers already taxed by soaring prices should be prepared to pay even more for their air freight next year, according to Niall van de Wouw, chief air freight officer at rate benchmarking platform Xeneta. “If I was a shipper, I would start managing expectations of the CFO that the spend on air will be higher in 2025 than it was in 2024,” van de Wouw said during an industry outlook webinar this week. Also on the Xeneta-organized webinar was Glyn Hughes, director-general of The International Air Cargo Association (Tiaca). Hughes said the scenario now playing out was the opposite of what was seen in 2023 when the excess capacity in the market meant forwarders could get access to space at good prices. “For the past 13 months, the capacity gap between what has been pre-booked, pre-sold (or) secured for a block space agreement and what is available on the spot market has become smaller ,” Hughes said. "But as load factors get even higher, it will be challenging for forwarders to access short term rates at reasonable levels versus the longer-term commitment with the shippers.” That was reflected globally in the contractual agreements between forwarders and airlines, with the global load factor of 63% in November at a two-year high, according to Xeneta. The analyst’s data shows shorter-term deals of three months or less fell from 29% of the market in the first quarter to 19% in Q4, while contracts with 12-month validity increased from 37% of the market in Q1 to 50% in Q4. Rates at two-year high Air freight demand rose 10% year over year in November, fueled by the continued boom in e-commerce, while capacity increased by a marginal 2%. That pushed spot rates in November to their highest level in almost two years, Xeneta noted. The average Shanghai-North Europe spot rate in the first three weeks of December was $5.2 per kilogram, a level that has not been seen since late 2022, according to the Baltic Air Index (BAI). Kathy Liu, vice president of global sales and marketing at Taiwan-based Dimerco Express Group, said there was no sign of a slowdown in the solid growth in volume out of Asia as the end of the year neared. “Starting mid-December, we’ve seen a significant uptick in cargo volumes, particularly for consumer electronics,” she wrote in an air freight outlook. “This is unusual, as the market typically slows down after Dec. 5. However, this year, the peak is expected to extend all the way to late January, just ahead of Chinese New Year.” One of the Asia-based airlines benefiting from high demand is Cathay Pacific, which has the added advantage of being based at Hong Kong, the world’s largest air freight airport. In November, Cathay Cargo carried 142,601 kilograms, a 15% increase in volume compared to the same month last year, with the 11-month volume of 1.4 million kilograms up 11% year over year. Several Asian airlines have announced a 10% increase in 2025 contract rates for both long-haul and intra-Asia routes, according to Dimerco. Tariff-driven bonus for Asian airlines While no slowdown is expected in the e-commerce-driven boom on trade lanes out of Asia, another air freight-friendly factor for airlines in 2025 will be the tariffs the incoming Trump administration has promised to impose on Chinese imports. Liu noted that many shippers were rushing to move stock via air freight from China to the US, hoping to beat potential tariff increases before Jan. 20 when Donald Trump takes office. She predicted this would lead to significant growth on the China-Taiwan trade lane as more semiconductors and consumer electronics are shipped from China to Taiwan for assembly, then on to the US to avoid potential tariffs. Hughes also highlighted the potential upside for air cargo from an increase in US tariffs on products made in China . “If President Trump is putting in 60% or 70% tariffs on a lot more Chinese products, two things will happen. We might see retaliatory measures, which would have an inflationary impact, but we also may see an acceleration of the China-plus-one manufacturing strategy,” Hughes told the webinar. “If Chinese manufacturers shift more of their final assembly to Vietnam, Malaysia or other parts of Southeast Asia, that could create even more air cargo volumes as production sites are proliferated across Asia,” he added. Contact Greg Knowler at greg.knowler@spglobal.com .

Air Cargo

Air Cargo Forwarder News

Air Cargo Carriers News

Tight capacity, high demand expected to push air cargo costs higher in 2025

<div class="phx-topic abstract-wrapper">The largest US less-than-truckload provider is set to become a separate, independent company as FedEx pivots to focus on its parcel delivery business.</div>

The largest US less-than-truckload provider is set to become a separate, independent company as FedEx pivots to focus on its parcel delivery business.

<div class="phx-topic">FedEx on Thursday said it will spin off its less-than-truckload (LTL) division as an independent company, setting the stage for increased competition in the US LTL sector. The separation of FedEx’s parcel and LTL freight divisions, to be completed over the next 18 months, will create a new publicly traded company that will already be the <a href="https://www.joc.com/article/journal-of-commerce-rankings-ltl-sector-revenue-drops-despite-yellow-distortion-5199865">largest LTL provider</a> in North America ranked by revenue.“This is the right time to pursue a separation as we respond to the unique dynamics of the LTL market,” Raj Subramaniam, FedEx president and CEO, said in a statement. “Through this process, we will unlock value for our freight business and position FedEx to create even greater value for stockholders,” Subramaniam said. FedEx Freight will continue to cooperate and maintain commercial ties with FedEx and its parcel divisions — FedEx Express and FedEx Ground, Subramaniam said. FedEx Freight had $9.4 billion in revenue in its fiscal year that ended May 31. For calendar year 2023, the revenue figure was $10.2 billion. The next-largest LTL provider, Old Dominion Freight Line, had $6.2 billion in revenue last year, while the third-largest carrier, XPO, had $4.7 billion in 2023 revenue. <h3>Revenue growth expected </h3>As a separate company, FedEx Freight will be able to grow that revenue and increase its industry dominance, according to Satish Jindel, president of SJ Consulting Group. “This spinoff will bring more investment money from hedge funds and institutional investors into the LTL segment, [specifically to FedEx Freight],” Jindel said. “They’ll be able to shed overhead costs connected with the parcel business and invest in what makes sense from an LTL point of view, and that’s good for shippers,” he said. Competing carriers among the largest LTL providers have been bracing for a FedEx Freight spinoff, in part by <a href="https://www.joc.com/article/new-terminal-sales-by-yellow-raising-stakes-for-us-ltl-carriers-5903607">rushing to acquire terminals</a> from bankrupt Yellow. “FedEx Freight as an independent company will be a much stronger competitor,” said an LTL executive who did not want to be identified. “The shackles are off now.” Contact William B. Cassidy at <a href="mailto:bill.cassidy@spglobal.com">bill.cassidy@spglobal.com</a>.</div>

FedEx on Thursday said it will spin off its less-than-truckload (LTL) division as an independent company, setting the stage for increased competition in the US LTL sector. The separation of FedEx’s parcel and LTL freight divisions, to be completed over the next 18 months, will create a new publicly traded company that will already be the largest LTL provider in North America ranked by revenue. “This is the right time to pursue a separation as we respond to the unique dynamics of the LTL market,” Raj Subramaniam, FedEx president and CEO, said in a statement. “Through this process, we will unlock value for our freight business and position FedEx to create even greater value for stockholders,” Subramaniam said. FedEx Freight will continue to cooperate and maintain commercial ties with FedEx and its parcel divisions — FedEx Express and FedEx Ground, Subramaniam said. FedEx Freight had $9.4 billion in revenue in its fiscal year that ended May 31. For calendar year 2023, the revenue figure was $10.2 billion. The next-largest LTL provider, Old Dominion Freight Line, had $6.2 billion in revenue last year, while the third-largest carrier, XPO, had $4.7 billion in 2023 revenue. Revenue growth expected As a separate company, FedEx Freight will be able to grow that revenue and increase its industry dominance, according to Satish Jindel, president of SJ Consulting Group. “This spinoff will bring more investment money from hedge funds and institutional investors into the LTL segment, [specifically to FedEx Freight],” Jindel said. “They’ll be able to shed overhead costs connected with the parcel business and invest in what makes sense from an LTL point of view, and that’s good for shippers,” he said. Competing carriers among the largest LTL providers have been bracing for a FedEx Freight spinoff, in part by rushing to acquire terminals from bankrupt Yellow. “FedEx Freight as an independent company will be a much stronger competitor,” said an LTL executive who did not want to be identified. “The shackles are off now.” Contact William B. Cassidy at bill.cassidy@spglobal.com .

Trucking News

Surface

FedEx to spin off industry-leading FedEx Freight LTL division

<div class="phx-topic abstract-wrapper">With a prolonged peak season, some non-asset-based intermodal marketing companies are reporting difficulties securing rail-owned containers and slots on trains in Chicago, Portland and Oakland over the past month.</div>

With a prolonged peak season, some non-asset-based intermodal marketing companies are reporting difficulties securing rail-owned containers and slots on trains in Chicago, Portland and Oakland over the past month.

<div class="phx-topic">Class I railroads are dealing with disruptions on the US West Coast and in the critically important Chicago market amid an extended peak shipping season that continues to set monthly records for domestic and international intermodal cargo volumes. While the disruptions have not reached the level of delays seen earlier this year in <a href="https://www.joc.com/article/la-lb-rail-dwells-spike-to-two-year-high-amid-record-imports-in-september-5750222">Los Angeles</a> or <a href="https://www.joc.com/article/los-angeles-tacoma-lead-gains-in-west-coast-imports-5217839">Tacoma</a>, some non-asset-based intermodal marketing companies (IMCs) report difficulties securing rail-owned containers and slots on trains in Chicago, Portland and Oakland over the past month. “It’s been surprising that coming out of Thanksgiving it has been challenging getting our hands on rail boxes in Portland,” said an IMC executive who did not want to be identified. The source noted that while the issues posed challenges, they were less severe than disruptions experienced in the past four years. Railroads have diverted capacity to address surging demand in Southern California, which has been compounded by increased holiday parcel shipments from carriers such as FedEx and UPS. <h3>Record-breaking cargo volumes </h3>Cargo fluidity has slowed amid unprecedented intermodal volume in the Southwest US that has exceeded even the pandemic-related surges in 2020 and 2021. The Southwest intermodal market includes the ports of Los Angeles and Long Beach, the country’s busiest gateway. Domestic intermodal shipments originating in the Southwest set new monthly records every month from June through November, according to data from the Intermodal Association of North America (IANA). Railroads hauled 165,068 domestic loads from the Southwest last month, the most ever for the month of November. The heavy volumes have put pressure on Union Pacific (UP) and BNSF Railway moving cargo from Los Angeles to Chicago, Memphis, and markets in Ohio such as Cincinnati, Cleveland and Columbus. Between Nov. 18 and Dec. 13, railroads hauled 1.59 million international and domestic intermodal loads, marking the highest four-week average for that period since 2020, according to the Association of American Railroads (AAR), and showing clear evidence of a prolonged peak season. <div class="wrapper-narrow"><dynamic-object type="jocchartid" resource-id="6e445b7a-996b-4aec-afbc-9c2b9f2e6b78"></dynamic-object></div>Still, despite the sustained volumes, service metrics have improved for train movements off the West Coast in the last four weeks. The number of loaded intermodal railcars idling for more than 48 hours has returned to normal levels, data from the US Surface Transportation Board (STB) shows. UP reported an average of 46.5 loaded railcars per day idling for more than 48 hours over the last four weeks, down from nearly 170 railcars per day in the first 45 days of the quarter. A spokesperson for UP said the railroad has worked to “meet committed capacity, reduce port dwell and improve transits.” <h3> Chicago backups </h3>IMCs, meanwhile, say they’ve faced struggles since mid-November securing reservations to drop off containers at CSX’s Bedford Park terminal in Chicago. “It’s gotten pretty bad at times with a lack of gate reservations, unless you’re willing to wait a week,” said a second IMC who also did not want to be identified. “It’s been really challenging.” The Midwest has experienced elevated domestic cargo volumes, with monthly records set in five of the last six months. In November, railroads hauled a total of 73,856 loads from the Midwest to the Northeast and Southeast, according to IANA, the second-highest November total after 2018. CSX said its gate reservation system is a critical tool to manage cargo flows during periods of heavy volume to ensure a smooth transfer of containers between trucks and trains. While the reservation system prevents terminals from becoming clogged with containers during volume surges, customers may have to wait days before dropping off boxes because only a finite number of reservations are granted each day. “While we recognize that persistent holiday traffic, weather conditions, and dwell increases created temporary delays for some IMCs, we continue to actively work with our customers to address their evolving service requirements,” a CSX spokesperson said in a statement to the Journal of Commerce. “Shippers are encouraged to collaborate with their account managers to explore solutions for increased volume or changing needs.” Contact Ari Ashe to <a href="mailto:ari.ashe@spglobal.com">ari.ashe@spglobal.com</a>.</div>

Class I railroads are dealing with disruptions on the US West Coast and in the critically important Chicago market amid an extended peak shipping season that continues to set monthly records for domestic and international intermodal cargo volumes. While the disruptions have not reached the level of delays seen earlier this year in Los Angeles or Tacoma , some non-asset-based intermodal marketing companies (IMCs) report difficulties securing rail-owned containers and slots on trains in Chicago, Portland and Oakland over the past month. “It’s been surprising that coming out of Thanksgiving it has been challenging getting our hands on rail boxes in Portland,” said an IMC executive who did not want to be identified. The source noted that while the issues posed challenges, they were less severe than disruptions experienced in the past four years. Railroads have diverted capacity to address surging demand in Southern California, which has been compounded by increased holiday parcel shipments from carriers such as FedEx and UPS. Record-breaking cargo volumes Cargo fluidity has slowed amid unprecedented intermodal volume in the Southwest US that has exceeded even the pandemic-related surges in 2020 and 2021. The Southwest intermodal market includes the ports of Los Angeles and Long Beach, the country’s busiest gateway. Domestic intermodal shipments originating in the Southwest set new monthly records every month from June through November, according to data from the Intermodal Association of North America (IANA). Railroads hauled 165,068 domestic loads from the Southwest last month, the most ever for the month of November. The heavy volumes have put pressure on Union Pacific (UP) and BNSF Railway moving cargo from Los Angeles to Chicago, Memphis, and markets in Ohio such as Cincinnati, Cleveland and Columbus. Between Nov. 18 and Dec. 13, railroads hauled 1.59 million international and domestic intermodal loads, marking the highest four-week average for that period since 2020, according to the Association of American Railroads (AAR), and showing clear evidence of a prolonged peak season. Still, despite the sustained volumes, service metrics have improved for train movements off the West Coast in the last four weeks. The number of loaded intermodal railcars idling for more than 48 hours has returned to normal levels, data from the US Surface Transportation Board (STB) shows. UP reported an average of 46.5 loaded railcars per day idling for more than 48 hours over the last four weeks, down from nearly 170 railcars per day in the first 45 days of the quarter. A spokesperson for UP said the railroad has worked to “meet committed capacity, reduce port dwell and improve transits.” Chicago backups IMCs, meanwhile, say they’ve faced struggles since mid-November securing reservations to drop off containers at CSX’s Bedford Park terminal in Chicago. “It’s gotten pretty bad at times with a lack of gate reservations, unless you’re willing to wait a week,” said a second IMC who also did not want to be identified. “It’s been really challenging.” The Midwest has experienced elevated domestic cargo volumes, with monthly records set in five of the last six months. In November, railroads hauled a total of 73,856 loads from the Midwest to the Northeast and Southeast, according to IANA, the second-highest November total after 2018. CSX said its gate reservation system is a critical tool to manage cargo flows during periods of heavy volume to ensure a smooth transfer of containers between trucks and trains. While the reservation system prevents terminals from becoming clogged with containers during volume surges, customers may have to wait days before dropping off boxes because only a finite number of reservations are granted each day. “While we recognize that persistent holiday traffic, weather conditions, and dwell increases created temporary delays for some IMCs, we continue to actively work with our customers to address their evolving service requirements,” a CSX spokesperson said in a statement to the Journal of Commerce. “Shippers are encouraged to collaborate with their account managers to explore solutions for increased volume or changing needs.” Contact Ari Ashe to ari.ashe@spglobal.com .

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IMCs dealing with rail service disruptions amid unusually high volumes

<div class="phx-topic abstract-wrapper">The end of a regulation that limited import house locations will allow more flexibility for warehousing options, making the cold chain network more efficient for food importers.</div>

The end of a regulation that limited import house locations will allow more flexibility for warehousing options, making the cold chain network more efficient for food importers.

<div class="phx-topic">US food importers say the end of a federal policy linked to warehousing will allow them to nab refrigerated storage space more than 50 miles from a port, helping to reduce the risk of spoiled products and allowing containers to be moved out of marine terminals faster. Freight forwarders say elimination of the regulation, which was originally adopted to address delays caused by reefer containers being left at port terminals, will be especially helpful in preventing inspection delays during seasonal volume influxes of temperature-controlled fruit and vegetable cargoes.Food importers, in general, expect to see increased efficiency in their cold chains after the US Food Safety Inspection Service (FSIS) withdrew the policy limiting warehousing options. FSIS is part of the US Department of Agriculture (USDA). The regulation, which required import houses (I-House) be located within 50 miles of a shipment’s port of entry, was terminated Dec. 13. An I-House designation allows a warehouse to serve as a holding area for imports waiting to be inspected by FSIS, a stage where some food importers face delays. Since the policy change, FSIS has said it will consider, on a case-by-case basis, the addition of I-Houses outside of a 50-mile radius, while considering the availability of inspection personnel, expected volumes and operating hours.“We welcome this common-sense ruling, which will help our members not only drive operational efficiencies but also better meet growing customer needs for import services,” Sara Stickler, president and CEO of the Global Cold Chain Alliance, said. “An arbitrary restriction on where an inspection facility must be located leads to unnecessary inefficiencies.” <h3>Warehousing limitations, labor shortages</h3>Despite the progress expected by ending the warehouse rule, Eric Brown, president at JTP Transportation and a chair member of the Meat Import Council, said the temperature-controlled food import industry is still facing a major efficiency problem and that solving the warehouse issue may only amplify the impacts of a labor shortage. “We now have twice the amount of beef coming into the country with only half as many USDA inspectors that we had in the past,” Brown told the Journal of Commerce. “Inspecting the cargo quickly [drives the] inefficiency of the warehouses.” FSIS acknowledged in the Dec. 13 notice that network expansions will be limited by inspection staffing capabilities, saying it would like to provide more flexibility to import businesses, but it must be “balanced against the agency’s existing inspection resources.”“They have got to increase the number of people they have for sure,” Bill Duggan, North American advisor at reefer market consultant Eskesen Advisory told the Journal of Commerce. “Whether or not they have the budget for that, I don’t know.”Contact Laura Robb at <a href="mailto:Laura.Robb@spglobal.com">laura.robb@spglobal.com</a>. </div>

US food importers say the end of a federal policy linked to warehousing will allow them to nab refrigerated storage space more than 50 miles from a port, helping to reduce the risk of spoiled products and allowing containers to be moved out of marine terminals faster. Freight forwarders say elimination of the regulation, which was originally adopted to address delays caused by reefer containers being left at port terminals, will be especially helpful in preventing inspection delays during seasonal volume influxes of temperature-controlled fruit and vegetable cargoes. Food importers, in general, expect to see increased efficiency in their cold chains after the US Food Safety Inspection Service (FSIS) withdrew the policy limiting warehousing options. FSIS is part of the US Department of Agriculture (USDA). The regulation, which required import houses (I-House) be located within 50 miles of a shipment’s port of entry, was terminated Dec. 13. An I-House designation allows a warehouse to serve as a holding area for imports waiting to be inspected by FSIS, a stage where some food importers face delays. Since the policy change, FSIS has said it will consider, on a case-by-case basis, the addition of I-Houses outside of a 50-mile radius, while considering the availability of inspection personnel, expected volumes and operating hours. “We welcome this common-sense ruling, which will help our members not only drive operational efficiencies but also better meet growing customer needs for import services,” Sara Stickler, president and CEO of the Global Cold Chain Alliance, said. “An arbitrary restriction on where an inspection facility must be located leads to unnecessary inefficiencies.” Warehousing limitations, labor shortages Despite the progress expected by ending the warehouse rule, Eric Brown, president at JTP Transportation and a chair member of the Meat Import Council, said the temperature-controlled food import industry is still facing a major efficiency problem and that solving the warehouse issue may only amplify the impacts of a labor shortage. “We now have twice the amount of beef coming into the country with only half as many USDA inspectors that we had in the past,” Brown told the Journal of Commerce. “Inspecting the cargo quickly [drives the] inefficiency of the warehouses.” FSIS acknowledged in the Dec. 13 notice that network expansions will be limited by inspection staffing capabilities, saying it would like to provide more flexibility to import businesses, but it must be “balanced against the agency’s existing inspection resources.” “They have got to increase the number of people they have for sure,” Bill Duggan, North American advisor at reefer market consultant Eskesen Advisory told the Journal of Commerce. “Whether or not they have the budget for that, I don’t know.” Contact Laura Robb at laura.robb@spglobal.com .

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Reefer cargo bottlenecks could improve after US scraps warehousing policy

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The world of LTL is slow to embrace change. Business anachronisms permeate current supply chain processes. These vestiges of the way things used to work define the LTL freight transportation procurement process of many modern shippers.David Knuth, logistics specialist at IEWC, a global supplier of cable and wire based in Wisconsin, is happy to have modernized the RFP process, automating the entire LTL bidding procedure with Bid$ense, SMC³’s automated truckload and LTL freight transportation sourcing solution. But when prompted, he can still recall what once was.In his previous job, a large part of his duties were consumed by creating an intermodal bid package for carriers. In a spreadsheet, Knuth detailed the company’s volumes lane by lane, taking care to delete any errant keystrokes or misleading data. He would then email out the information to each carrier, taking time to respond to detailed technical questions about the spreadsheet data. Finally, he had to compile all the results, create an algorithm that would compare the carriers on each lane, and award the business.“It was a huge undertaking. It took about four months to do,” Knuth said of the old process. “It was almost a full-time job for that part of the year, every year.”In his new job at IEWC, he sat down with Bid$ense on day one and was amazed at the capabilities. Knuth had never before used a bid tool. SMC³’s latest versions of Bid$ense automate the process even further, taking truckload and LTL RFPs entirely online. The tool draws on RFP best-practices protocols to streamline the bidding communication process, enabling bidding carriers to respond accurately and promptly to shipper requests. The solution also does all the distribution work automatically, electronically submitting shipper bid data to carriers based on their actual service capabilities and performance records. Carriers are alerted with timely prompts for RFP deliverables, so shippers aren’t waiting by the phone for responses.Another benefit of automating the process is the data-cleansing assistance. When Knuth sent spreadsheets to carriers, data errors might cloud the bidding process; he might have to resend data or simply accept a price that did not truly reflect the costs of doing business. Data cleansing is incredibly beneficial, he said.The spreadsheet technique also made bidding analysis an onerous task. Since Bid$ense automates and streamlines the entire RFP process, intensive examination is now simple. SMC³ knows that each bid has more than one best outcome. With uniform responses from each carrier, shippers can quickly rank results and create an unlimited quantity of what-if scenarios to make the optimal procurement decision.Jesse Burnett of Central Garden &amp; Pet experiences many of the same benefits. Founded in 1980, Central Garden &amp; Pet has spent the last three decades growing from a small garden supply company to a provider of a range of products from dog chews and bird seed to soil supplements and natural insecticides. For much of its life, the company shipped these disparate goods via LTL and truckload carriers to retailers throughout the country, relying on each business unit to negotiate directly with their freight transportation providers. This arrangement worked fairly well for a small company, but as Central Garden &amp; Pet expanded, leadership decided to consolidate decision making.Burnett helped centralize the transportation decision making in 2015 with SMC³’s Bid$ense. Before Bid$ense, every business unit operated independently as far as negotiating with carriers.“There were a lot of different things just floating around,” he said. “We didn’t have master agreements in place; no national pricing at all. The pricing from carriers was just all over the place, depending on where you were.”The transformations he saw with Bid$ense were immediate. Burnett has been using the tool about every other year since its implementation at the company. Central Garden and Pet’s $19.6 million 2019 LTL bid saved the company just more than 9 percent when compared to its historical average. For Burnett, though, bid automation extends far beyond savings.“We knew that we weren’t getting the best pricing offer from our carriers just because nothing was centralized,” he continued. “We knew that if we combined everything from all these business units and paired it with one corporate offering, then it would drive some cost benefit with it.”When the company initially decided to centralize bid procurement, executives researched a number of different methodologies and technologies. In the end, though, Burnett found that Bid$ense was both widespread and well known, and that his carrier partners already knew how to use the application. Burnett also highlighted the data-cleansing process as a major benefit, saying the rigorous process ensures that carriers always return the best price.“It definitely has helped drive savings,” he said. “Any time you go out there and you drive that competitiveness with the carriers and they know they’re in a bid environment, it seems to sharpen their pencils.”Transportation procurement is an integral part of the modern supply chain. With Bid$ense, shippers can develop a strategic implementation plan that saves them time and money, but also helps them create strong relationships with their carrier partners. These carriers appreciate the solution’s data-cleansing process; when carriers receive a complete shipment history and future volume forecast, they don’t have to guess on pricing. Carriers that receive more data from shippers get a complete picture of that shipper’s freight, allowing them to accurately plan instead of simply preparing for the worst-case scenario. Clean data presented through an automated system can lead to both bigger shipment savings and a lasting partnership between carrier and customer.Whether customers are looking to streamline over-the-road transportation bidding by automating the RFP process or create an entirely new, centralized sourcing process, Bid$ense has the analytical horsepower to get the job done.SMC³ 2020 Customer Case Study

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Shippers save money, time with automated transportation bidding tools

If there’s one immutable truth in the world of logistics, it’s this: LTL is an inherently complex form of transportation. Tariffs, rates, DIM weights, transit times — it’s enough to confuse even seasoned logistics professionals. The solution to this knowledge gap has historically been on-the-job training or university supply chain education, but for a variety of reasons there is now a pressing need for third-party, remote LTL training that prepares logistics workers for transportation success. Global Scope Can Overlook Local Intricacies In the past, professionals looking to move into a supply chain career learned about the basics of supply chain from universities. However, many of these college supply chain programs are now global in scope, focusing on worldwide supply chain management instead of the intricacies of specialized domestic transportation. And even these programs, which used to be widespread, are becoming less common. LTL is not an industry of broad-brush strokes; supply chain professionals really need a pointillistic understanding of the logistics of LTL in order to excel in the industry. Accelerating Need for Dedicated LTL Education This lack of specified training put the onus on employers to prepare new hires with the LTL knowledge needed to do their jobs. Dedicated LTL study is a necessity, not a luxury. At the same time, changes in LTL and the broader supply chain world are accelerating. The reliance on e-commerce has ballooned since the start of the pandemic, and last-mile LTL shipments and related e-commerce strains on the supply chain won’t diminish once social distancing abates. That genie isn’t going back into the bottle. So supply chain employers need logistics workers that are fully versed in all aspects of the industry, ready to solve unique shipping and delivery problems based on their extensive supply chain knowledge But why care about LTL? It’s been reported that some shippers in today’s world are no longer concerned with what mode is used to ship their goods. A Multimodal Approach Ensures On-Time Delivery This mode agnosticism means supply chain stakeholders have to be well versed in all modes of transportation. As unforeseen weather events and other disruptions, such as protests, become more common, savvy logistics employees will need to be armed with familiarity of all modes, not just the most popular, to ensure that freight is delivered on time, without damage, and in the most financially expedient way possible. Offerings like SMC³’s LTL online education courses cover a wide range of topics from LTL basics and operations to more advanced concepts like pricing analytics and transportation law. The company also has plans to continually refresh content, adding new expert presenters and taking the feedback of students to make the courses even better as time goes on. Learn more about&nbsp;<a href="https://logisticstrainingcenter.com/smc3-courses/" rel="noreferrer" class="joc_admin__link">SMC³’s LTL Online Education program</a>&nbsp;and view the 2021 hybrid schedule, featuring live industry experts,&nbsp;<a href="https://www.smc3.com/onlinelearning2021/" rel="noreferrer" class="joc_admin__link">here.</a>

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