Supply Chain Roundup

This week:

• Long-term air cargo contracts almost disappeared in October
• Low trans-Pacific ocean demand will likely continue into the first half of 2023
• Greenscreens.ai announces new investment in truckload pricing software
• Port of NY-NJ sees a noticeable increase in empty container sweeps after September’s announcement of new long-dwelling container fees
• Three unions reject rail contract agreements with railroads, while two more will soon announce their decisions

Airlines Almost Completely Cease Long-Term Air Cargo Contracts Due to Weak Market 

Air cargo contracts lasting six months or longer comprised 17% of the total global air cargo market through the third quarter of 2022. By October, that share dropped to just 1% at a time that is usually the highest peak season for air cargo and cargo transportation, according to Xeneta. 

The sheer drop in air contracts is due to unstable demand and excess air capacity on the market, causing rates to drop. As a result, air cargo contracts lasting three to six months increased to approximately 50% of the total global market, rising 36% in October from the third quarter. The global air cargo spot market rose by 30% in the same period to a market share of 37%. 

Airlines out of Asia and Europe predict that the usual fourth-quarter peak season will not increase long-term contract numbers. Just last week, China to North America spot rates fell $5.68/kilogram to a rate 52% lower than that of last year, while spot rates for China to North Europe fell 33% year-over-year in the same week. 

 

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Flattened Trans-Pacific Demand Will Continue into Q1 of 2023 

October this year saw US imports from Asia drop to a 20-month low after September’s accelerated drop in cargo volumes after demand on the east-bound trans-pacific market fell from record highs earlier in the year. Total October imports from Asia totaled 1.44 million TEU, a decrease of 11% from October 2021. 

October was normally the final peak season month for trans-Pacific imports. After shippers and retailers frontloaded orders at the start of the year, current forecasts predict that decreasing cargo volumes will continue into the first quarter and maybe through the first half of 2023, according to the National Retail Federation (NRF) and Hackett Associates through the publication Global Port Tracker. 

Cargo volumes through 2022 to the present show a total increase of 21.2% compared with 2019 volumes, thanks to the busy first half of 2022, with a 2.4% year-over-year increase. But October imports are only 2% higher than October 2019, indicating that demand and cargo volumes are now returning to pre-pandemic levels. 

Volatile Truckload Market Sparks Investment in Pricing Software Provider

Venture capital firm Tiger Global recently invested $5 million into software vendor Greenscreens.ai, helping Greenscreens to further their spot truckload pricing software. Greenscreens made the announcement on November 15, and the investment indicates strong demand among shippers and truckers for accurate and reliable spot market pricing data as the truckload market remains volatile. 

Greenscreen has a list of over 70 brokers and is focused on providing real-time data based on the buying power of individual businesses instead of calculating rates off of broader market averages. The Tiger Global investment will help fund Greenscreen’s product and technology teams throughout the USA and Lithuania. 

Since November 2021, Venture Capital firm Tiger Global has invested in CloudTrucks, Emerge, Nowports, Nuvocargo, and other software and technology providers for the trucking industry. 

Empty Container Sweeps Increase at the Port of New York-New Jersey Amid Growing West Coast Diversions 

The port of New York-New Jersey can handle increasing volumes of ocean cargo as carriers increase the number of empties they remove from the port. In September, the port released details of a new $100 container fee for long-dwelling empties, which would start next year, prompting carriers to place more emphasis on empty sweeps. As a result, the port can now process more incoming containers with reduced chassis shortages and ship backlogs as cargo diversions away from the West Coast increase. 

Since the port’s July peak of 200,000 empty boxes, carriers have swept approximately 30,000 long-dwelling empties from the port. In September and after the new fee announcement, carriers removed 9,128 long-dwelling empties compared with approximately 5,500 in August, showing that the threat of additional fees for long-dwelling boxes has been effective. Combined with short-dwelling empties, September saw a total of 313,762 empty TEU containers exported from the port. 

The growth in empty sweeps is also driven by import slowdown, giving carriers additional vessel capacity to uplift more empty containers from the port of New York-New Jersey. The extra space means the port has more equipment, space, and labor to handle growing cargo numbers. In October, the port handled a total of 792,548 TEU, the third consecutive month it has ranked as the busiest port in the USA, outperforming the port of Los Angeles. 

Three Rail Unions Have Now Rejected Labor Contracts with Railroads 

The Brotherhood of Maintenance of Way Employees (BMWED), the Brotherhood of Railway Signalmen (BRS), and the International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, Forgers & Helpers (IBB) have each downvoted agreements presented by US railroads. 

The BMWED and BRS unions have agreed to a cooldown period ending December 4, which they may extend to December 9 to align with the cooldown period of IBB. The cooldown periods reflect a mutual agreement of no striking or lockouts while the parties continue labor contract negotiations with railroads. 

After two years of negotiations, seven railway worker’s unions have ratified the agreement, while two unions, the Brotherhood of Locomotive Engineers (BLET) and Sheet Metal Air, Rail, and Transportation Workers (SMART-TD), will announce their decision on November 21.