This week:
- After Israel-Hamas ceasefire agreement, analysts disagree on when Red Sea crisis will end
- ILA-USMX avoid another strike, but shippers must deal with effects of their preemptive moves
- US ports association reaches out to incoming Trump administration about funding, new tariffs
- BNSF Barstow’s BIG project to proceed after California withdraws locomotive clean air rule
- Analyst: Intermodal market was strong in 2024, but conditions likely to change this year
Analysts Disagree on Timeline for Resuming Shipping Through Red Sea
Despite a ceasefire agreement between Israel and Hamas that went into effect over the weekend, supply chain experts disagree on the timeline for resuming safe shipping through the Red Sea. While one analyst suggests a best-case scenario of Suez Canal transits restarting next month, others warn that Houthi attacks will likely persist.
The ceasefire, which went into effect Sunday, has raised hopes for a return to the shorter Red Sea route. Carriers have largely avoided the Red Sea for the past 14 months due to Houthi attacks, instead choosing the longer route around the Cape of Good Hope. The situation is known as the Red Sea crisis among supply chain observers.
Lars Jensen, CEO of Vespucci Maritime and a Journal of Commerce (JoC) analyst, outlined the best-case scenario, which is dependent on the six-week ceasefire holding up, a full Israeli withdrawal from Gaza, and a rebuilding plan for the territory. However, Jensen also acknowledged a lack of clarity in the Israel-Hamas agreement.
“There is no specificity at this point as to whether or when the Houthis will lift their proclaimed embargo against certain groups of merchant vessels passing through the southern Red Sea,” Jensen told the JoC. Meanwhile, Jack Kennedy of S&P Global Market Intelligence spoke for other industry analysts., opining that the ceasefire will not guarantee safety in the Red Sea. He argues that the Houthis are likely to continue targeting international vessels regardless of any agreement between Israel and Hamas.
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Even After ILA-USMX Deal, Shippers Still Face Short-Term Challenges
Even though a second strike in three months at US East and Gulf Coast ports was narrowly avoided, precautionary measures taken by shippers are now causing supply chain challenges. Multiple industry stakeholders say shippers will continue to face these issues in the short term.
Before the recent tentative agreement between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) on a new master contract, shippers had prepared for a strike by frontloading cargo and pausing bookings. According to a January 9 LinkedIn post on the official C.H. Robinson account, these preemptive actions will lead to delays at some ports as they work through the backlog of increased volume.
The National Retail Foundation (NRF) noted in a January 10 press release that because the deal was reached at the “last minute,” retailers accelerated the import of spring merchandise to ensure sufficient stock in case of a strike this month.
Beyond frontloading, shippers also diversified their sourcing, utilizing secondary suppliers and diverting some inbound shipments to West Coast ports. In an email to Supply Chain Dive published last week, Brian Pacula of West Monroe said these strategies have resulted in higher inventory levels, extended transit times, and increased transportation expenses. Pacula warned these actions will likely affect balance sheets through increased inventory and cost of goods sold figures in the short term.
US Ports to Trump Admin: Keep the Funding, Reconsider the Tariffs
As Donald Trump returns to the White House this week and becomes the 47th President of the United States, US ports are communicating their legislative priorities with the incoming administration and Congress. Even though many of their positions align, American Association of Port Authorities (AAPA) representatives spoke out on Trump’s campaign promise of higher import tariffs. They also asked that funding for port infrastructure initiatives continue.
In a statement released last Wednesday, the AAPA said it met with Trump’s transition team and Department of Transportation nominee Sean Duffy. The AAPA urged Congress to “not rescind infrastructure spending” from the Inflation Reduction Act , which was passed during outgoing President Joe Biden’s term. In addition, the AAPA asked for other funding for port, intermodal rail, and road projects to be maintained.
The AAPA joined numerous other groups in opposing Trump’s plan for broad new tariffs. The association argues that higher import duties may reduce cargo volumes, ultimately lowering port revenues.
BNSF Barstow Expansion to Proceed After California Emissions Rule Withdrawn
California has abandoned a proposed regulation that would have mandated zero-emission train locomotives by 2030. This decision clears the way for BNSF Railway to proceed with its $1.5 billion project to expand its Barstow terminal.
The California Air Resources Board (CARB) withdrew the rule after a US District Court judge temporarily blocked its implementation in November. The court expressed concerns the proposed rule would violate federal interstate commerce statutes. The withdrawal coincides with the US Bureau of Land Management’s approval of the land sale to BNSF for the Barstow Intermodal Gateway (BIG) project.
The BIG expansion is expected to be completed in 2027 or 2028. It will serve as a transloading hub. Ocean containers will be transferred to 53-foot domestic containers for inland transport, facilitating faster returns of ocean containers to the ports of Los Angeles and Long Beach.
Coming Off Strong 2024, Intermodal Market Faces Slowdown in 2025
Larry Gross, president and founder of Gross Transportation Consulting and a JoC analyst, recently looked back on the intermodal market’s 2024 performance, noting strong growth. However, Gross expects many of the factors that led to intermodal market strength to subside this year.
Writing in the JoC, Gross noted his initial forecast for the intermodal segment in 2024 was 5.5% growth, while actual growth reached 7.5%. Among the factors contributing to the strong showing were a shift of import volumes back to US West Coast ports due to Red Sea disruptions, the US East Coast labor concerns that resulted in October’s three-day ILA strike, and year-long frontloading.
Looking ahead to 2025, Gross anticipates a slowdown in intermodal activity, as many of the factors that drove 2024’s growth aren’t expected to continue. The ILA labor situation has stabilized, the Red Sea route may reopen, and the frontloaded volumes that defined 2024 are unlikely to continue throughout 2025.