This week:

• Red Sea vessel diversions push ocean schedule reliability back to 2022 levels
• Ocean carriers pursue GRI spot rate increases as the Lunar New Year approaches
• The Port of New Orleans receives a federal grant of $226 million for the construction of a new container terminal
• Domestic carriers see higher volumes but reduced revenue for the start of 2024
• Cargo volumes increase at the Californian ports of Oakland and Long Beach as volumes divert to the US West Coast

Ocean Schedule Reliability Falls to 2022 Levels Due to Red Sea Diversions

As attacks on commercial vessels in the Red Sea and Suez Canal continue, carriers on the Asia-Europe trade lane have reported that carrier reliability in December fell to levels not seen since October 2022. The situation is expected to worsen as diversions continue around South Africa, and shippers are warned that further disruptions are in the pipeline as carriers omit more ports to make up lost time on the longer voyages. 

In December, schedule reliability on the Asia-North Europe lane fell 9.2 percentage points to 46.2%, with ships arriving five days late on average. The backhaul Europe-Asia lane fell eight percentage points in the same period to 64.8%. Asia-Mediterranean schedule reliability fell by a lower 3.2 percentage points, reaching 63.5%. 

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Ocean Carriers Push for Spot Rate Increases on Asia-US Trade Lane

Ocean carriers operating on the Asia-US trade lane are pushing to implement GRIs (General Rate Increases) on their spot rates, ranging from $600 to $1,000/FEU, as the Lunar New Year approaches. The price increases are a move for carriers to better leverage the already tight season, compounded by routings away from the Red Sea. 

The GRIs will likely come into effect on either the 1st or 15th of February, with rates then expected to lower again when seasonal factory closures around Asia come into effect as part of the Lunar New Year. Many carriers implemented GRIs earlier in the month on the Asia-US lane which have stuck. The average rate to the US East Coast sat at $4,050/FEU, rising to $6,166 by January 24. Rates to the US West Coast for these same dates rose from $2,800/FEU to $4,100. 

Port NOLA Receives Additional Federal Funding for Proposed Container Terminal

In order to keep pace with other port development projects throughout the US Gulf Coast, the Port of New Orleans (Port NOLA) has plans to construct a new mega-container ship terminal, receiving a $226 million federal grant for the project. The new ship terminal, called the Louisiana International Terminal (LIT) project, is reportedly the largest federal investment in a container terminal in the Department of Transport’s (DOT) history. 

New Orleans also received $73 million in December as part of DOT’s Mega Grant program, totaling over $300 million of the estimated $1.8 billion required for the complete construction of the new terminal. Work is expected to begin in 2025, with the terminal opening in 2028. The terminal will be able to handle as many as 2 million TEU per year, with two berths that each have a 55-foot draft for the handling of ultra-large container ships. 

LIT project partners Ports America and Mediterranean Shipping Co.’s Terminal Investment Limited have also pledged an additional $800 million for the terminal’s construction.  

Domestic Carriers Face Murky Start to 2024

A challenging start to 2024 for domestic shippers has left many hoping to increase rates in the second half of the year, with Knight-Swift Transportation’s CEO Dave Jackson stating in a fourth-quarter earnings call on January 24 that there is no more room to lower prices further. Knight-Swift reported that in Q4, their intermodal revenue fell by 16% year-over-year despite a 4.2% increase in intermodal volumes. Union Pacific Railroad also reported a similar pattern in Q4, seeing a 5% decline in intermodal revenue despite a 5% increase in volume.

The current economic uncertainty means this is the second year straight where shippers have the pricing leverage over truckload and intermodal carriers heading into the bidding season. The next three months will likely see the current tepid market continue.

Ports of Oakland and Long Beach See YoY Cargo Volume Increases for December

The Californian ports of Long Beach and Oakland reported year-over-year cargo volume increases for December, in part thanks to cargo diversions to the West Coast due to the travel restrictions caused by the Panama Canal drought. The Port of Long Beach handled 709,819 TEUs last month, representing a 30% increase over volumes seen in December 2022. The Port of Oakland reported 176,013 TEUs, representing an 8% year-over-year increase.

Across the same period, Long Beach experienced a 38% increase in loaded imports and a 46% increase in empties. With volumes returning, San Pedro Bay will increase on-dock rail capacity this year through the Pier B On-Dock Rail Support Facility, which will double the size of the existing Pier B rail yard, allowing the rail yard to handle approximately 4.7 million TEU annually.

In the Port of Oakland, loaded imports increased by 16% year over year last month, while loaded export volumes rose 13% and total port volumes increased 6% month over month.