This week:

  • Starting April 1, Maersk will begin billing shippers directly for container detention charges rather than billing NVOs
  • A new Norfolk-Memphis rail service will open to improve rail movement in and out of the Port of Virginia
  • A group of global shippers has partnered together to try and leverage more demand for zero-emission maritime fuels
  • Southern California’s volume declines cause drops in truck and rail rates
  • Projections show US import volumes will begin to improve but will take some time before returning to 2022 levels
  • Southeastern ports capture more of the Asia import market

Maersk will Shift to Directly Billing Consignees for Container Detention Charges Instead of NVOs

On April 1 this year, Maersk will send container detention charges directly to consignees instead of to the drayage providers involved in merchant haulage on behalf of shippers. The change is intended to improve the billing process as drayage providers, or non-vessel-operating common carriers (NVOs), would usually be billed for container detention charges which they would then bill to the consignee or shipper.

Maersk is making the billing change ahead of new requirements that they anticipate from the Federal Maritime Commission (FMC), as the FMC is in the process of clarifying rules regarding demurrage and detention billing practices as a result of the Ocean Shipping Reform Act 2022 (OSRA-22). One clarification that the FMC is considering is whether detention and demurrage bills should only be sent between contractually related parties, which would exclude NVOs operating on behalf of the shipper.

Maersk has said in a statement that shippers can choose whether or not demurrage and detention billing is sent directly to them or first to the drayage provider.

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Norfolk Southern Rail to Launch New Norfolk-Memphis Service

On April 1, Norfolk Southern Railway (NS) will launch a new intermodal rail service to capitalize on the continued East Coast cargo shift caused by the prolonged West Coast International Longshore and Warehouse Union (ILWU) contract negotiations. The new international intermodal Norfolk-Memphis service will run approximately 900 miles between the Port of Virginia and Memphis, with trains running daily serving both terminals at the Port of Virginia.

Intermodal rail services currently provided by NS that serve Memphis primarily come from Charleston and Savannah, but around three-quarters of import loads to Memphis come from other locations. Service out of the Port of Virginia is restricted to the Midwest, Kentucky, Missouri, and some northern areas, so opening an additional service from the Port of Virginia to Memphis provides shippers with another route to transport cargo from the East Coast further inland. It will also benefit exporters in Memphis and surrounding areas who have previously suffered from congestion issues when transporting products to the East Coast ports.

Global Shippers Partner Together to Push Harder for Zero-Emission Maritime Fuels

Amazon, Patagonia, Tchibo, and the Aspen Institute have formed a partnership called the Zero Emission Maritime Buyers Alliance (ZEMBA), which was announced on March 9. The partnership between Aspen and the three global shippers forms yet another initiative devoted to increasing the demand for zero-emission maritime fuels in the industry, particularly amongst carriers.

Estimates show that global shipping accounts for approximately 3% of human-caused carbon emissions. With mounting pressure from consumers for environmentally friendly products, new environmental protection legislation, and growing global climate change concerns, the ZEMBA members hope to use their leverage to increase demand for green fuels. This year they will request that carriers submit proposals by 2025-2026 on transitioning to zero-emission shipping.

While the International Maritime Organization’s current targets are to reduce maritime carbon emissions by at least 40% by 2030 compared with 2008’s levels with either 70% or full decarbonization by 2050, groups like ZEMBA, as well as Ship It Zero and are calling for other large shippers like Home Depot, Target, Walmart, and more, to join.

Truck and Rail Rates Out of Southern California Drop as Volumes Decline

Low import and freight volumes in the Los Angeles area are causing trucking and rail rates to drop faster than they are falling nationally. The dropping import volumes are primarily caused by declining import numbers from Asia and the continued cargo shift from the West Coast to the East and Gulf Coasts.

January and February this year saw a decline in freight moves out of Los Angeles and neighboring Ontario of 21% year-over-year compared with the national average decline of just 14%. In January, laden imports into the ports of Los Angeles and Long Beach dropped 24% year-over-year, while the West Coast’s total share of imports from Asia dropped to 54.1% from January 2022’s 57.2%.

As a result, linehaul freight rates out of southern California declined by more than 40% in February year-over-year, excluding fuel costs, while the average spot rate dropped 35%, including fuel costs. Likewise, average domestic intermodal contract prices decreased year-over-year from $3,100-$3,500 to $2,600-$3000 in February.

US Imports will Start Improving but Are Still Lower than 2022

The next several months starting with March will see gains in US import volumes after February experienced the lowest import levels since May 2020, according to the National Retail Federation (NRF) and Hackett Associates. Projections for February’s import volumes sit at around 1.56 million TEU, a 13.6% drop from January and 26.2% lower year-over-year.

Current projections show that it will take until July before import volumes start to resemble 2022’s levels. According to Global Port Tracker (GPT), March’s projected import volume is 1.74 million TEU, April 1.87 million, May 1.92 million, June 2 million, and 2.13 million by July. Regarding year-over-year differences, March is 25.9% down from March 2022, April is 17.2% down, May is 19.7% down, June is 11.5% down, and July will be just 2.5% down.

Southeastern Ports Make Improvements to Continue Capturing Diversions from the West Coast

The diversion of discretionary cargo away from the West Coast has led to many importers of Asian-made goods favoring ports in the Southeast, Savannah in particular. 2022’s Asia import volume only decreased by 0.3% after 2021’s 13.5% spike, however, the Southeast’s market share rose by 1.1% from 19.8% to 20.9% between these two years, a 5.2% volume increase, while the West Coast’s market share dropped from 59.9% to 56.4%.

Savannah led the Southeast ports with a market share increase of 0.7% to an 11.1% total, increasing the port’s import volume by 6.1%. Charleston followed suit with a market share increase of 0.5% to a market share of 3.8% after a 14.6% spike in shipment volume.

Although it remains to be seen whether the Southeast will maintain its market share after ILWU contract negotiations finish, the Southeast ports are a gateway to North and South Caroline, Georgia, Tennessee, and Florida. And as Southeastern ports get more upgrades and improved supply chain infrastructure investments, shippers may prefer to send imports from Asia directly to the Southeast ports rather than to the West Coast, where they must make the intermodal journey across the country.

(Photo Credit: Zachary Keagle | Unsplash)

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