This week:

  • Additional air services are adding capacity but simultaneously lowering air cargo market rates amid weakening demand 
  • The FMC continues its work in creating new rules governing demurrage and detention charges that terminals and carriers bill to shippers 
  • The ports of Los Angeles and Long Beach experienced on-dock delays due to longshore worker job action regarding the ILWU negotiations 
  • The White House was asked to intervene in the ILWU negotiations by a coalition of US shippers and transportation organizations 
  • The UP intermodal lane from Chicago to Los Angeles is experiencing delays due to higher freight volumes and weather problems that are slowing down the repositioning of rail cars 

Air Capacity Floods into Major Trade Services, Weakening Air Cargo Market Rates

The air freight market is weakening as rates on many trade lanes drop year-over-year. However, rates still remain higher than pre-pandemic levels. Reactivated passenger flights, combined with increased air freight capacity as freighter operators launch more services connecting Asia, Europe, and the US, are hitting the market hard amid weakening demand, declining ocean freight rates, and continued high inventory levels in the US and Europe. 

According to air cargo analyst World ACD, global air freight capacity for March increased by 15% year-over-year, with all regions experiencing double-digit capacity growth. Trans-Pacific air cargo rates for March fell 30% year-over-year to an average $4.79/kg, still almost 40% higher than in March 2019, according to the Baltic Air Index (BAI). Trans-Atlantic westbound rates are down 25% to $3.60/kg, 30% higher than in 2019, while China-Europe rates are down 17% from last year to $3.71/kg, 30% higher than 2019. 

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FMC Questions Terminals and Carriers about Their Demurrage and Detention Charge Practices

Chassis equipment shortages that plagued the US market through and before 2022 should be overcome by June this year as new chassis equipment orders are fulfilled and while US import volumes drop. As the market approaches an equilibrium between demand and equipment, chassis providers should use the time to prepare for future surges in import volume. 

Truckers and BCOs are also acquiring their own chassis to improve performance as Union Pacific Railroad and the Federal Maritime Commission change their stance regarding the prohibition of using private chassis in merchant haulage agreements.

Terminal Gate Delays at Los Angeles and Long Beach Due to ILWU Job Action

Terminals at the ports of Los Angeles and Long Beach have seen significant delays since March 15 caused by dockworkers due to the ongoing contract negotiations between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA), which have been ongoing for over ten months. 

The delays are due to longshore workers refusing to stagger their meal breaks at the ports, leaving the docks unmanned for two one-hour periods each day, during which work cannot be done. The longshore workers previously would stagger their breaks to ensure that dock activity was uninterrupted. However, the worker’s refusal to do so over the past weeks is a retaliation over an intra-union manning change. Because the staggering of breaks is not a contractual obligation while ILWU-PMA negotiations continue, PMA cannot simply force the workers to return to staggered breaks. 

The fear of disruptions and job actions such as this concerning ILWU contract negotiations are one of the key reasons why shippers have been diverting cargo away from the West Coast. The West Coasts’ market share in Asia imports dropped to 53.3% in February from 60.4% in May last year when the negotiations began. `

US Shipping and Transportation Coalition Pushes for White House Action in ILWU Negotiations

A shipping and transportation coalition of 238 entities has asked the White House to step in regarding the ILWU contract negotiations, which have severely disrupted supply chains and diverted cargo away from the West Coast. The National Retail Federation (NRF) and the Agriculture Transportation Coalition (AgTC) are two coalition members. The coalition sent a formal letter to the White House just after the Los Angeles and Long Beach ports disruptions caused by longshore worker job action. 

Although the negotiations between ILWU and PMA have led to agreements on some core aspects, the two parties still have yet to agree on pension benefits, wages, automation, and more. Shipping and transportation companies are becoming frustrated without an end date in sight. Cargo diverted away from the West Coast during the contract negotiations will not come back until an agreement is settled. As retailers and shippers plan out their import supply chains for the coming summer, many are hesitant to transition back to the West Coast while negotiations continue. 

Delays Grow for UP Domestic Intermodal Shipping between Chicago and Los Angeles 

Higher than average freight volumes and an imbalance of equipment due to weather are causing delays for domestic intermodal shippers along the Union Pacific Chicago-Los Angeles corridor. According to the Intermodal Association of North America (IANA), intermodal volume from the Midwest to the Southwest increased 3.5% year-over-year in February, setting a new record for January and February along the lane, while domestic intermodal volume as a whole has fallen by 4.3%. Additionally, interruptions from weather have slowed UP’s car cycle times, with terminals in Chicago and Joliet struggling to process 53-foot containers in particular. 

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.

(Source: John McArthur | Unsplash)

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