This week:

  • Air cargo volumes on the trans-Atlantic trade lane see their first monthly decline over the past two years in March
  • The ILWU announces progress regarding West Coast negotiations with PMA
  • A new Alabama bill could give shippers more tax credits for shipping more cargo through the state
  • Demand and rates fall on the westbound trans-Atlantic market
  • US truck tonnage increases month-to-month but shows a deficit with seasonal adjustment

Elevated Trans-Atlantic Air Cargo Volumes Saw Declines in March

High levels of inflation in the US caused westbound trans-Atlantic volumes to fall 12% year-over-year in March, the first monthly decline in two years despite consecutive declines over the previous 12 months in the global air market. But although demand has only just started to drop in this market, spot rates have consistently fallen to rates approximately 30% lower than at the very start of 2023, leading to 54% of March’s trans-Atlantic volume moving on the spot market. 

Increased air freight volume is expected to exert continued downward pressure on trans-Atlantic rates as airlines increase the number of passenger flights which will keep spot rate volumes high. In the last two weeks of March, European outbound cargo capacity increased by 15% year-over-year. By the start of April, spot rates from North Europe to North America averaged $3.27/kilogram, 42% lower than the same period in 2022 and 29.8% lower than the start of the year.

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The ILWU Announces a Potential and Tentative Deal with PMA without Revealing Key Details

The International Longshore and Warehouse Union (ILWU), which has been in contract negotiations spanning West Coast ports with the Pacific Maritime Association (PMA) since May 10 last year, announced on April 20 that the two parties have reached a tentative agreement on key issues. The ILWU statement said that a final deal was still being worked out, and no key details were revealed regarding where progress was made.

While previous statements were released jointly between both the ILWU and PMA, the PMA instead chose to release a separate statement later that same day, agreeing that talks were progressing while simultaneously highlighting ongoing ILWU Local 13 work action that has disrupted the ports of Los Angeles and Long Beach for the previous three weeks.


Shippers Might Get More Tax Credits for Alabama Cargo Thanks to New Bill

A new bill introduced in the Alabama legislature’s Ways and Means Committee could boost tax incentives for shippers who move freight through the Port of Mobile and other Alabama State facilities to encourage higher container, air freight, bulk cargo, and export volumes. Current law gives shippers a $50 tax credit for each TEU when they ship 5% or more cargo than they did in the previous 12 months. The new legislation encourages greater cargo movement by providing a maximum tax credit of $125 per TEU when shippers reach a 25% cargo increase over their base amount. No timeline has been set for when the bill will progress to the full legislature for a vote.

First-quarter container volumes in Mobile dropped 7% year-over-year to 125,664 TEU, although the port’s intermodal numbers show significant growth with total container lifts rising 89% in the same period. The Alabama Port Authority’s and CX Transportation’s continued investment in intermodal infrastructure aims to further improve high-volume rail capacity with an intermodal container transfer facility in Montgomery County that is expected to open in 2025. APM Terminal also plans on doubling track space at the port’s near-dock rail yard by 2025.

Westbound Trans-Atlantic Demand and Rates Declined Sharply in March

The westbound trans-Atlantic market saw a sharp decline in cargo and rates in March which could weaken the trade lane’s second quarter. The first quarter saw improved vessel reliability and more capacity combined with slowing volume, contributing to dropping rates after the record highs in 2022. Although January’s import volume from North Europe to North America was up 9% year-over-year, February saw a decline of 5.7%, which then increased to a year-over-year decline in March of 16.3% with just 172,658 TEU imported for the month. Q1 saw a total drop of 5.2% compared with Q1 2022.

Spot rates along this trade lane fell by as much as 69% year-over-year for March to an average of $2,373/FEU, 62% lower than on December 31. Contract rates on the westbound trans-Atlantic have also fallen, dropping by 33% in March compared with December 31. By mid-April, contract rates averaged $3,111/FEU, 38% lower year-over-year. February’s schedule reliability showed significant improvements from February 2022, rising to 44.3% from 14.3%. As capacity and schedule reliability improves, DHL is warning shippers to watch transit times as carriers slow vessel speeds in order to comply with new IMO 2023 regulations to reduce fuel consumption and CO2 emissions.

 US Truck Tonnage Rises for March but Doesn’t Meet Expectations

The American Trucking Association’s unadjusted for-hire truck tonnage index increased by 9.3% from February to March, and although it is a significant increase from one of the most recent low points, it is much lower than the 17.2% increase from February to March in 2022, or the 17.4% increase for March 2021. This leads to a 5.4% seasonally adjusted decline, with the lower increase largely attributed to falling home construction, factory output, and soft retail sale volumes.

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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