This week:

• More than nine months later, Red Sea crisis still has major impact on global supply chain
• BNSF intermodal project to reduce emissions, but is it enough for California’s clean air rules?
• Rail dwell times way up as Los Angeles-Long Beach ports hit peak season in already busy year\
• Cargo theft sees massive spike in first half of 2024 as criminals streamline their operations
• Business plan to revitalize container handling service at Port of Portland’s T6 released

Ongoing Red Sea Crisis Still Reducing Capacity, Pushing Rates Upward

More than nine months after its beginning, the Red Sea crisis is still contributing to a significant reduction in container vessel capacity and pushing freight rates upward. In an editorial published August 28 in the Journal of Commerce (JoC), Vespucci Maritime CEO and Partner Lars Jensen looked at the ongoing impact the crisis has had on the global supply chain and how the container shipping market might react going forward.

Jensen pinpointed the start of the crisis to the hijacking of the car carrier Galaxy Leader on November 19, 2023. Since then, more than 100 merchant ships have been attacked, and at least 39 other vessels have been hit and sustained damage. Two sank after being attacked.

CU Lines, FESCO, NewNew Shipping, and SeaLand have offered Asia-to-Europe services that have been among the most successful responses to the Red Sea crisis. CMA CGM’s long-running “Phoenician Express” via the Suez Canal has also been a popular alternative amid the crisis.

Going forward, Jensen sees an opportunity for niche carriers to provide viable alternatives. “The longer the Red Sea crisis lasts, the more we will see these carriers solidify not only their financial position but also their customer relations in the region,” Jensen wrote in the JoC. “This provides them with a stronger platform for competing in the wider intra-Asia market when the crisis is eventually resolved.”

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BNSF’s Planned SoCal Intermodal Project Under Threat by State Clean Air Rules

BNSF Railway’s proposed $1.5 billion intermodal facility in inland Southern California may run afoul of California’s aggressive push for zero-emission locomotives by 2035, according to JoC Executive Editor Mark Szakonyi.

In an editorial published in the JoC on August 28, Szakonyi pointed out that BNSF’s 4,100-acre project aims to ease pressure on SoCal ports by reducing local truck hauls. While this would have the positive effect of cutting truck traffic and emissions — and reducing costs for supply chains in the US’s largest import gateway — it may not meet California’s rail engine mandate passed earlier this year.

For its part, BNSF says that California’s planned phase-out of diesel locomotives is too fast and if it has to follow the mandate, the intermodal project would be infeasible. The US Environmental Protection Agency (EPA) ultimately has the final say on locomotive standards. The project’s fate may rest on whether the EPA grants the California Air Resources Board (CARB) a necessary waiver for the rapid diesel phase-out, or if the agency sides with BNSF and the broader Class I industry.

LA-LB Ports Seek to Mitigate Peak Season Congestion as Rail Dwell Times Rise

Dwell times for rail containers at some Los Angeles and Long Beach terminal ports are nearly double what they were earlier this summer, a sure sign peak season is in full swing. This is amid surging imports, continued front-loading, rerouting due to potential labor strikes at US East and Gulf Coast ports, and Canadian rail disruptions. While some port customers worry the dwells will grow longer soon, LA-LB complex managers are working to mitigate congestion.

LA-LB rail container dwell times rose from 4.73 days in June to 5.66 days in July, according to data from the Pacific Merchant Shipping Association (PMSA). The Port of Los Angeles website reported last week that nearly 28% of rail containers at the port’s six terminals were experiencing dwell times of nine days or longer. At the Port of Long Beach, dwell times averaged six to seven days.

Port of Los Angeles Executive Director Gene Seroka told the JoC, “That’s far too long.” Long Beach Container Terminal President Anthony Otto said BNSF is positioning intermodal rail traffic to help reduce dwell times. Seroka said the LA ports are working toward “dwells of two to four days.”

Cargo Theft on the Rise as Criminals Become More Sophisticated

According to a report by the supply chain risk management and intelligence firm Overhaul, cargo theft in North America rose 49% in the first half of 2024 compared to the same time frame in 2023. Overhaul’s report, released August 22, placed the average cost per cargo theft at $115,230 per incident, an 83% year-over-year increase.

Overhaul Director of Intelligence Danny Ramon said he sees the situation getting worse before it gets any better. “I’d be very surprised if we don’t wind up with another one or two large strategic cargo theft groups operating in the US within the next three years,” Ramon told the JoC, noting that cargo thieves are becoming more organized and sophisticated.

Electronics top the list of stolen products, accounting for 23% of thefts this year. California reported 45% of all incidents, leading Overhaul to define a “Southern California red zone,” where cargo thefts are most likely to occur. This zone extends approximately 200 miles from origin points such as the ports of Los Angeles and Long Beach.

Port of Portland Delivers Plan to Keep Container Terminal Operational

The Port of Portland is working to keep the container service at Terminal 6 (T6) going, four months after announcing it would shut down container handling operations.

In April, Curtis Robinhold, the port’s executive director., said T6’s cargo container handling operation would soon stop, following $13 million losses in both 2022 and 2023, and a failed effort to lease the site to a third-party container handler. However, in May, Oregon Governor Tina Kotek pledged $40 million in state funds to keep the container handling service up and running — if the Port of Portland submitted a viable business plan that justified the investment.

The port delivered its plan on August 23. Among the goals are a 10% increase in cargo volumes; working with a private terminal operator to better market T6; increasing shipper outreach; and stabilizing container operations with a service reliability initiative.