NPL Newsletter: Container Prices Rise, ILA/USMX Contract Expiration, and Tropical Storm Alberto

The international shipping market shows a mixed bag this month. Import volumes are on a tear, surging compared to May. However, exports are taking a hit, falling behind previous numbers. Domestic pricing continues a slight month-over-month climb, but remains 2-5% lower than last year. Capacity is tightening across the Southern US, while Midwest capacity continues loosening. Adding to potential cost increases, diesel prices saw their first uptick since early April, a trend likely to continue throughout summer.

This week’s transportation news is dominated by several pressing issues. International container prices skyrocketed by 30-40% in the second half of June, a trend expected to continue. On the East Coast, a potential labor disruption looms as the ILA and USMX contract nears its expiration at the end of September. Adding to the challenges, hurricane season has officially begun – the first named storm of the season, Tropical Storm Alberto, threatens to bring heavy rain and flooding to South Texas this week.

via Journal of Commerce Gateway index
via DAT Trendlines index and US Energy Information Administration
Domestic Regional Capacity via DAT Market Conditions
via DAT Market Conditions, previous 8-day index

Freight capacity has remained relatively stable, compared to last week. The only notable change observed was within the dry van sector, where the Great Lakes region transitioned from a neutral capacity to a tight market. Flatbed capacity adjustments were identified in the Lower Atlantic and Upper Midwest regions, experiencing downgrades from tight to neutral and loose to very loose, respectively. Finally, reefer capacity in the Southeast tightened further, moving from tight to very tight.

Rising Container Shipping Rates Reshape Global Trade Landscape

Recent reports highlight a significant increase in world container shipping rates, presenting both challenges and opportunities for global trade. This upward trend stems from a confluence of factors, including increased demand for goods, limited vessel capacity, and rising fuel costs. As a result, freight costs across major trade routes have climbed, impacting businesses reliant on efficient supply chains.

Fueled by persistently strong demand for goods, container shipping rates experienced another significant jump in the second half of June, with 40-foot container rates rising by 30-40%. This surge, coupled with equipment shortages plaguing major Asian ports, is creating a perfect storm for shippers. Some shippers are rushing to move cargo before prices rise further and equipment becomes scarcer. Shipping lines are capitalizing on this urgency, with plans to implement another five to fifteen-percent General Rate Increase in the first half of July.

Adding to the challenges, equipment shortages have become severe in most of Asia’s main loading ports. While shipping lines are repositioning empty containers to address the issue, the situation is likely to persist in the coming weeks. Delays caused by vessels rerouting via the Cape of Good Hope further complicate matters. This lack of available containers will likely exacerbate the challenges faced by shippers.

Compounding these issues is ongoing port congestion in Asia. Elevated yard utilization, unexpected bad weather, and vessel bunching are leading to low terminal operation efficiency and long wait times. The situation is so critical that carriers are resorting to last-minute port omissions in an attempt to maintain transit schedules, causing further disruptions for shippers.

Industry leaders advise shippers to anticipate and adapt to these changes through strategic planning. Proactive communication and collaboration with logistics providers are crucial in navigating the complexities of pricing and exploring cost-effective shipping solutions. Staying informed and agile will be essential for businesses to remain competitive and operationally efficient in the ever-evolving global marketplace.

Potential Labor Disruption Looms on US East and Gulf Coasts

Tensions are rising on the US East and Gulf Coasts as contract negotiations between the International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) reach a critical juncture. With the current agreement set to expire on September 30th, fears of a labor strike are casting a long shadow over vital supply chain routes.

ILA President Harold J. Daggett expressed concerns about ongoing disagreements, stating that “negotiations are pointless” if USMX member companies continue to violate the current contract through automation efforts that threaten ILA jobs.

As the September deadline approaches with negotiations stalled, the potential for disruptions looms large. Shippers are scrambling to develop contingency plans, exploring alternative routes and bracing for the financial impact of potential delays and rerouted shipments. Industry experts echo the advice offered in the face of the global shipping challenges – proactive planning and open communication are paramount during this critical period.

Tropical Storm Warning Issued for South Texas

South Texas is bracing for heavy rain and potential flooding as Tropical Storm Alberto, the first named storm of the 2024 hurricane season, develops in the Gulf of Mexico. The National Hurricane Center (NHC) predicts an 80% chance the storm will form within the next two days.

Forecasters expect rain totals between 1-3 inches for Houston by Thursday, with areas south potentially receiving significantly more. Galveston and Brazoria counties could see 5-10 inches of rain, raising concerns about localized flooding.

Houston officials are urging residents to stay alert and prepared for heavy rain. Potential impacts on airports and seaports remain unclear, with port authorities monitoring the situation.