Transportation Roundup: Governments intervening to provide Red Sea shipping relief

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As Red Sea attacks continue to hamper the global shipping industry, several Asian countries are employing measures to help shippers.

The South Korea Ocean and Fisheries Ministry launched a program to provide a guaranteed 400 twenty-foot equivalent units (TEUs) of spot capacity for small and medium sized businesses on sailings leaving South Korea to Europe and the Mediterranean. Cargo owners utilizing long-term contracts will be guaranteed an extra 1,100 TEUs. Carrier HMM also agreed to use four extra loaders to help with the capacity crunch. Read more here.

Meanwhile, the Vietnam Ministry of Transport asked carriers to justify the soaring freight rates to Europe and North America and increase those connections.

In the U.S., parties interested in participating in the Federal Maritime Commission’s public hearing about the Red Sea and Gulf of Aden conditions can submit their request to participate to secretary@fmc.gov. The Feb. 7 hearing will allow stakeholders to communicate with the FMC about the disruptions. Learn more about the hearing and the FMC’s advisory about surcharges here.

Other notable stories:

A story by the New York Times features infographics showing changes in shipping routes since the Houthi attacks.  View the article here.

Transportation Roundup: Nearly 6 million TEUs diverting Red Sea

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As of Jan. 5, more than 420 container ships carrying 5.75 million twenty-foot equivalent units (TEUs) have diverted the Red Sea and are traveling around Cape of Good Hope. These shipment delays, coupled with the upcoming Lunar New Year holiday, are causing congestion in ports and increased spot rates. The next few weeks ahead of the New Year are expected to be very difficult for shippers but should subside after the holiday, according to Drewry Shipping in Journal of Commerce.

The Houthi attacks appear to be only affecting container traffic, as tanker and dry bulk vessels continue to use the Red Sea and Bab-el-Mandeb Strait at similar rates as before.

Operation Prosperity Guardian, the U.S.-led initiative to protect international ships on the Red Sea hasn’t gained traction as expected. Tobias Borck of the Royal United Services Institute believes the lack of participation could be due to political framing of the initiative, which has public participation from fewer than half of the countries expected to join. While there is strong support for the mission, the issue lies within the way the Houthis are framed.

“What’s at issue is the framing of the Houthis, and the way they are seeking to frame it,” Borck said. “On one side, [they] are compared to Somali pirates – armed non-state actors assaulting free movement – but on the other, they claim they are doing this to engender a ceasefire in Gaza.”

Read more about the initiative here.

Transportation Roundup: Shipper revenues drop, imports return to West Coast

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CMA CGM is the latest shipper to report a significant drop in net earnings in the third quarter, down 51.8% year-over-year in its container shipping segment. However, the number of twenty-foot equivalent units (TEUs) carried in the third quarter rose nearly 1% since last year. Other shippers reporting significant profit declines from the last year include Maersk, Hapag-Lloyd, Ocean Network Express and HMM. Read more from the Journal of Commerce.

Despite the revenue drop, CMA CGM still sees demand in North America and is investing in physical infrastructure, replicating the development of warehouse distribution fulfillment centers in Savannah to the Ports of New York and New Jersey.

With the labor issue on the West Coast resolved and low water levels in the Panama Canal restricting container ships bound for the East and Gulf Coast, imports are returning to the West Coast ports. After 26 months of East and Gulf Coast ports outperforming West Coast ports, the import volume streak started its shift back to the West Coast in August. Import numbers for East and Gulf Coast ports dropped 13.4% year-over-year and West Coast volumes rose 16.7% in September. Read more from Freightwaves here.

Other noteworthy stories:

Crippling port strike could hit 1 month before presidential election

Water stewardship will be one of the biggest food rends in 2024

Transportation Roundup: Canadians strike, West Coast port sets record

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More than 360 Canadian workers on the St. Lawrence Seaway began striking on Sunday for higher wages to keep up with rising living costs. The bi-national St. Lawrence Seaway is an important shipping corridor for several North American industries, including agriculture, energy, steel, construction and manufacturing. The seaway has 13 locks in Canada and two in the U.S.

Currently, there are no vessels waiting to leave the seaway system but more than 100 outside of the seaway will be impacted. Read the latest on the strike here.

On the opposite side of the U.S, holiday demand and the passage of the International Longshore and Warehouse Union contract led to the busiest September ever for the Port of Long Beach. The 829,429 twenty-foot equivalent units (TEU) moved in September is up nearly 12% year-over-year and passes the previous record from September 2020. The Port of Los Angeles is also showing a bit of recovery in recent months including a 5% year-over-year increase in September. Los Angeles and Long Beach ports are major gateways for agriculture products to Asian markets. Even in the midst of a large U.S. grain and oilseed harvest, freight rates are expected to be low with lower-than-normal export volumes expected.  Read more here.

Hong Kong-based container line Bal Container Lines recently filed a complaint with the Federal Maritime Commission (FMC) regarding nearly $9 million in congestion surcharges from SSA Marine at the Port of Long Beach. Bal Container alleges they were never told the purpose or trigger of the surcharges, how to alleviate the fee or how the fee could alleviate congestion. SSA has 25 days to file a verified response with the FMC.

Transportation Roundup: Container ag exports down, rates up

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Containerized U.S. agricultural exports dropped to the lowest first-half volume since 2016, with four West Coast ports recording the largest declines. Soybean exports suffered the largest declines in sales. Lower demand from China, as well as more competition from other exporting countries, are largely to blame for the decline.

The first half of 2023 saw a 13.6% drop from 2022 and the USDA projects overseas ag sales for the 2023 fiscal year at $177.5 billion, down 10% from 2022. Read more from the Journal of Commerce.

Both spot and contract rates for U.S. exports, however, are still up from pre-pandemic levels. The World Container Index assessed spot rates from Los Angeles to Shanghai at $838 per 40-foot equivalent unit (FEU) which is still up 66% from five years ago. Spot rates for imports are slightly down from five years ago. Read more from Freight waves here.

On the railroad, there have been several new services recently announced. Canadian National (CN) and Norfolk Southern are launching a domestic intermodal service beginning Oct. 2 to help Upper Midwest and Canadian markets reach the Southeastern U.S. The new service will use steel-wheel interchanges in Detroit and Chicago so that CN customers can reach Atlanta and Kansas City, Mo., markets via Norfolk Southern. Read more here.

On the East Coast, CSX rail and the Georgia Ports Authority recently announced an intermodal service providing direct rail between the Port of Savannah and Rocky Mount, N.C. The service will run seven days a week and includes a three-day ship-to-shore transit time. Learn more here.

‘A firsthand look’: SSGA finds opportunities in Halifax

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The Specialty Soya and Grains Alliance (SSGA) is creating opportunities beyond the St. Lawrence Seaway.

In August, SSGA hosted a See for Yourself Port of Halifax tour, sponsored by the Minnesota Soybean Research and Promotion Council (MSR&PC) with the Wisconsin Soybean Marketing Board sponsoring Friday’s lunch. Connected to more than 150 countries, the Port of Halifax has the potential to export northern-grown soybeans to European countries through the Great Lakes St. Lawrence Seaway System, expanding the market and increasing farmers’ bottom lines.

“The See for Yourself program gave us a firsthand look at the shipping opportunities available to the Eastern United States and Canada,” said MSR&PC Vice Chair Gail Donkers. “Over the next 10-50 years, the Council is looking to expand markets out of Duluth and the Port of Halifax to provide more opportunities for Minnesota soybean farmers.”

Generating conversations was the focus while in Halifax. Those conversations were kickstarted at the PIER, a center for port innovation, planning and strategy, where attendees heard from key players in the shipping and transportation industry. As a member-supported company, the PIER is a living lab for maritime transportation and logistics, dedicated to solving persistent sector challenges.

“We want to drive innovation for our supply chain and create efficiencies,” said PIER Director David Thomas. “These problems are larger than just one partner. We have to be able to work with our rail line, with our terminal operators, with our carriers.”

Along with Thomas, SSGA Executive Director Eric Wenberg, MSR&PC Director of Market Development Kim Nill, Minnesota Soybean Growers Association Executive Director Joe Smentek, Great Lakes St. Lawrence Seaway International Trade Officer Jazmine Jurkiewicz, Atlantic Grains Council Vice President Neil Campbell and Hapag-Lloyd Senior Manager of Port Operations Xavier Hamonic spoke with the group.

“SSGA is focused on the logistics and the business behind this trade,” Wenberg said. “As a learning and listening organization, we’re going to have conversations and figure out what to do next. Shipping and transportation is the backbone of what we do.”

In marketing year 2021/2022, the United States exported more than 2 billion bushels of soybeans, yet only about two percent left the country via the St. Lawrence Seaway. Why? The better question is ‘Why not?’

“Why not Duluth-Superior?” Smentek asked. “We’ve had really great conversations with feed mills in Morocco. They want soy from the upper Midwest because they know the quality of the product that we have. There is a lot of opportunity for bulk shipments, especially port to port.”

Tackling trade barriers is hard work. If it was easy, everyone would be doing it.

“There are still barriers,” Smentek said. “The biggest one right now is economics. It is cheaper out of Houston and Norfolk. Highway H20 is working on a study to say, ‘Here is the cost that goes into the St. Lawrence Seaway and here’s the cost that goes into Houston.’”

In addition, exporting from Houston is cheaper because the state of Texas pays a lot of the costs associated with shipping and transportation.

“The question is, what fees can we tap into?” Smentek said. “If there is a pilot fee on a dock, can the state of Minnesota and Wisconsin pay for the pilot to come into Duluth-Superior? Can we start doing those things? But those questions haven’t even been asked yet. So that’s really what this effort is about.”

Luckily, neither SSGA nor soybean farmers shy away from asking questions that no one else is asking.

“It’s nice to have farmers, the experts, in the room to ask those questions,” Smentek said.

While there is still work to be done before the Port of Halifax becomes a hub for Upper Midwest-grown soybeans, SSGA and Minnesota and Wisconsin soybean growers are doing what they can to make the stars align.

“It’s a good exercise for Minnesota and Wisconsin checkoffs to make sure that there is a plan,” Smentek said. “And if you do have people that want U.S. soy like they do in Morocco, that they have a cheap, easy way to get it there and to get it there from Minnesota and Wisconsin.”

Transportation Roundup: Labor strike effects to linger

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Nearly 75% of International Longshore and Warehouse Union (ILWU) of Canada members voted to approve the tentative agreement with West Coast ports last week, but congestion in the supply chain could take months to recover from the strikes. The new agreement increases wages, benefits and training.

While the Canadian workers were on strike, many ocean carriers diverted and unloaded at U.S. ports instead. Containers on railroads piled up and are expected to take at least two months to clear up, while also taking a big hit to railroad’s revenue. Read more from CNBC here.

In ocean shipping, carriers are reporting lower profits but are still earning more than they did pre-COVID. Ocean Network Express (ONE) reported a 58% drop of net income in January-March and a 91% drop from last year, but the $513 million in earnings in their first quarter were still much higher than $5 million in April-June 2019. Profit trends are similar for CMA CGM: Their $1.33 billion net income this quarter is an 82% drop from a year ago and 34% drop from the first quarter. In quarter two of 2019, the ocean carrier had a net loss of $109 million.

Meanwhile, Maersk will adjust its operations in response to an expected decline of 1-4% of global container volumes. Their second quarter profits also sharply dropped from $8.62 billion in 2022 to $1.45 billion. Read more about Maersk’s drops in profit here.

Other articles of interest:

What the TEU tea leaves are telling us

Feds call attention to maritime ‘near misses’

Transportation Roundup: Maritime industry automation could be global crisis

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During the International Longshoremen’s Association (ILA) convention on Monday, President Harold J. Daggett expressed his displeasure with automation in the maritime industry. Automation efforts such as container tracking would eliminate jobs, which Daggett called a “global crisis that demands a global response.” The ILA is the largest union of maritime workers in North America, representing longshoremen on the Atlantic and Gulf Coasts, Great Lakes, major U.S. rivers, Puerto Rico and Canada. Read more about Daggett’s comments here.

July has been a rollercoaster for ports in Canada, starting with a strike by the International Longshore and Warehouse Union (ILWU) Canada. Union members are expected to vote on a tentative contract agreement later this week. The ports were shut down Tuesday morning for members to review the tentative deal. The strike has disrupted cargo handling at Vancouver and Prince Rupert, which are vital for both U.S. and Canadian markets. Read more here.

A column in the Journal of Commerce reminds us to consider the comparative base when saying demand and ocean freight waves have “collapsed.” While rates from Asia to the West Coast have dropped 86% since in their peak in late 2021, this comparison is skewed due to the pandemic supply chain crisis. If comparing rates from Asia to the West Coast in 2019, rates are actually 17% higher, which suggests the market hasn’t collapsed, only normalized. Read more here.

SSGA leads transportation panel

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On July 13, SSGA Executive Director Eric Wenberg led a panel, “Teamwork Approach to Logistics & Transportation,” at the U.S. Agricultural Export Development Coalition’s (USAEDC) Attaché Seminar. Panelists, which included Port of Los Angeles CEO Gene Seroka, Brig Skoy of Savage Services and Jaeson Dandalides from CMA-CGM, discussed better approaches to moving equipment and making strategy.

Addressing USDA foreign attachés from U.S. embassies worldwide and leaders from U.S. agricultural associations, the panel stressed the need for better data and transparency between rail and ocean carriers to help reposition equipment. Often, carriers must overbook their vessels 150 percent so they can get a 90 percent fill rate.

The panelists detailed cases whereby working together has facilitated better outcomes in ag shipping. Seroka led the panelists saying he was ready to lead whatever discussion was needed to facilitate plans to get equipment where it was needed. Wenberg emphasized the need for USDA officials to keep logistics in mind when making plans for overseas market development and market access. It doesn’t make any sense to promote goods against logistical hurdles that are too great for companies to overcome.

Transportation Roundup: Submit Export Sales Reporting and Maintenance System comments

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SSGA is collecting comments from members about the USDA Export Sales Reporting and Maintenance System 2.1 (ESRMS 2.1). Access the survey at this link.

SSGA will submit your anonymous comments from this survey to USDA-FAS. Anyone involved in the reporting for an exporting company can submit their comments at this survey and multiple people from the same company can submit comments. Please complete the survey with your comments by EOD tomorrow, June 28.

USDA-FAS is interested in public comment on 1) whether collection of contract-based information will help improve the timeliness and reliability of the data in USDA’s Export Sales Reports; 2) the accuracy of the agency’s estimate of the burden of the collection of information including validity of the methodology and assumption used; 3) ways to enhance the quality, utility and clarity of the information collected; and 4) ways to minimize the burden of the collection of information on those who are required to report, including through the use of automated, electronic, mechanical or other technological collection techniques or other forms of information technology.

ESRMS 2.1 is available for user acceptance testing at this link until June 30.

SSGA would like to congratulate member Grain Millers Inc. for their recent 2023 Shipper of Choice award from FreightWaves. Grain Millers manufactures and supplies whole grain ingredients and is headquartered in Eden Prairie, Minn. The Shipper of Choice awards honor shippers for their collaboration, flexibility and attentiveness to carrier partners over the last year. Learn more about the awards here.

Last week, four Republican Senators introduced legislation that would prevent longshore workers from engaging in disruptive work slowdowns or resisting automation efforts at U.S. ports. Longshore unions would also be barred from impeding “modernization efforts at a port.”

The legislation, called the Preventing Labor Unions Slowdowns Act, would add two types of unfair labor practices by longshore work unions into the National Labor Relations Act and Labor Management Relations Act. Learn more about the proposed legislation here.

Another article of note:

Port of Cleveland attempts to punch above its weight

Despite labor agreement, some West Coast-bound ships still delayed