Compiled by Bruce Abbe, SSGA Strategic Adviser for Trade and Transportation

UP to expand intermodal
During a fourth-quarter stock earnings call last week, Union Pacific railroad executives announced plans for the western Class I railroad to expand its intermodal container infrastructure.    

Of keen interest to many of SSGA’s Upper Midwest shippers, UP said it will expand its recently restarted intermodal facility in Minneapolis from a “pop-up” to a full intermodal terminal. 

UP officials said the railroad will also be adding capacity to its facilities in the Inland Empire area of Southern California east of the ports of Long Beach and Los Angeles, and it will be concluding a project to install wide-span big gantry cranes at its Global IV facility in Chicago. 

Its capital investment plans also include adding more rail cars, more sidings and other upgrades. Go here for the full story. 

Port congestion getting worse
Danish global container shipping consulting firm Sea-Intelligence recently analyzed data it receives from ocean carriers and concluded there are no signs yet heading into the new year that port congestion and bottlenecks are easing up.   

The analytical firm ran the numbers and determined that 11.5% of global container shipping capacity was taken out of the market in November due to ships being parked off ports, notably U.S. West Coast ports. That was marginally better than 12.5% taken out of the market in October. Add that lost capacity to what Sea-Intelligence said was an increase of global demand by 7%, and you’ve got the crunch shipping is now experiencing. 

Sea-Intelligence CEO Alan Murphy indicated available data shows congestion issues worsening as 2022 begins, without signs of improvement yet. Go here for the full story. 

Ocean carriers post $150 Billion profit year
Bloomberg News and the American Journal of Transportation reported last week the leading ocean container carriers earned an estimated $150 billion in profits by year end 2021, thanks to extraordinary high rates for consumer goods imports. Yet reliability – ships arriving within scheduled arrival times – hovered between only 33 to 40% during the year. 

Spot rates for 40-foot containers shipped from Asia to the U.S. topped $20,000, up from $2,000 just a few years ago, and recently has been holding around $14,000. Not all shippers pay those rates, thanks to long-term contracts, but new contract negotiations will be getting underway during a period of high existing rates. Smaller importers and exporters in many countries are feeling the heat, with the situation magnified by the market concentration of the ocean shipping lines.  Go here for the detailed report. 

Not all shippers suffer the same 
Not all importers and exporters have been suffering to the same degree. Prominent shipping analyst Lars Jensen, CEO of Vespucci Maritime, told the Journal of Commerce that despite the huge delays at the delays and shut downs in some trade lanes, many of the biggest consumer product companies are reporting record profits as well – among them Walmart, Target, Home Depot, Lowes and Dole Food.   Those are companies in the center of the consumer product demand surge. Go here for the full story. 

U.S. ports report record volumes
With 2021 behind us, the United States’ main container shipping ports are reporting much-increased, and, in many cases, record container traffic for the year. The sharpest increases are in imports handled.  Exports were strong too – if you include empties among the exports. For loaded exports, including agricultural exports, the story is far different with the West Coast ports showing declines, while East Coast ports held their own or increased as well: 

• Northwest Seaport Alliance: The jointly operated ports of Seattle and Tacoma (NWSA) saw its container traffic hit 3,736,200 20-food-equivalents (TEU) – up 12.5% from 2020. Imports were 1,554,671 TEU, up 16.8%. Exports were at 1,427,449 TEU. However, full loaded exports declined by 12.5%.  Go here for a full report. 
• California ports: The Port of Los Angeles (POLA), the largest in the U.S., hit a yearly annual record of 10.7 million TEU in 2021 – up 13% from 2020. The Port of Long Beach (POLB), its next door neighbor and second-largest, posted a total of 9,384,368 TEU, up 15.7% and the first time it has topped 9 million TEU handled. However, loaded exports have been down nearly all year at the big southern California ports. The Port of Oakland handled 2,448,248 TEU, down 0.5% for the year. Oakland has been a focus of efforts by the industry regulators and experts to diversify incoming cargo to try to relieve congestion pressure. Go here for more information. 
• East Coast, Gulf ports: Over on the East Coast and Gulf Coast, container traffic at region ports have also been setting records, with the story more positive for exports. The Port of Virginia in Norfolk handled a record 3.5 million TEU, up a whopping 25.2% from 2020. That included an increase in loaded exports of 11.6% to 1.05 million TEU. Loaded imports were up 27.5% to 1.68 million TEU. The Port of Charleston handled 2.75 million TEU at its terminals – up 19% from 2020, and up 13% from 2019.  Imports were up 25% to 1.29 million TEU at Charleston, while loaded exports were also up posting a 5% increase to 814,94 TEO. The Port of Mobile, Alabama on the Gulf of Mexico posted increased container cargo by 19% to a record 502,623. Go here for the full story.

Porcari addresses container crisis
John Porcari, the Biden Administration’s port envoy and head of the administration’s task force to address the supply chain crisis, recently spoke to the International Propeller Club of the United States, a major shipping industry annual event.    

Porcari covered a full range of steps the administration has and is taking to address the crisis, including a host of infrastructure investments and pressing for service improvements.    

He also addressed the problems U.S. exporters have been facing finding space for containers on ships.    

“It is not acceptable to disadvantage U.S. exporters,” he said. 

Go here for the full story. 

Compiled by Bruce Abbe, SSGA Strategic Adviser for Trade and Transportation

The container ship and container logjam at West Coast ports particularly in Southern California, is continuing despite some signs of progress. 

Port of Los Angeles (POLA) Executive Director Gene Seroka said Friday that the number of containers overstaying their time at the port had declined by 60% after the port announced a planned penalty fee – a move it has avoided implementing three times.

However, area truckers say that, while the containers piled up too long on-dock may be declining, the boxes are still piling up off-dock. Harbor Trucking Association CEO Matt Schrap told Bloomberg that containers are clogging up space elsewhere around the port and continue to use up scarce chassis needed to move other inbound containers. 

Ships backed up … way offshore
Cargo ships waiting to unload at POLA and the Port of Long Beach are still at unprecedented levels as new ships keep arriving intent on unloading freight destined for area warehouses and railroads to inland terminals that importers have designed their supply chains around.

Backed-up ships have numbered in the 90s in the last couple of weeks – some nearby in San Pedro Bay, and others repositioned 100-plus miles offshore.

Freightwaves even noted earlier this month that some ships destined for Southern California are even being held back off Japan, Taiwan and Mexico, rather than heading for SoCal.

New round of blank sailings
Perhaps more concerning to export shippers looking for containers and vessel space is word that the logjam on the West Coast is causing an rising number of blank – or cancelled – sailings and sliding sailings as ocean carriers skip ports in Asia and the U.S. in an effort to try to recover their sailing schedules.

In some ways, it’s understandable as ocean carriers want to get pack to predictable schedules, but it’s also concerning because of added limitations in trying to move containers where they need to go – loaded or empty.

The Journal of Commerce reported last week that the West Coast has been hit hardest by the new blank sailings, rising from a weekly average of 7.7 per week for the first nine months of 2021 up to 13 blank sailings in recent weeks. The article quoted the head of Sea Intelligence, a noted maritime consulting service.

“We’re not seeing the same pattern to the U.S. East Coast or on Asia-Europe,” he said.

The Japanese-owned carrier Ocean Network Express (ONE) reportedly cancelled 29 sailings in December, 22 of them to the West Coast.

Gulf, East Coast ports see opportunities
While they, too, face some congestion issues – notably trucking shortages – East Coast and Gulf ports seem to be handling the surge in imports and traffic better. There is also more growth in capacity in the works.

California’s supply chain issues open up a business opportunity for Gulf Coast ports noted a story on Mississippi Public Radio. The Port of Mobile saw container volume go up 27% in September compared to a year ago, while the Port of South Louisiana had more than 47% more tons of cargo flow through its port during the second quarter.

Last Friday, the Port of New Orleans (NOLA) welcomed the delivery of four new post-panamax gantry cranes for its Napoleon Avenue Container Terminal. The big cranes made a 15,643-nautical-mile journey from Shanghai, as part of a $112 million investment, including $49 million for the cranes’ construction and delivery, plus $63 million for landside dock improvements.

The Port of Savannah in Georgia achieved its 16th consecutive month of record growth in November, processing 495,750 TEU of containers – up 6.7% from a year earlier. Savannah has been the No. 1 export port for the U.S. at times in recent months.

Savannah is undergoing a series of expansions that are projected to increase the port’s handling capacity by 25%, reports Container News.

Last week the Georgia Ports Authority (GPA) announced in a news release Savannah will speed up its addition of 1.6 million TEUs of on-terminal container capacity by this June. The GPA board also announced it had approve a $24.4 million purchase of nine electric-powered, rubber-tired gantry cranes to support the expansion.

FMC’s Bentzel grades U.S. logistics system D+
Federal Maritime Commissioner Carl Bentzel pulled no punches when asked in an interview about the status of the U.S. shipping logistics system.

Asked by Freightwaves and CNBC reporter Lori Ann LaRocco to grade the U.S. logistics system, Bentzel said: “Regretfully, I would have to give it a D-plus, solely based on the level of congestion and price increases.”

Bentzel, who spoke at the Global Trade Exchange last August, said that the U.S. supply chain not only needs major physical improvements, but it also needs 21st-century data improvement to manage the country’s supply chain.

Data sharing is a big part of the problem today. SSGA shipping leaders have raised that issue to FMC and other regulatory agencies, noting the lack of timely, accurate information about container availability and status of shipments.    

No end in sight for demand boom
While everyone is wondering how long the congestion logjam will last, Sea Intelligence said last week that, while it sees declines in some categories of imported freight demand, it sees growth in others. Together, it doesn’t see a near term end to the demand boom in the U.S.

In fact, U.S. government data shows consumption of services is running at near pre-pandemic levels, and consumption of goods is continuing to increase.

By Bruce Abbe, SSGA Strategic Adviser for Trade & Transportation

Late last week the U.S. House of Representatives finally approved a $1.2 trillion infrastructure funding package that is being called “historic” – perhaps due to its size (even though it whittled down from earlier proposals by the Biden Administration) or perhaps due to it finally getting done after decades of similar past proposals getting left undone in the congressional dust bin. President Biden has indicated he will sign the bill, which was approved by the Senate in August. 

Here are a few highlights of the package: 

• A five-year reauthorization of the recurring Federal Highway Bill, funded at $273 billion for roads and bridges, the highest allocation in decades. 
• $550 billion in new spending, including $110 billion for roads, bridges and other major infrastructure projects. 
• $17.4 billion in new spending for inland and coastal waterways and ports infrastructure. 
• $66 billion for freight and passenger rail. 
• $25 billion for airports to improve runways, gates and multi-modal connections. 

• $73 billion for upgraded electrical power. 
• $65 billion for broadband access expansion. 
• $55 billion for clean water 
• $5.7 billion for electrical vehicle charging stations 

The package also includes a range of other programs groups have been pursuing. Among them are a younger-truckers pilot program that will make 18- to 21-year-olds eligible for interstate truck driving, additional trucking safety protections and an hours-of-service exemption for certain ag haulers. 

More detailed coverage can be found in the American Journal of Transportation, Freightwaves and The Associated Press (via St. Louis Post-Dispatch). 

Ocean carriers bristle at congestion fees 
Last week, much of the chatter in the transportation media focused on the consternation ocean container carriers were feeling about the announcement that the ports of Los Angeles and Long Beach are about to assess fees on carriers for containers with imports that overstay their time on port property, which has clogged the system.    

The fees are not cheap. For containers sitting on the docks more than nine days, the charge is $100 per container for the first day, $200 for the second, $300 for the third, and so on. 

Then late last week, two terminals at the port of Tacoma, part of the Northwest Seaport Alliance, announced they, too, will be instituting overstayed container fees on import containers. Husky Terminal and Washington United Terminals, which serve mostly The Alliance carriers, including ONE, Hapag-Lloyd, HMM, and Yang Ming, will assess surcharges of $315 and $310, respectively, for import containers that have exceeded 15 days on the terminals, beginning Nov. 15. 

It remains to be seen if these efforts, reluctantly taken by the ports, will yield success in unclogging the ports.  

Ocean carriers are used to assessing these demurrage fees on shippers and truckers, not being the recipient of the penalties. Naturally, some of the carriers indicated they will pass them on to their customers.    

There’s been no end of finger pointing at other parties: Carriers blame import customers for not picking up containers or bringing the empties back. Importers blame big retailers who often negotiate long “free time” provisions in their ocean carrier contracts and leave cargo on docks and on chassis for long periods at the ports. Truckers blame terminals for gates not being open and warehouses for not having space and accepting containers.   

After prodding by the Biden Administration, more ports and terminals are trying to extend hours of operation, but it’s been slow going, and terminals and carriers say not enough truckers use the extended hours to make it worthwhile. 

But at some point, something must be done. The penalty fees definitely have caught the attention of the steamship lines. So far – cross our fingers – no such penalties have been announced on export-loaded containers, which shippers want to push through the ports as soon as they can and are not deemed to be part of the on-dock, delay/congestion problem. 

More coverage can be found in Freightwaves and Journal of Commerce. 

Seeing signs of rate relief
Container News reports that, since September, some shippers have seen some relief from the exorbitant east-bound rates for imports to the U.S. from Asia.    

The digital freight-forwarding company Shifl said the China-U.S. spot rates (which have hit $20,000, $30,000 and even higher) dropped in October by more than 50%. Shifl pegged the spot rate from China to Los Angeles as dropping from a high of $17,500 in September to $8,500 in October. New York-based Shifl indicated China to East Coast U.S. spot rates are around $13,800 per 40-foot container currently, a 29% decrease from September’s rates of $19,500. Mind you, those West Coast rates were below $3,000 18 months ago. 

Shifl believes the decline is due to the peak season rush to bring in consumer goods for the holidays is largely over, despite a good share of those goods still sitting on ships offshore. Hopefully, the downward trend will continue. 

Ocean carriers banking more profits
Despite all the turmoil, the steamship lines keep reporting ever higher and higher profits. 

At the beginning of the month, Hapag-Lloyd upped its 2021 operating profit projections by an extra $1 billion. That’s on top of the $4 billion rise previously forecasted.    

Not revenue. Not profit. But rise in profit. 

Hamburg, Germany-based Hapag forecast its 2021 operating profit will be in the vicinity of $12 billion to $13 billion (U.S.). That’s up from a previous projection of $7.6 billion back in March. Read more on Journal of Commerce. 

Meanwhile, at Denmark-based Maersk, the profit picture looks every bit as rosy. Third-quarter record revenues reached $16.6 billion. The company tripled its rise in earnings before interest, taxes, depreciation and amortization (EBITDA) to $6.9 billion (U.S.), with the ocean carrier sector accounting for $6.3 billion. Maersk is forecasting the full-year EBITDA to yield $22 billion to $23 billion, reports Container News.

New container dray operation opens in Minneapolis
On a more positive note, Container Port Group (CPG), a 50-year-old major container drayage company, recently has opened a new trucking terminal in Minneapolis, a key container rail market used by many SSGA exporters. 

CPG, with 23 terminals along the East Coast and Gulf Coast, recently added three new terminals in entirely new markets, according to a report in the American Journal of Transportation. The new Minneapolis terminal is one of the new market operations. New Orleans and Greer, S.C., are the other two. 

Container shippers interested in checking out CPG’s rates and service should contact Eddie Fuchs at Eddie.Fuchs@containerport.com. 

CPG’s president was recently featured in a story in the American Journal of Transportation commenting on dealing with current challenges for the industry.