Competitive Shipping Roundup: Extended hours are worthy goal, but congestion is no easy fix

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By Bruce Abbe, SSGA Strategic Adviser for Trade and Transportation

The search for answers to the compounded, system-wide, congested global container shipping system continues, and last week’s news and developments point to some concerted efforts but no quick, easy fixes. Here’s a look:

White House pushes expansion of hours
In response to complaints and pleas from shippers and their organizations, including SSGA, the Biden Administration in August created a Supply Chain Disruptions Task Force in that includes senior executive staff at the departments of transportation, agriculture and others to work with industry on solutions.    John Porcari, a former head of the Port of Baltimore and industry veteran, was tapped as a port envoy for the task force.

Porcari reportedly told a group of exporters last week that he will be working to expand operating hours at more ports, a strategy that started at the ports of Long Beach and Los Angeles last month and looks to be getting a bit of traction at the PNW ports and others. He’s urging large volume retail importers, ports and terminals to expand their operational times.

Expanding operating hours at the ports and dock terminals – ideally to 24-7 like other ports around the world – won’t provide a quick solution some, industry experts advised the Journal of Commerce (JOC) and the Agriculture Transportation Coalition’s annual virtual meeting last week. Terminal operators at LA/LB claim they have been offering truckers and import retailers incentives to use the after-hours gates opened last month, but few of them are as of yet doing so. Experts speculate that the warehouses are simply full and not operating after hours, so the truckers don’t have enough places to move the containers.

The space availability and congestion issues are more systemwide, particularly so on the land side and inland U.S. Rail service to inland warehouses and distribution centers in the Midwest from the West Coast is also being restricted, or staged, by the Class I intermodal railroads. There are space limitations at their inland container yards where, again, the containers too often are sitting on chassis and not moving off to warehouses.

Ed DeNike, president of SSA Containers, the largest port terminal operating company in the U.S., told the AgTC meeting that it’s not a terminal issue now.  They have been operating longer hours with little support from truckers so far. West Coast terminals are full of import containers that aren’t moving.

“Just pick up your containers,” he said.

Higher container dwell times at rail and port terminals, backed-up vessels bunched at the main gateway ports, trucking and chassis shortages and labor shortages at various points including warehouses are all contributing to the compounded congestion problem. It will take extended operational hours at critical bottleneck points throughout the system to make it flow faster.

‘Double-Flex Solution’
One incremental solution at the ports some experts have been advocating would be to move to “double-flex hours,” which would open the gates two or three hours earlier for the truckers during day shifts, instead of pushing night and weekend shifts when other parts of the system aren’t yet running.

The International Longshore and Warehouse Union (ILWU) says it is ready and supports 24-7 and extended hours. Yet the current contract between the ILWU and the Pacific Maritime Association employers group reportedly does not allow for double-flex at container terminals.

ONE announces new Port of Oakland service
Speaking at the AgTC annual meeting, Jeremy Nixon, president of Ocean Network Express (ONE), the large consolidated Japanese-owned container carrier line, announced that ONE will be reinstating a regular, direct service between Asia and the Port of Oakland, a key U.S export port.

The regular service will start November 15, and until then, ONE will be having other ships stop at Oakland. Oakland has suffered recently from a decline in ocean carrier service, while LA/LB has been seeing increases.

Meanwhile, John Wolfe, president of the Northwest Seaport Alliance joint operation for the ports of Seattle and Tacoma, said NWSA will also be extending gate hours and is adding needed container storage space at nearby terminals and is looking for additional space. NWSA is a key gateway for many SSGA export shippers.

Ocean carrier profits – wow!
In the midst of all this system congestion, ocean container carriers say is the result of an unprecedented surge in trade from Asian manufacturing companies North America and Europe (translation: not their fault) they are rolling in the revenue like never before.

London-based global shipping consultancy Drewry provided its latest industry revenue estimates last week, and according to JOC, Drewry says container shipping’s pre-tax profits for 2021 and 2022 could be as high as $300 billion.

“This extreme profitability is built on an incredible full run of pricing … tight space, strong demand … and port congestion in Asia and at destination ports in the U.S. and Europe has driven spot rates to new highs almost every week,” the report said. “Contract rates have followed spot rates and are far above pre-pandemic levels.

Drewry noted in its Container Insight Weekly, that the $300 billion in earnings makes for “an extraordinary war chest to play with.”

Competitive Shipping Roundup: Container port congestion hitting both sides of Pacific

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By Bruce Abbe 

It’s not just a West Coast or even just a U.S. problem.    

The port congestion clogging in the global container shipping pipeline looks every bit as severe off the ports of China as it does off the largest U.S. container ports. 

A little more than a week ago, Freightwaves reported that 61 container ships were at anchor or drifting in San Pedro Bay off the ports of Los Angeles and Long Beach, the largest container ports in the U.S. which handle 50% of all imports coming into the U.S. That shattered the previous record. Later last week, that total climbed briefly to more than 70 waiting vessels. The Northwest Seaport Alliance has also reported recently that 15 container vessels were anchored in Puget Sound waiting to berth at the ports of Seattle or Tacoma. 

The same thing is happening on the other side of the Pacific Ocean. As of Friday, 154 container ships were waiting to load cargo destined for the U.S. and elsewhere off China’s big container ports of Shanghai and Ningbo, Freightwaves reported. There were 242 container ships waiting for berths across all the ports of China. It’s further indication that trans-Pacific container shipping demand has overwhelmed port capacity, Freightwaves senior editor Greg Miller wrote. 

“While the number of ships in the world is finite, operators can shift ships to wherever they make the most money. And the trans-Pacific is now a particularly lucrative trade:  Spot rates (for imports to the U.S.), including premiums, can top $20,000 per forty-foot equivalent unit (FEU),” the publication noted. Landside capacity for rail, trucking, terminals, warehousing and storage, however, is limited on both sides of the Pacific. 

Meanwhile, U.S. exporters continue to struggle to find container bookings, deal with delayed bookings or rolled cargo, and longer transit times to serve customers overseas.   

Return to blank sailings
The backlog of ships on the trans-Pacific has gotten to the point that the three big ocean carrier alliances, made up of the top 11 steamship lines, are reportedly now bringing back canceled or “blank” sailings – simply because the ports can’t handle the added cargo they’d bring. 

Container News reported Monday that The Alliance (made up of carriers Hapag-Lloyd, ONE, Hyundai Merchant Marine, and Wang Ming) announced 20 cancellations; the 2M alliance (Maersk and MSC) are planning 14 cancellations; and the Ocean Alliance (CMA-CGM, Evergreen and Cosco-OOCL) announced six cancellations. About 80% of the cancellations will happen in the Asia-North America and Asia-Europe trade lanes. 

Extended hours at ports
Cargo shippers and the U.S. Department of Transportation have been engaging the industry, calling for the U.S. ports to adopt longer hours of operation, eventually moving to 24/7 operations like exists elsewhere globally. 

The ports of Long Beach and Los Angeles announced September 17 they are about to make such a move. Mario Cordero, executive director of the Port of Long Beach said Long Beach will take its first steps toward 24/7 operations by maximizing its nighttime operations. Port of Los Angeles Executive Director Gene Seroka announced POLA will expand weekend operating gate hours. Both called on marine terminal operators at their ports to incentivize the use of all available gate hours, especially night gates, to reduce congestion and maximize cargo throughput capacity.  

‘Pleading with importers’
The Journal of Commerce recently published an analytical piece that shed light on how the problems are becoming more acute because importers are not moving their freight fast enough from inland and port terminals to their warehouses. A shortage of labor and, at times, space at the warehouses are backing up congestion through the supply chain to the ports. Importers are leaving containers on chassis longer, to the extent there is a major chassis shortage inland at Chicago, Kansas City and Minneapolis and at the coasts.   

“The bottlenecks in the inland supply chain have made it extremely difficult for terminal operators to plan their operations each day”with ship schedule uncertainty adding to the problems. Vessel on-time performance to the West Coast was only 15.7% and only a little better – 20.9% – on the East Coast in July, JOC reported. 

‘Why are supply chains so messed up?’
If you want it all in a nutshell – or to be able to tell everyone else what is going on when they ask you, ”Why are Supply Chains So Messed Up?” – you might want to check out an opinion piece just out by Craig Fuller, CEO of Freighwaves.     

Go here for his insightful comments. 

Vancouver hits volume record
While supply chains seem to face ever more disruptions and delays, the fact is there is still a lot of freight moving through the system to meet high demand. 

The Port of Vancouver, British Columbia, a key gateway container port serving many SSGA exporter members, announced it set a record for the first half of the year clocking 1.9 million TEU in containers handled, up 24% from the pandemic-reduced first half of 2020 and still 155% higher than 2019. While imports through Vancouver were up 20% over 2020, exports were up 29%. Go here for the full story. 

Bruce Abbe is SSGA’s strategic adviser for trade and transportation.

Competitive Shipping Update: SSGA appears at IANA Expo

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The Specialty Soya and Grains Alliance is being represented at the Intermodal Association of North America’s 2021 Intermodal Expo being held this week in Long Beach, California.

SSGA Strategic Adviser for Trade and Transportation Bruce Abbe was an invited participant on an exporters panel that discussed the complex supply chain challenges export shippers have been experiencing recently and what the impact has been on their global trade customers overseas. The session is fittingly titled, “Exporters – A Voice in the Intermodal Wilderness.”

Dan Miller, global container lead for Cargill, and Charles Ferraro, global category manager, logistics for FMC Corporation also appeared on the panel. Mike Williams, senior vice president, logistics solutions for ContainerPort Group, was the moderator.

In addition to the discussions about supply chain problems, here are a few additional bits of positive news developments heard in the halls at IANA 2021, a major industry event focused on all sectors of the intermodal shipping industry – ocean, rail, trucking/drayage and logistics:

  • Minot, North Dakota – Word is, Minot’s renewed intermodal facility served by BNSF railroad has handled some 40 trains since it got rolling again. Bulk transloaded grain products are a key freight.
  • Pocatello, Idaho – Union Pacific is about to start a new modest intermodal rail terminal operation, similar to BNSF’s Minot operation, in Pocatello, with direct service to Tacoma. Boxes will come in out of Chicago, much like Minot’s. Barley, lumber products and potatoes (French fries, eventually) are the key freight.
  • Coos Bay, Oregon – There is background discussion that Coos Bay, a modestly sized port on the Oregon coast is seriously moving to expand its ocean container service capability. While it’s a further haul from the Midwest and plains than Portland, which is also working to reinvigorate its container ship service capability after losing it during a period of port labor strife a few years back, Coos Bay is right on the ocean without a long trek for the container ships up the Columbia River.

Ag industry sends urgent plea to ease crisis
More than 70 national agricultural organizations, including SSGA, this week delivered an urgent plea to the Biden Administration to take steps to relieve the supply chain shipping crisis facing U.S. exporters.

A White House Supply Chain Task Force has been holding virtual meetings with agriculture and food industry stakeholders to identify near term solutions. SSGA Board Chairman Bob Sinner participated in the ag session.

Go here to view the joint industry letter sent to President Biden, Transportation Secretary Pete Buttigieg, Agriculture Secretary Tom Vilsack, Federal Maritime Commissioner Dan Maffei, Attorney General Merrick Garland and Council of Economic Advisors Chair Cecilia Rouse.

Spreading the news
SSGA recently contributed a post on the current state of container shipping, recapping Federal Maritime Commissioner Carl Bentzel’s GTE presentation, to the Illinois Soybean Association’s “Bean There” trade ad exports blog. Illinois Soybean Association sponsored the GTE, along with seven other state groups. Check out the article here.

Shipping Act reform would allow FMC to determine ‘unreasonable’ export rejections

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The Ocean Shipping Reform Act of 2021 (H.R. 4996) includes, in part, common carriage provisions stating that ocean container carriers may not unreasonably reject export cargo if it can be loaded safely, arrive on time to be loaded and be shipped to a location that the carrier is already scheduled to ship to.

The export handling requirements in the bill are of much interest to inland ag exporters like many Specialty Soya and Grains Alliance members.

(Look for this topic to get attention at this week’s U.S. Soy Global Soy Trade Exchange & Specialty Grains Conferece in St. Louis when Federal Maritime Commission (FMC) Commissioner Carl Bentzel takes part in a panel discussion on container shipping. The SSGA breakouts session is set for 9:45 p.m. Wednesday, Aug. 25. More information on the GTE can be found here.)

Determining what is “reasonable,” particularly in this area where the steamship lines want to be able to control their business service without such hinderances, is not always a clear picture. The Journal of Commerce (JOC), in a recent analysis story, noted the legislation essentially delegated to the FMC the responsibility to determine what patterns of export rejections or avoidance by ocean carriers shall be considered “unreasonable.”

The bipartisan legislation, co-authored by Representatives John Garamendi (D-Calif.) and Dusty Johnson (R-S.D.) seeks to strengthen FMC enforcement of container ocean lines’ responsibilities in several areas.

“If you are going to be a common carrier, if you are going to U.S. ports to be part of the stream of commerce, you need to be willing to accept some very basic rules of the road, including not unduly discriminating against agricultural U.S. exports,” Johnson said at a recent media briefing.

Container exports drop at Port of LA

Port of Los Angeles (POLA) Executive Director Gene Seroka last week delivered his monthly port performance news briefing. While July saw the United States’ largest container port continue a run of 12 consecutive months of year-over-year growth, Seroka lamented the steep decline in exports and shined a critical spotlight on the steep rise in the shipping of empty containers back to Asia.

Other notables from the briefing:

  • Imports continued to grow at POLA – up to 470,000 TEU (twenty-foot equivalents, the standard measure for container volumes) in July.
  • Yet loaded exports fell to only 91,000 TEU – down a whopping 27.6% year-over-year for July. That made for the lowest number of loaded exports since 2005.
  • Ocean carriers shipped a record number of empty containers back to Asia – 331,000 TEU’s – up 20.4% from the previous year.
  • Empty container exports are now 3 to 1 over loaded container exports of all products out of POLA.

“The largest export commodity now going out of LA is air,” said Seroka, who has long been a strong advocate for increasing U.S. agricultural exports during his time at POLA and previously as the North American president of APL shipping line.

More coverage here.

China faces congestion disruptions, too

Although it hasn’t gotten as much public recognition as the container ship congestion off the California and other West Coast ports, there is another big, congested clog of ships causing supply chain gridlock.

It’s in bulker ships parked off of docks near the Yangtze River system in China.

Spot rates for bulk shipping are also on the climb, affecting costs and availability of ships to haul U.S. commodity soybeans, corn and wheat to and from the United States’ largest customer.

Go here for more detailed coverage.

Compiled by Bruce Abbe, SSGA strategic adviser for trade and transportation

Transportation Roundup: Shipping challenges expected to continue

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By Bruce Abbe, SSGA Strategic Adviser for Trade and Transportation

The global container-based supply chain serving U.S. exporters and importers is continuing to experience unprecedented challenges, congestion, delays and cost increases at virtually every step in the system – overseas and North American ports, railroads, shipping lines, inland rail terminals, trucking and warehousing. With the peak season for consumer product imports just now getting underway, the outlook appears bleak for container availability and meaningful service improvements for the rest of 2021, industry experts advise.

Here’s an overview of current developments, with links to key sources:

K+H insights

Historic growth in imports to North America are the underlying driving force causing the severe strains in the transportation infrastructure, according to Kuehne+Nagel, one of the world’s largest logistics and forwarding companies.

In a report to update its customers, K+H described the pinch points and congestion across the supply chain spectrum – inland rail service shutdowns, chassis shortages and increasing dwell times, clogged ports on the West Coast and in Asia looking to backslide with more congestion due to rail service cutbacks, a chronic shortage of truckers, and ocean carriers maxed out for capacity and driving up rates.

“At this time, there is no indication as to when cargo will again flow at pre-pandemic service and transit time levels,” K+H concluded.

Rail challenges

Chicago intermodal rail service suspended: Union Pacific and BNSF railroads shocked the industry last week with an announcement that they were temporarily suspending intermodal train service to and from UP’s Global IV and BNSF’s Logistics Park container rail yards in Chicago from the West Coast starting July 18. BNSF’s suspension was expected to last two weeks.

The two largest container rail terminals in the Chicago area are jammed up, with containers and chassis packed in with no room to add and serve more until they are moved out. Rail service to and from the West Coast has had volume limits on the number of container rail cars to Chicago for a number of weeks.

UP’s suspension, first reports said, was expected to last at least a week.  A later report indicated UP will restart shipments from Global IV on a gradual staggered basis. The suspension impacted container movement from the Ports of Los Angeles, Long Beach and Tacoma. Several SSGA member exporters ship through those ports from Chicago and are seeing further delays.

UP reportedly considered re-opening its Global III container rail yard in Rochelle, Ill., which it closed in 2019, to store overflowing containers. SSGA member shippers may want to watch that potential development to see if any enhanced container availability for exports could develop that can avoid the trucking logjam at the other two leading container yards.

Disruptions to continue through ’21: UP President and CEO Lance Fritz forecasted in a call with stock investment advisers that the international intermodal congestion and disruptions the system is now experiencing will likely persist through the end of 2021, according to a Freightwaves report.

CN offers incentive: Canadian National (CN) railroad announced it is offering to waive up to $1,050 in demurrage fees in Chicago and Memphis for importers if they pick up their containers at those rail yards during weekend off-hours. The program is an incentive to space out and get more containers moved during three off-hour periods between now and August 9.

Wildfires hamper rail service: Wildfires in inland British Columbia are hampering rail service between Kamloops and the Port of Vancouver. Canadian Pacific and CN are operating there under a government Ministerial Order that includes targeted slower speeds, increased equipment inspections and preventive measures. For awhile, CN needed to operate on CP lines until bridge and rail line repairs could be completed. Ships continue to be anchored off-shore, and there is a high level of on-dock cargo not moving out at normal flow. The order will last until at least Aug. 4 and could be extended, according to an operational update issued Monday from the port.

FMC to audit ocean lines

In response to pleas from cargo exporters and importers – including SSGA, Agriculture Transportation Coalition, members of Congress and senior Biden Administration officials – the Federal Maritime Commission (FMC) told the nine largest container shipping lines serving the U.S. market that it will immediately begin auditing how the lines issue detention and demurrage per diem penalties upon shippers. The move indicates the FMC is serious about cracking down on unreasonable penalty fees.

FMC’s new “Vessel-Operating Common Carrier Audit Program” will assess if the carriers are in compliance with its previously announced Interpretive Rule and handling of such penalties.

“The Federal Maritime Commission is committed to making certain the law is followed and that shippers do not suffer from unfair disadvantages,” FMC Chairman Dan Maffei said.

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

STB to examine rail congestion

President Biden’s Executive Order that called for the FMC to collaborate with the Justice Department on matters of preserving competition, also called on the U.S. Surface Transportation Board (STB) to collaborate with FMC on regulatory oversight on supply chain issues.

The STB, which for years has deemed intermodal container shipping to be one of the exemptions – essentially off-limits to federal regulatory oversight – is now taking a new interest in intermodal rail container operations given the congestion turmoil rocking the industry sector.

The STB is now asking Class 1 railroads to explain how they are dealing with the container supply chain problems. STB is also asking the railroads to provide information on how they are applying their own version of detention and demurrage penalty fees and considering if the railroads’ use of such penalties for intermodal should fall under STB’s own guidance on detention and demurrage fees on other rail car shipping.

STB Chairman Marty Oberman requested information on the number of free days allowed for container storage before penalties kick in, the daily fees for demurrage fees, any increase or decrease in such fees since January and any caps in such fees, breakdowns in volumes of stored containers, and if any efforts are being made by the railroads to reduce those storage fees when a delay in picking up the container is out of the control of the shipper or cargo receiver.

Actions by STB to formally address or oversee application of detention and demurrage fees by the railroads would represent a new departure from policy by the agency.

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

Biden issues Executive Order to beef up competition in key industries

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

Ocean carriers, rails targeted for stronger regulation 

President Biden issued a broad Executive Order on Friday, July 9, calling on federal agencies to strengthen oversight and enforcement of regulations to maintain market competition and prevent unfair monopolistic practices.  

The order identified 72 initiatives by more than 12 agencies to promote competition. Ocean container carriers and railroads, so vital for ag shippers, along with big tech, occupied center stage for the effort. 

The specific details and language in the order will shed light on how extensive the Executive Order will yield actions. Following are reports from industry media: 

FMC welcomes ‘crackdown’ on ocean carriers 

Federal Maritime Commission (FMC) Chairman Dan Maffei said he welcomed the Executive Order’s call for the Justice Department to collaborate with the FMC to investigate the global ocean carrier sector and possibly issues fines for uncompetitive practices and pricing. 

Some 85% of ocean container shipping is now controlled by about 10 major ocean container lines – none of them American-owned – which operate in just three vessel-sharing alliances. The order encourages FMC to use vigorous enforcement of rules to preserve competition. It’s also worth noting that exorbitant container rates are beginning to get examined by the European Union. 

Maffei told Freightwaves, while the FMC is an independent agency and therefore not technically subject to presidential executive orders, he “very much intend(s) to cooperate with it. The President is saying all hands on deck, which we appreciate.” 

Maffei also noted that excessive detention and demurrage penalty fees currently “is a huge issue we’re working on, and it’s important to get to the bottom of it because it’s unfair to shippers. If those practices are abused it tends to decrease capacity, which makes things worse.” 

The World Shipping Council, which represents 90% of the ocean carrier trade, disputes the charges of uncompetitive practices and says the current disruptions to supply chains are the result of historic increases in demand for imported consumer goods. 

STB ordered to examine rail competition 

It remains to be seen how the U.S. Surface Transportation Board (STB) tackles the Executive Order’s charge to increase competition and resist further monopolization in the railroad sector. The order did, however, identify areas the Biden Administration sees as key steps including: 

  • Beginning rulemaking, or reup an earlier STB proceeding, to encourage “reciprocal switching,” which would strengthen the ability of captive shippers to have access to more than one railroad and more competitive pricing. 
  • Consideration of other rulemakings related to competitive access, including bottleneck rates and interchange commitments. 
  • Ensuring that future mergers and acquisitions are examined with the public interest in mind. 
  • Stronger enforcement of on-time performance requirements and assurance that passenger rail service on freight rails is not subject to unwarranted delays or interruptions. 

STB Chairman Marty Oberman said the board has been actively looking at the issues identified in the Order, and he would urge board members to prioritize issues related to competitive access, and practical rate relief options. 

Freightwaves has more detailed coverage of the Executive Order on rail issues. 

Meanwhile, Bloomberg Businessweek Economics Editor Peter Coy says, “There’s a good reason Biden singled out railroads for criticism.” He notes the STB itself has warned that consolidation in the railroad industry had “created the potential for monopolistic pricing.” 

In other transportation news … 

Drewry forecasts huge profits for container lines  

Last week, one of the world’s most-recognized, leading maritime consulting agencies, UK-based Drewry, issued a forecast that global ocean container lines are on track to achieve an eye-popping $80 billion in annual collective profits in 2021, and they could reach $100 billion for the first time in history. 

That forecast is up a whopping increase from Drewry’s forecast of earnings before interest and taxes (EBIT) made in March, Maritime Magazine reports. 

“Even if carriers do refer to type and the current newbuild (of new container ships) craze ends the upcycle in 2023, they will have made so much money between 2020 and 2023 that they will be set up for years to come,” Drewry noted in its Container Weekly report. 

More details in Maritime Magazine and Container News. 

Wildfires disrupt rail, port services 

The Port of Vancouver, B.C., has issued several operational updates over recent days to inform the shipping community and stakeholders about the changing status of rail service by both Canadian Pacific (CP) and Canadian National (CN) from inland Canada and the Midwest U.S. to the busy container port. 

Wildfires in the Pacific Northwest – particularly in the British Columbia interior between Kamloops and Boston Bar and North Bend – have caused the railroads to pause service for periods of time while they check out the safety status of the tracks and rail corridors. The Canadian Ministry of Transport has issued precautionary safety measures. 

The breaks in rail traffic flow have contributed to more container ships at anchorage off the port near or above capacity. Vessels in port can be viewed at the PortVan eHub app that can be downloaded here.   

Container ships often call at Vancouver before making their next stops at the Northwest Seaport Alliance ports of Seattle and Tacoma. Delays can impact transit times from each of the ports.

Transportation Roundup: Bipartisan bill would require ocean carriers to accept U.S. container exports

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Legislation now being drafted by two key members of the U.S. House Transportation and Infrastructure Committee (House T&I) aims to strengthen the ability of the U.S. Federal Maritime Commission’s (FMC) to enforce its oversight of the maritime ocean container shipping system.   

Representatives John Garamendi (D-Calif.) and Dusty Johnson (R-S.D.), chairman and minority leader, respectively, of the House T&I’s Coast Guard and Maritime Subcommittee, are proposing a bill that is largely in response to complaints from agriculture exporters about chaotic supply chain problems they face in serving overseas markets due to ocean carrier practices. 

The legislative proposal reportedly will call for amending the U.S. Ocean Shipping Act to: 

  1. Strengthen the FMC’s ability to enforce its guidelines for ocean carriers’ use of detention and demurrage per diem penalties. 
  1.  Bar ocean carriers from refusing to handle export bookings.     

These two issues have been the central complaints of agricultural shippers, including the Specialty Soya and Grains Alliance and Agriculture Transportation Coalition in particular, but also of other U.S. container exporters and importers. 

The legislation reportedly will call for increased funding for FMC’s Consumer Affairs and Dispute Resolution (CADRS) service to have the resources to conduct stronger oversight.  

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

A hearing held June 15 by the House T&I Subcommittee on the Impact of Shipping Container Shortages, Delays and Increased Demand on the North American Supply Chain focused on the FMC’s efforts to address the current shipping supply chain crisis. You can watch a video recording of the hearing by clicking here. 

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

Transportation Roundup: Western railroads battle capacity

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For weeks, if not months, exporter shipper members of the Specialty Soya and Grains Alliance have been struggling with increasing congestion, rail and trucking delays, and shortage of truckers – all stemming from capacity limits at the inland container rail yards, notably at Chicago’s and Kansas City’s main intermodal yards.    

A report this week from the Journal of Commerce (JOC) shared what the two main western Class 1 railroads are doing to try to alleviate the situation at BNSF’s Logistics Park and Union Pacific’s Global IV terminals in Chicago.   

Inland intermodal traffic has climbed between April 4 and May 30 by 26% for UP, and by 8.4% for BNSF.  BNSF’s Tom Williams told JOC while the different stakeholders – trucking companies, importers, marine terminal operators – are focused on their own operations and needs, they may not have “a good perspective of the entire supply chain dynamic.” 

“We desperately want to free up cars to get back to the ports,” he said. “And I’m not trying to point fingers because this is a global supply chain challenge.” 

Surface transportation bill 

The U.S. House Transportation and Infrastructure Committee last week introduced a $547 billion surface transportation reauthorization bill. A mark-up of the legislation was scheduled for June 9. This version of the Highway Bill is similar to H.R. 2 introduced last year. It calls for a 79% increase over current funding levels. 

Of interest to ag transportation, there is a provision authorizing a 10% per axle weight tolerance for dry bulk freight, which would benefit truckers and container drayers with bulk-loaded grain that can shift some when braking or going over bumps. 

There are also some study and data collection provisions that will look into freight transportation fees and per-mile user fees (potential alternatives to raising gas taxes), driver detention time, hours of service and more. Click here for a link to a fact sheet from the committee on the bill. 

This is not to be confused with the big overall infrastructure investment proposals that are under discussions in Washington, although it could become a part of a big omnibus package. The surface transportation bill will need to be reauthorized.   

If you think you’re having a bad day …  

Be glad you weren’t one of the people in charge of berthing an OOCL container ship at Taiwan’s busy Kaohsiung port last Thursday. Click here to see what can happen when a container ship – even a modest-sized, unladen one – taps a docked loaded one during the delicate berthing process. 

American Shipper reported that just one worker who was operating the destroyed gantry crane was injured. Port of Kaohsiung officials said he suffered a cut to the arm. Two crane maintenance workers were temporarily trapped but were said to have been rescued unharmed.  

South Korea’s Port of Busan experienced a similar accident last year when the Milano Bridge vessel came into berth with a bit too much momentum and collided with another container ship. 

These are reminders of the dangers and incredible scale of the transportation systems employed in the worldwide container shipping system. Both Kaohsiung and Busan are key ports frequently used by SSGA member exporters in reaching customers across Asia. 

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

Competitive Shipping Roundup: Inland container rail ramp congestion squeezes trucking availability

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

Trucking congestion at key inland rail container ramps is now perhaps the largest impediment to moving more container freight overseas for U.S. exporters. The latest bottlenecks in the chaotic global container shipping supply chains have been moving inland as the import surge continues, with the fall peak season on the horizon. 

“U.S. drayage drivers quitting as rail ramp congestion crimps pay” the title of a report last week in the Journal of Commerce (JOC). Despite increases in rates and driver pay from trucking companies, “drayage providers in Chicago, Cleveland, Columbus, Dallas, Kansas City and Memphis have seen as much as one-quarter of their drivers quit because of their decline in income,” JOC reported.    

That bears out exactly what Specialty Soya and Grain Alliance has been hearing of late from several of its exporter shipper members.   

“Members tell us they are facing ever more difficulty finding trucking. Some tell us they’ve lost regular, dependable dray drivers because they are shifting to hauling other freight,” said Bruce Abbe, SSGA advisor for transportation and trade. “If you have a good driver hang on to him or her.” 

Drivers report its common now to have to wait in lines two hours to pick up or ingate a container – even up to six hours – at key Chicago yards including BNSF Logistics Park and UP Global IV. Trucking is hard to come by at Kansas City and elsewhere due to chassis shortages as well. Container dray drivers get paid by the trip, and the congestion delays have reduced the number of trips drivers can make in a day. 

CN gains upper hand in tug-of-war for Kansas City Southern 

Although it’s not final, Canadian National (CN) railroad seems to have moved ahead of its Canadian competitor Canadian Pacific (CP) railroad in the competition to acquire Kansas City Southern (KCS) railroad. The KCS board on May 21 determined a revised offer from CN was a “company superior proposal” and signaled its intent to move forward with the CN merger agreement.  

The Class One railroad merger still needs to run the course under U.S. Surface Transportation Board proceedings, and CP may continue to press it’s earlier offer that was initially accepted by KCS. 

 Go here for more details from Railway Age. 

‘Relentless online boom’ continues to disrupt global shipping  

If there is any doubt the current surge in container shipping demand, driving rates ever higher and reliability of service ever lower is a global crisis, a lengthy report in AsiaNikkei.com on May 19 should settle any doubt. 

“This is uncharted territory in terms of carrier profits – in terms of freight rates, in terms of just the level of disruption that the supply chain is seeing,” Simon Heaney, Drewry’s Long-based senior manager for container research said in the report, an interesting read about the scale and diverse impact of the global container shipping crunch, from seafarers to freight forwarders to shippers. The disruption is at a level beyond anything Heaney has seen over a 20–year career. 

Competitive Shipping Roundup: New FMC chair Maffei calls for review of Shipping Act

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

The newly appointed chairman of the Federal Maritime Commission (FMC) last week told a major shipping industry trade group that it’s time for a review of the U.S. Shipping Act’s laws and regulations. 

FMC Chair Daniel Maffei, speaking to the National Customs Brokers and Forwarders Association of America, said the last significant reform of the shipping laws was nearly 23 years ago, and key provisions date back to 1984. 

The shipping environment has significantly changed since those times, Maffei said, as the number of major ocean carriers has gone from more than 20 down to about nine. No major carrier is domiciled in the U.S., yet container shipping volume on the high seas has tripled. 

In light of the current, unprecedented surge in imports, skyrocketing rates and nearly unmanageable congestion in supply chains, Maffei said a review of the U.S. shipping act by Congress is in order. 

SSGA and the Agriculture Transportation Coalition have been among groups that have urged Congressional consideration of reforms to the Shipping Act to strengthen the FMC’s review and enforcement powers, as well as requirements upon the ocean carriers to provide full and fair service to U.S. exporters. 

Click here to view the full story in Container News. 

Maritime industry analyst: Brace for two years of high rates 

During a major container shipping outlook webinar last week by the prominent, London-based, global shipping consulting firm Drewry, shippers were advised to prepare to see higher freight rates and tight capacity for at least two more years. 

A Drewry executive said some relaxing of freight rates was seen for 2022, but ocean carriers are still expected to keep rates high, thanks to the capacity management capability they achieved during the pandemic and the “pricing discipline they have shown,” Loadstar reported. 

The consultancy predicted a blend of spot rates, contract rates, backhaul and regional rates will increase 23% this year, with some head–haul rates “substantially higher.” 

Ocean carriers log unprecedented profits 

While shippers are struggling with poor service and unprecedented congestion at ports globally and at inland container rail terminals in the U.S., the ocean carriers at the center of the supply chains are reporting unprecedented levels of profits, thanks to a continued surge in imports and high rates. 

Last week, A.P. Moller-Maersk reported a first-quarter profit of $2.7 billion. That was a record quarterly return for the largest ocean carrier and just shy of its full yearly profit of 2020.     

Cosco Shipping Holdings, the parent company that owns Cosco Shipping Line and Orient Ocean Container Line, reported it earned $2.39 billion for the first quarter of 2021, that was up a whopping $2.33 billion over the first quarter of 2020.   

Ocean Network Express earlier reported a net profit of $3.48 billion for its fiscal year that ended March 31. The ocean carrier was formed in 2017 through the merger of the container shipping divisions of Japanese conglomerates NYK, Mitsui OSK Line and Kawasaki “K Line.” 

How long the current global container congestion crisis will last is subject of much debate. The Drewry analyst above noted the ocean carriers have signed contracts for 170 new build ships during the first three months of the year. However, the majority won’t be delivered until 2023, on top of other existing orders. 

Lars Jensen, CEO of another major consulting firm Vespucci Maritime, told a webinar in late April that the shortage of capacity and equipment was mainly caused by congestion in the U.S., exacerbated by the temporary Suez Canal blockage. He termed it a “temporary shortage.”   

“In 2019 there were enough vessels and containers in the world, but in 2020, when we moved less cargo than in 2019, there were all these shortages,” he said. The “physical number of containers or ships” are not the problem, he argued. Rather, it’s a need to rebalance the market after getting rid of the congestion bottlenecks.” 

Empties also leaving East Coast ports 

While U.S. ag exporters continue to fret that their freight keeps getting way laid at the ports or their bookings denied or delayed as the ocean carriers favor shipping empty containers back to China, the issue is not just a problem seen at the West Coast ports serving the Trans Pacific trade. 

The Port of New York and New Jersey reported in March empty returns of containers climbed by 77.5% in March compared to a year earlier, amounting to 267,542 TEUs. Imports were also up 44.%, at 393,159 compared to 271,511 in March of last year.  Exports dropped 7.4%, down to 126,699 compared to 136,780 a year ago.