No let-up in container import demand surge

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Stress to transportation supply chains through end of summer

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

Inland U.S. ag container exporters are anxiously waiting for a breather from the disruptions caused by the demand surge for container–shipped import products that has led to limited access to containers for shipping food products to locations other than China. Indications now are signaling no let–up in the foreseeable future.    

According to research by Panjiva, U.S. seaborne imports of containerized freight increased by 50.5% year over year in March and by 36.9% when compared to March 2019, resulting in a record 3.02 million TEUs (20-foot-equivalent units) shipped, or 97,300 per day. Consumer demand continues to be the main driver of this growth. For instance, Panjiva reports leisure products and home furnishings climbed 94.9% and 91.4% this March compared to March 2019. 

Also: 

  • In March, the always busy Port of Long Beach set an all–time record for the number of containers handled at its terminals. Long Beach reported 840,387 TEUs were handled in March, up from the previous record of 815,885 set in December. March is normally a slower month. For the first quarter of 2021, the Port of Long Beach handled 2.4 million TEUs. The total number of empty containers, including outbound empty containers (270,016 TEUs) also were all-time highs for the port, according to Freightwaves. On the east coast, the Port of Charleston, S.C., also reported record volume of containers in March.    
  • Further, the National Retail Federation told the Journal of Commerce that its member retailers see no let-up in their ordering surge through the end of the summer. NRF projected imports to remain at record or near record levels through August.  That demand is reportedly being driven by the need to restore their inventories-to-sales ratio level that is near a 30-year low. The fall back-to-school and late fall/early winter holiday high demand seasons follow right behind. 
  • The container shortages felt throughout the global system took a further jolt from the recent six-day blockage of the Suez Canal. Ocean carriers reportedly warned that there will be a deeper shortage of containers available in China, particularly 40-foot units, in the coming weeks. Those shortages could further spike spot rates in China for its export manufactured goods heading to the West.  

Industry experts, including SSGA logistics members, say these projected trends, coupled with current pandemic-driven constraints and backlogs on the ocean/ports/rail systems, could last throughout much of the rest of the year. Exporters will need to continue to explore all creative options for accessing containers and ship space. 

STB adopts final rule on Class 1 rail demurrage billing

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

While many Specialty Soya and Grains Alliance (SSGA) member shippers would like to see stronger federal regulation of the ocean container carriers and terminals to prevent abuses when it comes to demurrage and detention penalties, they may find a small bit of encouragement from a new federal rail regulation step. 

Last week the U.S. Surface Transportation Board (STB) adopted a final rule that requires Class I railroads to include certain minimum information on or with demurrage invoices and provide machine-readable access to that information. The minimum information includes such things as billing cycle, shipment, care placement, credit and debit information and more. The STB announcement said the aim is to improve “the ability of rail users to review and verify the accuracy of demurrage changes and facilitate the resolution of disputes between railroads and their customers.” 

It’s hardly a revolutionary change, and Class II and Class III rail carriers are not subject to the rule.    

When announcing the rule, the STB stated that demurrage, if properly handled, serves as an incentive to prevent undue rail car detention and thereby encourages efficient use of rail cars in the rail network. 

The National Grain and Feed Association and other associations pushed the STB to create guidelines that ensure such rail penalty charges are commercially fair, practical and commercially reciprocal in nature. The STB, however, did not include guidelines for demurrage and accessorial charges and practices in the final rule. It only addressed minimum information requirements. 

Click here for the announcement from the STB, and here for coverage in Railway Age. 

The Federal Maritime Commission (FMC), which regulates ocean shipping practices at ports and terminals in the U.S., adopted and released “interpretive rule” guidelines for detention and demurrage last summer after a year-and-a-half long study that sought input from all parties. The interpretive rule basically lays out how the FMC will look at disputed detention and demurrage charges applied to shippers and truckers. FMC will look at the appropriateness of such per diem charges based on if they are appropriate to make the transportation flow more efficient.     

Shipper groups and some policy makers, however, have been disappointed that over the past year during the disruptive pandemic-driven congestion crisis and the ensuing import surge that the FMC’s interpretive guidelines have shown minimal results in reforming ocean carrier behavior. SSGA and other ag shipper groups would like to see stronger enforcement steps on ocean carrier and terminal practices to prevent unfair or misapplied per diem penalties on shippers for delays they had no control over. 

Maffei designated FMC chair

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The Specialty Soya and Grains Alliance congratulates Daniel Maffei, who was designated chair of the Federal Maritime Commission by President Biden on Monday.

Maffei, a native New Yorker who served two terms in the U.S. House of Representative as well as in the Department of Commerce for the Obama Administration, has served on the FMC as a commissioner since 2016.

“We commend the appointment of Daniel Maffei to FMC chair,” said SSGA Executive Director Eric Wenberg. “He is excellently suited for this position. He understands the trade issues we are facing amid the current container shipping crisis and the regulatory response needed to reduce the shocks to the supply system.”

Maffei co-authored a letter to the World Shipping Council regarding U.S. exporters concerns about cargo being refused by major ocean carriers and how that could be a violation of the Shipping Act. Those discriminatory practices were first brought to the public’s attention in October. Maffei has also supported the FMC’s investigation into detention and demurrage practices by ocean carriers.

In a statement released Tuesday, Maffei said this is a “critical time for our nation’s supply chain. Due to the effects of COVID-19 and an unprecedented import boom, we are dealing with serious challenges to America’s international ocean transportation system – challenges that the FMC has a vital role in addressing, both on its own as an independent agency and in cooperation with other agencies.”

Maffei replaces Michael Khouri as FMC chair.

SSGA comments on the Suez Canal situation

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Our group of companies has been vocal in recent months about the logistical problems besetting our field crop container exports. We have been adversely affected and sorely mistreated by international carriers and an intermodal system that decided to maximize profitable traffic at the expense of U.S. ag exporters and our customers abroad.   

Eric Wenberg, SSGA Executive Director

I will hit the pause button and support them, as an example of the problems they face themselves were overcome by Evergreen shipping, the Suez Canal Authority and the Government of the Arab Republic of Egypt. Thank you for freeing the Ever Given. To these groups, SSGA extends its support and gratitude for resolving the difficulties in the Suez Canal. 

If critics of globalization or trade see what happened in the Suez as an opportunity for a cheap shot or as an argument that even the mighty corporation can be punished, then they make a mistake.  

U.S. barges get caught in the Missouri. Trucks get stuck in the mud in prairie states. I know of two rail links here that have such hairpin turns that trains must slow to 20 mph. And, as we know all too well lately, our ports are congested, if not clogged. Our shortfalls are many.  

When a bipartisan U.S. Congress takes an infrastructure bill seriously, when the Biden administration acts to help our shipping slowdown at home through the Federal Maritime Commission, and when you can finally ride a fast train in the United States, then I’ll be interested in those criticisms.  

Today, my business associates and I offer our thanks to the striving tug, dredge and ship crews who risked their lives to unclog the Suez Canal and return normal shipping to the Mediterranean and the Gulf – and around the world.  

You will have only had to a visit a port once to understand the dangers. The scale at which global trade works delivers cost benefits and efficiency. The intermodal system is run by people and those workers deserve our respect.  

Thank you. We are proud of you. Struggle on. 

Eric Wenberg
Executive Director, Specialty Soya and Grains Alliance 

Shipping Roundup: CP to acquire Kansas City Southern

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Will create single north-south railroad line serving North American market 

The biggest news on the shipping front over the past week occurred Sunday with the announcement that Canadian Pacific Railroad is acquiring Kansas City Southern, the smallest of the U.S. Class 1 railroads, in a deal that will create the first single railroad network serving all three North American nations. 

News reports put the cost the merger at $25 billion, while others reported it at $29 billion, including stock transfers. KCS shareholders are projected to own about 25% of CP stock if and when the transaction is completed. The new merged railroad will be called Canadian Pacific Kansas City. The deal still needs approval by the U.S. Surface Transportation Board (STB) and Mexico’s national rail regulatory body, which may be completed in mid-2022.     

CP President and CEO Keith Creel will serve as the head of the new railroad. Creel told listeners on a shareholders and media call that the merger is “not about cuts, line rationalizations … it’s about growing the network” to serve a growing market buoyed by the new U.S.-Canada-Mexico Trade Agreement. 

The two railroads share a rail yard in Kansas City. A connected single railroad could be expected to offer more efficient service for grain and soy commodity bulk movements from Canada and the northern Midwest states deeper into Mexico. Both railroads have substantial intermodal container shipping operations. Although the merger will not bring about more direct new east to West Coast service, KCS does connect to the southern Mexico west coast port of Lazaro Cardenas and to U.S. ports on the Gulf of Mexico. The line can be expected to provide intermodal service from Mexico’s growing manufacturing centers to Chicago and the Upper Midwest. 

Go here for more detailed coverage in Freightwaves, and here for more coverage by Bloomberg News via Chicago Business. 

Shippers monitoring Montreal dockworkers stalemate
A long-brewing dispute between the dockworkers union at the Port of Montreal and the Maritime Employers Association took a turn for the worse Sunday.    

The union’s 1,125 dockworker members voted by an overwhelming 99.71 percent to reject the latest offer that the employers said was their “final offer.” The union has not yet voted to strike and plans to go back to mediators.    

Earlier recent news reports said some ocean container carriers had begun diverting container cargo to other eastern Canadian ports including Halifax and Saint John’s in anticipation that there might be a strike. 

Canadian Pacific and Canadian National railroads provide intermodal container service from U.S. Midwest and Upper Midwest states to Montreal port that runs around Chicago and across Michigan and does not require shippers to use two railroads, as they often do to reach East Coast U.S. ports. 

Go here for coverage in the Montreal Gazette. 

CNBC: Ocean carriers rejected $1.3 billion in U.S. ag exports
CNBC released more follow-up research last week on ag export container rejection by ocean container carriers during the second half of last year. The business news network found the carriers rejected or avoided handling a potential $1.3 billion in U.S. ag exports from July through December. 

“Carrier practices are not only inflicting significant financial damage to U.S. exporters and importers, but are extremely short-sighted,” Peter Friedmann, executive director of the Agriculture Transportation Coalition, told CNBC. “Those practices are causing U.S. exporters to lose foreign customers and setting the stage for the ocean carriers themselves to lose significant business in the future.” 

SSGA members have found that containers became much less available for exporters at the end of October, November and December during that period, and for some carriers up through the first quarter of 2021. 

While the congestion at the ports of Los Angeles and Long Beach gets much of the attention for the current container shipping woes, the Northwest Seaport Alliance, comprised of the ports of Seattle and Tacoma, which serve many SSGA members, told CNBC it also suffered a large loss in exports. In 2019, the ports shipped 913,332 containers of full exports. In 2020, that number dropped to 790,620 containers. 

“Our exporters are suffering,” John Wolfe, CEO of The Northwest Seaport Alliance, told CNBC. “We have spoken with our terminal operators and carriers about this issue and there is more work to be done by all in order to address the extreme challenges faced by our export community.” 

Federal Maritime Commission chairman Louis Sola told CNBC, “I can say for a fact that some carriers have decreased their exports in return for empties (mainly the European lines)  while other have made a conscious effort to pick up the slack and increases their exports in 2020 (mostly the Asian lines),” said Sola. “I do find this most interesting and warrant that it requires further discussion.”   

Go here for more detailed coverage by CNBC. 

Compiled by Bruce Abbe, SSGA adviser for trade and transportation

Shipping News: Congress, media take notice of crisis

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The container shipping crisis continues to garner attention from government officials and the mainstream media alike. 

Last week, 24 U.S. senators, led by Amy Klobuchar (D-Minn.) and John Thune (R-S.D.) signed onto a letter to the Federal Maritime Commission (FMC), expressing bipartisan support for the FMC’s investigation into reports of unreasonable practices by ocean carriers that are posing challenges for ag exporters. 

On Tuesday, a similar letter from 111 members of the U.S. House of Representatives was delivered to the FMC. As well, a letter from senior Democrats and Republicans of the House Transportation Committee and the Coast Guard and Maritime Subcommittee was sent to FMC asking that immediate action take place “to ensure that ocean carriers are abiding by” the Shipping Act.   

Those actions came on the heels of a letter to President Joe Biden from SSGA and 70 other agriculture associations, urging intervention into the crisis. The letter was also sent to USDA Secretary Tom Vilsack, Transportation Secretary Pete Buttigieg, Council of Economic Advisors Chair Cecilia Rouse and FMC Commissioner Michael Khouri. 

SSGA’s announcement about the letter to the president with 70 other ag associations received coverage in Progressive Farmer/DTN, Red River Farm Network, FarmProgress and High Plains Journal, among others. 

Meanwhile, the New York Times picked up on the container crisis story over the weekend, illustrating how global disruptions of the container shipping system and shortage of containers and capacity are impacting supply chains in both directions – westbound and eastbound – in an article headlined ‘I’ve Never Seen Anything Like This’: Chaos Strikes Global Shipping. 

According to a Freightwaves story, the American Society of Civil Engineers gave U.S. infrastructure, which includes roads, highways, bridges, waterways, ports and rail system, an improved grade from four years ago, moving it up to a C- from a D+. The report card’s individual grades included a B- for ports (up from C+), D for roads (D), C for bridges (C+), B for rail (B) and D+ for inland waterways (D).

SSGA issues transportation advisory

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On Monday, the Specialty Soya and Grains Alliance issued to its members its second Global Markets Transportation Advisory in the last 11 months to provide an update about the current state of containerized soya and grain shipping and the impact the crisis is having on U.S. exporters, along with SSGA’s efforts and appeals for action and change.    

This advisory was written on behalf of SSGA’s Competitive Shipping Action Team as a resource for members to better understand the situation and to communicate to their overseas customers what is happening. We encouraged them to pass this message along to others, and you can do the same by downloading the advisory here. 

SSGA joins ag associations in plea to President Biden

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The Specialty Soya and Grains Alliance joined 70 other agriculture associations this week in an urgent plea to President Biden for intervention into the container shipping crisis that has severely injured food and other U.S. ag and forestry exports that our international customers are depending on. 

In the letter sent Wednesday, the group requested that provisions available to the Federal Maritime Commission (FMC) via the Shipping Act and other government tools “be immediately applied to stem the current ocean carrier practices that are so damaging to our agricultural products.” 

U.S. agricultural exporters’ access to international markets is being jeopardized by this unprecedented dysfunction and cost of ocean transportation services, which includes unreasonable and unjust practices such as the rejection of U.S. agricultural cargo by ocean carriers who are shipping empty containers back overseas to keep up with the high demand for U.S.-bound imported goods. 

“The only way to get out of this is for ocean carriers to return to previous levels of taking containerized exports out of the U.S. instead of such a high percentage of empty containers,” said Darwin Rader, SSGA’s secretary/treasurer and competitive shipping action team chair. “There’s a lot of frustration among U.S. exporters. We have to keep pushing as hard as we can for carriers to treat U.S. exporters fairly to help restore the balance of trade.” 

In October, SSGA was one of the first national agricultural associations to shine a light on the disruption of the food supply chain and other critical problems facing containerized ag exports after members began to be informed that some ocean carriers were suspending containerized and other overseas ag shipments. 

Earlier this month, SSGA representatives had the opportunity to give testimony to the FMC, along with other national ag organizations. And last week, FMC announced it had issued an information demand to ocean carriers and marine terminal operators to answer questions about policies and practices that have contributed to this crisis. 

The letter to President Biden, organized by the Agriculture Transportation Coalition (AgTC), points out that ocean carriers are enjoying their most profitable period in decades, “charging unprecedented freight rates (and) imposing draconian fees on our exporters and importers,” while potentially irreversible damage is being done to the U.S. companies that ship containerized agricultural products. 

The letter was also sent to USDA Secretary Tom Vilsack, who was confirmed on Wednesday, along with Transportation Secretary Pete Buttigieg, Council of Economic Advisors Chair Cecilia Rouse and Federal Maritime Commissioner Michael Khouri. 

To read a copy of the letter, go here.. AgTC has an overview of the current export crisis here.

Competitive shipping: Container crisis dominates trade news

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

The leading international container shipping trade news media over the past week continued to focus on the current crisis in the global container shipping system. Here is an overview: 

“Trans-Pacific container system slows under Asia import surge” The Journal of Commerce (JOC) noted in a feature posted Friday that covered the proverbial waterfront on the issues at hand – the “… seemingly unending deluge of imports from Asia into North America …” clogging of the system and “slowing cargo through rail hubs including Chicago,” ever-climbing rate increases, and a reminder that this is occurring right before the traditional March start-up period of contract negotiations between shippers and ocean carriers. 

On a positive note, new services and efforts to find alternative gateways were also noted. 

“Logistics failures costing business: U.S. Exporters” Input from SSGA factored heavily in a separate JOC report that focused on challenges exporters are facing:   

(SSGA) which represents exporters of identity-preserved grains, peas, lentils, food-grade soybeans, and other agricultural products that move in containers, is hearing from its members that their problems start with a lack of communication from carriers when sailings are canceled, or departure times changed, or when vessels are overbooked and their shipments are “rolled” to subsequent voyages.  But the problems don’t stop there. 

“The ultimate kick in the teeth is when they charge you detention and demurrage for it,” (SSGA’s) Bruce Abbe said, referring to fees that carriers levy for containers that sit at the ports after free storage time elapses, or for the late return of equipment. Exporters say they are being charge for breakdowns in the supply chain that they did not cause.” 

Exporters have been urging ocean carriers to provide shippers with timely information, with adequate lead time, so that they can manage shipments and avoid costly unfair penalty fees. 

Agriculture Transportation Coalition Executive Director Peter Friedmann noted the issues at hand were addressed last year by the Federal Maritime Commission (FMC), which issued guidelines ocean carriers should follow to make such penalties serve the purpose of improving container flow system-wide. The carriers, he charged, “ignore” the FMC guidelines because they have turned detention, demurrage and other such penalties into profit moves, JOC reported.    

“Carriers are making money on these ancillary charges while their customers are losing their shirts,” Friedmann said. 

California wants FMC action, too California is also pressing the U.S. Federal Maritime Commission to take immediate action on the ocean shipping crisis to protect against the delays and rising costs buffeting the state’s huge agriculture export industry. 

California Lieutenant Governor Eleni Kounalakis laid out several possible steps in a letter to the FMC, including the suspension or reduction of detention and demurrage penalties and cancellation of “congestion surcharges”— another new onerous development at least one carrier is hitting shippers with. Better, timely communication with shippers and truckers on empty return times was another recommendation.   

“Immediate steps must be taken to help alleviate the multitude of challenges being experienced at the ports,” Kounalakis told the commissioners. 

New containers may not be enough to meet demand The head of one of the largest container leasing companies, CAI International, told Freightwaves last week the three large Chinese container manufacturing companies, which control 80% of the global trade, are not likely to produce enough containers for the industry to “build its way out of the equipment crisis.”     

They are “managing output to keep prices high,” he reportedly said. Other shipping industry consultants concurred.     

Hapag-Lloyd says COVID, congestion, container shortage make for ‘perfect storm’ German ocean carriers Hapag-Lloyd’s CEO Rolf Habben Jansen held a virtual global news conference Thursday, in which he explained developments that lead to the current crisis and what ocean carriers are dealing with. Coverage by Freightwaves. 

Logjam at LA/LB Last Wednesday there were as many as 62 ships anchored in San Pedro Bay off the ports of Los Angeles and Long Beach, waiting to get into one of the full berths to unload their cargo. A video featuring an aerial view of the anchored fleet was posted on YouTube.  

Federal Maritime Commission demands information from carriers

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SSGA applauds investigation, which includes marine terminal operators

The Specialty Soya and Grains Alliance applauds last week’s Federal Maritime Commission decision to issue an information demand to ocean carriers and marine terminal operators to answer questions on detention and demurrage practices, as well as policies and practices related to container returns and container availability to exporters.

In a press release issued Feb. 17, the Federal Maritime Commission (FMC) announced that Commissioner Rebecca F. Dye issued the order to determine if “ocean carriers operating in an alliance and calling the Port of Los Angeles, the Port of Long Beach and the Port of New York & New Jersey” are meeting their legal obligations, along with marine terminal operators (MTOs) at those ports. According to the FMC press release:

The orders are being issued under the authority Commissioner Dye has as the Fact Finding Officer for Fact Finding 29, “International Ocean Transportation Supply Chain Engagement.”  …

Failure of carriers and MTOs to operate in a way consistent with the Interpretive Rule on Detention and Demurrage that became effective on May 18, 2020, might constitute a violation of 46 USC 41102(c) which prohibits unjust and unreasonable practices and regulations related to, or connected with, receiving, handling, storing, or delivering property.

Information received from parties receiving demands may be used as a basis for hearings, Commission enforcement action or further rulemaking.

In October, SSGA was among the first national agricultural associations to shine a light on the disruption of the food supply chain and other critical problems facing containerized ag exports after members had been informed that some ocean carriers were suspending containerized and other overseas ag shipments in order to keep up with import demand of goods from Asia.

“In their haste to meet increased demands for foreign imports to the United States, the ocean carriers have left U.S. ag exporters behind while clogging the ports and disrupting the supply chain throughout the system, including rail and trucking,” said Eric Wenberg, SSGA executive director. “That’s why the Federal Maritime Commission needed to step in. But more needs to be done.

“Now, ocean carriers and marine terminal operators must cooperate with the FMC, and the hope is this can be resolved quickly so our members’ products and ingredients can get to the foreign food manufacturers who have been patiently waiting for them.”

On Feb. 9, SSGA representatives had the opportunity to give testimony to the FMC, along with a large contingent of national ag organizations, including National Grain and Feed Association and the Agriculture Transportation Coalition.

For more on the container shipping crisis, see the latest IP-ODCAST, in which SSGA Secretary/Treasurer and Competitive Shipping Action Team Chair Darwin Rader spoke about the ongoing situation.