The BOC Blast #409 – April Showers Bring May Flowers and More Concerns

April Showers Bring May Flowers and More Concerns

As we approach the midpoint of April more concerns in the freight world loom on the horizon. We continue to face unprecedented capacity constraints and will continue to keep our customers and partners updated.

US Container Shipping Girds for New Reality of Undercapacity

Mark Szakonyi, Executive Editor JOC | Apr 15, 2021 10:11AM

The US container shipping system has maxed out its capacity, and on the back of what’s shaping up to be the sharpest US economic recovery since 1984, there are growing signs that it will only get messier in the foreseeable future for shippers and their transportation partners.

Some cargo owners are already raising product prices because of port disruptions and higher shipping costs, while wholesalers have less flexibility in adjusting more fixed prices with customers. The drumbeat of companies complaining of higher logistics costs isn’t letting up; retailer Dollar Tree told investors on Mar. 3 that import and domestic freight rate increases will add $80 million to $100 million in additional costs in fiscal 2021.

The elevated volumes have been unrelenting. On a year-over-year basis, US imports from Asia have risen by double-digit percentages in every month since August 2020, according to data from JOC.com’s parent company, IHS Markit. During the 13-month period from Aug. 1, 2020, through Aug. 31, 2021, imports are projected to be at or above 2 million TEU in 11 of the 13 months, according to Global Port Tracker, which is published monthly by the National Retail Federation and Hackett Associates. Before last year, monthly US imports from Asia had only hit the 2 million TEU mark once, in October 2018.

This week, new economic forecasts suggest the US economy is heating up faster, with IHS Markit predicting a 6.2 percent expansion this year. That’s a 0.5 percentage point upgrade from the company’s expectations for the US economy just a month ago.

“The 6 percent GDP growth some US economists are forecasting for this year could be conservative. Based on what our customers are telling us, I don’t think 10 percent growth is out of the question,” XPO Logistics chairman Brad Jacobs wrote in a note to shareholders on Tuesday.

Congestion spreading ‘like a virus’.

Steady and elevated retail demand and a manufacturing rebound will weigh further on a port and inland network system that’s looking even more stressed than it was four months ago. Congestion has spread from Southern California up the coast and onto the East Coast and to inland hubs such as Chicago and Memphis.

Bringing congestion to heel remains elusive for Los Angeles-Long Beach marine terminals despite labor, chassis, and warehouse availability improving, according to marine terminal operators. Even though railcar availability is gradually returning to levels seen before winter storms disrupted rail networks in February, terminal operators say they need far more train arrivals to dig out of the congestion, which began building in the summer.

“On the West Coast, nothing has changed … it’s just spread around the country like a virus,” said Brian Kempisty, founder of Port X Logistics, a US port trucking provider. “LA was the epicenter, and then New York got hit, and then Norfolk and Savannah started getting hit, and now you have the rail ramps in Chicago and Memphis. It’s just an overwhelming amount of imports that seemingly has hit every single market.”

The limits to digging out when the inbound pressure won’t let up doesn’t appear unique to Southern California, either. A recent JOC analysis of laden imports at US ports and the ports of Vancouver and Prince Rupert, Canada, over the last three years suggests the current surge isn’t as strong as year-over-year comparisons show, and thus volumes have hit a level at which it is harder for ports to catch up.

Next disruption always lurking.

As last month’s Suez Canal blockage underscored, there’s always the chance of more disruption, even with supply chains stressed the most they’ve been in years. For example, escalating tit-for-tat actions between Montreal port employers and longshore workers are pushing Canada’s second-largest port toward another bout of disruption.

There’s no end in sight to the Asian import surge, even if there are expectations that consumer goods spending will shift toward dining and travel as vaccinations increase. US retailers say they’re pulling volumes at record or near-record levels through August, and they can’t keep up with demand, as reflected by the inventory-to-retail sales ratio hitting a near 30-year low in January.  

Manufacturers will be increasingly needing imported inputs, as two indices of manufacturing health — the IHS Markit and Institute of Supply Management purchasing managers’ indices (PMIs) — jumped in March. Whether they’re dependent on semiconductors or the lowest-value widget, manufacturers are strained by rising demand and supply chain disruptions, said Chris Williamson, chief business economist at IHS Markit.

“The market right now is really being limited more by capacity than demand, and so that creates some momentum of its own, natural momentum as containers — or loads — that can’t be moved now will have to move later,” Brian Sondey, chairman and CEO at Triton International, the world’s largest container lessor, told investors in late February.

With no evidence that US import demand will wane in the coming months, the retail demand cycles for back-to-school shopping, Halloween, and the winter holidays will ramp up the pressure through the traditional August to September peak season and through the fourth quarter, said James Caradonna, general manager pricing/Americas at M&R Forwarding and Multi Container Line. “Our concern is as we hit May, how realistic is it that the carriers can provide allocations against new contract MQCs (minimum quantity commitments), given what is likely going to be a dramatically reduced capacity situation, in good part because of the Suez Canal incident?” he said.

Over the last seven months, US importers of Asian-made goods needing guaranteed loadings and to be first in line for equipment could shell out so-called premiums of $2,500 to $3,000, rather than wait for weeks for a booking to be assigned a vessel. That’s becoming less of an option as the demand for premium service outpaces what carriers can promise, Caradonna said.

Eastbound container spot rates from Asia to the US West Coast have been above $3,000 per FEU since September and remain 80 percent higher than a year ago, according to Xeneta, a rate benchmarking platform.

“At a certain point of time, the rate level is almost irrelevant to a carrier when they are faced with this much operational disruption and such a backlog,” Caradonna said.

The BOC Blast 408 – Demand boom on collision course with ocean transport ceiling

URGENT NOTICE

AVAILABLE OCEAN SPACE AND EQUIPMENT FROM ASIA TO USA IS NOW AT THE LOWEST LEVEL SINCE THE BEGINNING OF PANDEMIC

KEY FACTORS CONTRIBUTING TO THE GLOBAL SPACE PROBLEM

1. Suez Canal incident has caused massive delays, canceled sailings and increased port congestion throughout the world reducing global capacity by as much as 30% in the next two to three months.

2. Panama Canal low water levels has forced a reduction of weight capacity on vessels which lowers the volume of containers and products moving through the Panama Canal to the USA from Asia.

3. US has hit the lowest inventory levels ever reported by the Institute for Supply Management since the ISM index was established in 1997. There is now a huge push to replenish those inventories.

4. New Covid-19 Relief Package fueling spending power with a continued shift of buying goods instead of services.

PLEASE READ SUPPORTING ARTICLES BELOW:

Demand boom on collision course with ocean transport ceiling

Greg Miller, Senior Editor, Freightwaves.com / American Shipper, April 2, 2021

Container ships line up for Suez Canal transits (Photo: Shutterstock/byvalet)

U.S. containerized imports show no sign of letting up as the second quarter begins. On the contrary: Consumer demand is strengthening in the wake of fiscal stimulus and falling inventories that necessitate even more restocking.

The biggest risk to Q2 container-shipping volume is not demand for goods, it’s transport supply.

Fallout from the Suez Canal accident will constrain vessel and container-equipment availability, leading to longer delays. By the end of this quarter, shoppers in America’s stores could find more bare shelves. Online shoppers could increasingly see the words “out of stock.”

Inventory restocking tailwinds

(Chart: FreightWaves SONAR)

The positive data on demand keeps piling up. On Thursday, the Institute for Supply Management (ISM) Customers’ Inventories Index (SONAR: ISM.MCIN) sank to 29.9 points.

“This reading is the lowest ever reported since the sub index was established in January 1997,” said Timothy Fiore, chairman of the ISM survey committee. “For eight months in a row, [the index] has been at historically low levels.”

According to Amit Mehrotra, transportation analyst at Deutsche Bank, this falling index number “tells us there is additional runway for restocking demand as retailers shift away from just-in-time inventory.”

Mehrotra expects cargo volumes to be “stronger for longer” as a result of both inventory restocking and increased consumer confidence driven by vaccines and stimulus.

New retailer surveys at investment bank Evercore ISI paint a similarly bullish picture. As of Thursday, the Evercore retail sales survey index was at 67.5, up from an average of 47.1 in February.

Evercore ISI’s retailers pricing power survey index rose to 33.4, its highest level since December 2019. “Improving demand with lean inventory” drove the rise, said the bank.

In general, if demand outpaces inventory replenishment, import demand grows.

Bookings are still rising

(Chart: FreightWaves SONAR)

FrieghtWaves’ SONAR platform features a proprietary index of shippers’ ocean bookings. Bookings are measured on a 10-day-moving-average basis in terms of twenty-foot equivalent units (TEUs) as of the scheduled date of departure. On Friday, the index for China-U.S. bookings (SONAR: IOTI.CHNUSA) hit a record high.

The nationwide index for inbound cargoes from all countries reached its highest-ever level on Wednesday.

The index also tracks bookings seven days into the future. This forward view shows that a fresh all-time high is coming next week.

(Chart: FreightWaves SONAR)

The cargoes tracked by this data will not arrive at U.S. ports until late April or early May. In other words, as strained as ports are now, they face even greater pressure in the near future.

In California’s San Pedro Bay, off the ports of Los Angeles and Long Beach, there were 32 container ships at anchor on Thursday. That’s back up above the average of 30.5 container ships per day that have been at anchor since the beginning of the year.

Meanwhile, up in Northern California, ship-position data showed 14 ships at anchor off Oakland on Friday. Anchorage levels there have been in double digits since February.

Suez Canal fallout is coming

The Suez Canal accident is putting more pressure on an already strained global system. The number of ships waiting to transit the canal peaked last Monday, at 367.

About 80-90 ships have transited per day since the Ever Given was refloated, according to Leth Agencies. Prior to the accident, there were 52.7 per day (year to date).

But even as transits surge, more ships keep arriving. As of Saturday, there were still 156 ships at anchor awaiting passage through the Suez Canal. That’s about three times as many as normal.

After container ships transit the canal northbound, they head to Europe or the East Coast. “What’s going to happen is we’re definitely going to see bunching at European ports,” said Nathan Strang, global head of ocean freight at freight forwarder Flexport, during a webinar presented by Flexport on Wednesday. “Bunching” refers to too many ships arriving at once, creating congestion.

“There may be reduced time in port to try to recover those schedules. That’s going to lead to export cargo and equipment being left behind,” said Strang. He added that “there’s going to be delays for Europe and East Coast services.”

‘Curveball’ to prolong situation

Strang also speculated that carriers could “blank” (cancel) sailings on other routes so they could switch more ships to Asia-Europe services to counteract the accident fallout. “Carriers may start blanking trans-Pacific and trans-Atlantic routes to recover on the more lucrative Far East [to Europe] route,” he said.

Anders Schulze, Flexport’s global head of ocean freight, predicted that the Suez Canal accident would lead to “a capacity reduction across the board, both in terms of vessel capacity and [container] equipment. There will be a domino effect in terms of vessels and equipment getting back to Asia.”

The disruption at the Suez Canal and congestion at European ports will limit the number of empty containers transported back to Asia. This, in turn, will reduce the number of empty containers available to stuff with Chinese exports bound for the U.S. on trans-Pacific routes.

“The equipment situation was already somewhat critical,” said Schulze. “We were just seeing a light at the end of the tunnel with equipment availability and now this curveball will prolong the situation.”

Further compounding challenges for shippers, at least one carrier — Maersk — has temporarily halted short-term bookings in the wake of the Suez Canal accident. As of Friday, Maersk’s short-term bookings from Asia to both North Europe and North America remained suspended until further notice.

Add it all up — rising consumer demand, very low inventories, a halt to some bookings, voyage delays, vessel and container capacity curbed by Suez Canal fallout — and it’s a recipe for more bare shelves at American stores.

World Trade Primed for strong but uneven recovery

The BOC Blast 407 – Ever Given’s Owner Files Suit and Declares General Average

Ever Given’s Owner Files Suit and Declares General Average

BY THE MARITIME EXECUTIVE 04-01-2021 06:00:00

Salvors celebrate the refloat of the Ever Given (Suez Canal Authority)

The owner of the boxship Ever Given has filed suit against operator Evergreen in connection with the vessel’s grounding in the Suez Canal on March 23, according to UK outlet The Lawyer. The details of the filing are not public, but the defendants include Evergreen and all other parties who may claim damages in connection with the incident.

The Panama-flagged Ever Given is owned by Panama-based Luster Maritime, a subsidiary of Japanese shipowner Shoei Kisen Kaisha. She is chartered to Taiwanese carrier Evergreen, with ship management by Japanese firm Higaki Sangyo Kaisha and technical management by the Hong Kong division of BSM.

As the shipowner, Shoei Kisen Kaisha is widely expected to bear the brunt of damage claims from shippers and shipping interests. Egypt alone believes it is owed at least $1 billion in compensation for the six-day shutdown and the cost of the refloat effort, Suez Canal Authority chairman Osama Rabie told reporters Wednesday. He did not specify who should be liable to pay the damages, but he emphasized that Egyptian responders “saved [the shipowner] so much by rescuing the ship without any major damage or losses.”

“We could agree on a certain compensation, or it goes to court,” Rabie said. “If they decide to go to court, then the ship should be held.”

Shoei Kisen Kaisha has declared general average in connection with the disaster, indicating that it will impose a bond requirement on cargo interests before releasing containers from the ship. Richard Hogg Lindley has been appointed as the GA adjuster, according to The Loadstar.

GA charges are typically assessed as a percentage of the value of the cargo, and in the case of massive losses – like the catastrophic fire on the Maersk Honam – shippers may be asked to pay GA and salvage bonds exceeding half the value of their cargoes. No cargo has been damaged in connection with this incident, but the bonds may be used to recover the cost of the refloat effort.

For its part, Evergreen believes that as the charterer it has “very low” exposure to financial risk from the grounding, president Eric Hsieh told Taiwanese reporters on Thursday. “Our risk exposure from the Ever Given incident is very low – even if there are damages, it will be covered by insurance,” Hsieh said. “Evergreen is free of responsibility from cargo delays [under the terms of carriage].”

The BOC Blast 405 – Suez Canal Update

Suez Canal Update

Suez Canal to be re-opened soon – no more deviations via Cape of Good Hope

Hapag Lloyd reporting:

The vessel EVER GIVEN has refloated in the early morning and will be towed to Great Bitter Lake for inspection. Towage operations for the vessel should commence very soon during high tide. Damaged area of the canal will be inspected and repaired if necessary.

We expect transits to start later this evening. It is still not clear if any vessels might be prioritized for passage. Current backlog should be cleared within four days.

We currently do not know the exact ETA of our affected vessels, but we will do our utmost to optimize the rotations in order to minimize potential bottlenecks at ports and terminals.

Please be assured that we are tirelessly working 24/7 to keep the impact on our customers as low as possible. We will keep you regularly updated about the further developments.

The BOC Blast 404 – Suez Canal Blockage Update

Suez Canal Blockage Update

BOC continues to monitor the evolving situation with the Suez Canal blockage. The Suez Canal stepped up efforts on Friday to free the MV Ever Given and end a blockage that has sent shipping rates for fuel tankers soaring and disrupted global supply chains for everything from grains to baby clothes.
Efforts to free it may take weeks and be complicated by unstable weather conditions, threatening costly delays for companies already dealing with COVID-19 restrictions.
Bernhard Schulte Shipmanagement who is the technical manager for MV Ever Given has provided the below update today March 26th:

  • “Another attempt to re-float the vessel earlier today, 26 March 2021, was not successful. Smit Salvage team on board confirm there will be two additional tugs of 220 – 240 T bollard pull arriving by 28 March 2021 to assist in the re-floating of the ship.”
  • “The focus is now on dredging to remove sand and mud from around the port side of the vessel’s bow. A specialized suction dredger, which can shift 2,000 cubic meters of material every hour, arrived on site on 25 March 2021 to support the ongoing dredging operations.”
  • “Arrangements are also being made for high-capacity pumps to reduce the water levels in the forward void space of the vessel and the bow thruster room.” Editor’s Note: We reached out to BSM and they have confirmed some water ingress i.e. flooding, limited to those spaces.
  • No pollution or cargo damage reported at this time.

Below is a list of vessels we currently know are effected. If BOC is moving your freight on one of these vessels, our operations team will reach out to advise you. It is too early, at this point, to provide updated ETAs on specific shipments, but we will continue to monitor and provide updates as we receive them.
Thank you, BOC.

Sources and Images used in this Blast are from gCaptain & Reuters.

The BOC Blasts 403 – Canada Border Services Agency Assessment and Revenue Management Project – coming soon!

Canada Border Services Agency Assessment and Revenue Management Project – coming soon!

The CBSA Assessment and Revenue Management (CARM) project is a multi-year initiative that will transform the collection of duties and taxes for goods imported into Canada. Through CARM, the CBSA will modernize and streamline the process of importing commercial goods.

Benefits

Once fully implemented, CARM will:
• simplify the overall importing process.
• provide a modern interface for importing into Canada.
• give importers self-service access to their information.
• reduce the cost of importing into Canada.
• improve consistency of compliance with trade rules.

The implementation of CARM is structured in a series of releases. The Accounts Receivable Ledger (ARL) was the first phase of the CARM project. For details on ARL, consult the Commercial payments and accounts section of our website.

Read more about the CARM features and on how to prepare for the CARM initiative.

Timeline

CARM Release 0: January 2021
The existing ARL system will be moved from its current data centre configuration to the more robust SAP S4/HANA system. External users of the system will not experience any change. Importers’ Daily Notices may be delayed a few days during the implementation of Release 0 for Electronic Data Interchange (EDI) clients.

CARM Release 1: Spring 2021
Release 1 will launch the CARM Client Portal, a self-service tool to facilitate accounting and revenue management processes with the CBSA.

CARM Release 2: Spring 2022
Release 2 will expand on the functionalities of the CARM Client Portal.
Stakeholder engagement

Join the CARM GCcollab group, an online forum for the trade chain community, where members can access the latest communications materials related to CARM. To join, simply create a GCcollab account and make a request to join the CARM group.

For questions about the CARM project and/or to register for future CARM-related communications, contact CARM Engagement (cbsa.carm_engagement-engagement_de_la_gcra.asfc@cbsa-asfc.gc.ca).

CBSA has also established a Trade Chain Partner Working Group, whose members continue to receive information on the CARM project.

Link: https://www.cbsa-asfc.gc.ca/prog/carm-gcra/menu-eng.html

The BOC Blast 402 – Depot closure empty returns snarling NY-NJ port truckers

Depot closure, empty returns snarling NY-NJ port truckers

Michael Angell, Associate Editor | Mar 12, 2021 12:08PM EST, JOC.com

The sudden closure of a major storage yard near the Port of New York and New Jersey has forced truckers to scramble for new places to store empty containers, affecting their ability to deliver loaded imports in a timely manner as the port deals with record volumes.

Drayage carriers say the episode underscores the ongoing problem of ocean carriers diverting empty container returns to sites other than where loaded imports are picked up, a problem that truckers say has gotten worse this month and drives up costs to shippers.

“The empty returns are another hurdle that is reducing our productivity,” Rob Movshin, regional vice president for drayage carrier ContainerPort Group, told JOC.com. “The first mile and the final mile in the international supply chain are the most important, but they are most stressed.”

Beth Rooney, deputy director at the Port Authority of New York and New Jersey, said empty returns affect port productivity by unnecessarily tying up driver time that could be spent delivering imports. She said the port authority is working with ocean carriers to increase their empty sweeps and looking for places where truckers can easily store empties.

“We need creative thinking on where to stage empty containers since we still have loads piling up at terminals,” Rooney said.

The port experienced its busiest two months for empties in the past four years recently — 246,859 TEU in December, followed by 241,154 TEU in January, according to port authority data. Those figures account for about one-third of total container volume coming through NY-NJ.

The issue of empty returns in NY-NJ resurfaced this month after port truckers were informed that Ironbound Intermodal Industries would be closing its Delancy Street yard in Newark. A memo from Ironbound said the “amount of equipment that enters our depot along with the associated repairs can no longer support the area in which we operate.”

Delancy provided storage for up to 12,000 containers, according to people familiar with the operation. Hapag-Lloyd, Ocean Network Express, and Cosco Shipping were among its customers, they added. It also served as a chassis depot for intermodal equipment providers.

Members of the Association of Bi-State Motor Carriers, which represents regional drayage carriers, relied on Ironbound as a relief valve for storing empty containers. Despite Ironbound being closed for container storage as of Feb. 19, Bi-State members said they weren’t informed of the closure until a week later.

“That came as a shock to all of us,” Movshin said.

With Ironbound closed, truckers were instead directed to bring empty containers to C&C Marsh Street Depot, another container yard in Newark.

However, a flood of empty returns there caused port authority police to temporarily turn away truckers from C&C on March 3 and 4 due to the resulting traffic jam on the main road serving the Port of Newark, according to an alert from the port authority.

In the interim, truckers were forced to bring empties back to their own yards, which are already full, or find other drop-off sites, Movshin said.

Those diversions meant truckers couldn’t pick up import loads, Movshin said. Truckers were also unable to reuse their chassis for an import load because it was still attached to an empty container, he said.

“Because C&C was overwhelmed by the volume of containers, they were not able to service the community,” Movshin said. “Because the chassis are in such demand, there’s no guarantee you can get a bare chassis at one of these pools or depots and you have just failed at that move.”

“After enduring snow delays and the high volumes in February, we were hoping to capitalize on the good weather in March,” Movshin said. “But this was another punch in the face.”

Empties continue to be diverted

Yet empty container diversions are continuing into March. Cosco Shipping said it would not take empty returns at Maher Terminal and the nearby Columbia Container Service depot on Thursday. It requested that drivers hold on to empties until Friday, when it anticipates gates will reopen, but it didn’t offer alternative drop-off locations for empties. Maersk also blocked truckers from returning some empties to APM Terminal on Tuesday.

Maersk waived per-diem fees for late container returns. However, Movshin said the waivers don’t make up for the lost productivity of empty containers sitting on chassis leaving drivers unable to pick up loaded containers.

Unlike Maersk’s automatic waivers, drayage carriers are more frequently required to document every step where the return of an empty container delayed picking up an import load in order to get ocean carriers to waive per-diem fees, Movshin said.

It’s also common for ocean carriers to change instruction to drivers with less than a day’s notice on where they return empties, said Lisa Yakomin, president of the Association of Bi-State Motor Carriers. Those changes force drayage carriers to switch up their dispatch plans for truckers for the following day, she said.

“Our members need at least 24 hours advance notice in order to properly plan their day,” Yakomin said. She said requiring drivers to drop off empties at sites other than where they pick up import loads cuts drayage productivity in half.

“Not only does this cause frustration for the driver, it also wastes valuable hours of service time, and in some cases, causes them to miss appointments for pickups at other terminals,” Yakomin said.

Port asks for better plans for empties

The problem of empty returns is not new at the NY-NJ port, where only about one-quarter of truck moves are a so-called double move with an empty delivered and import picked up, according to port authority data. The Federal Maritime Commission specifically called out empty container returns as one focus area in its probe of US port congestion.

Rooney said the issue of where to put empties stems from the limited space currently at the region’s marine terminals which are still grappling with a flood of loaded imports. Loaded containers are sitting on NY-NJ docks on average eight to 10 days on average, nearly twice their normal dwell, she said.

Empties also build up in the region because NY-NJ is the first port of call along the US East Coast. Container ships can’t regularly take back empty containers from the Northeast because they are loaded with imports for the US southeast, and they also need room to take their loaded exports.

“The ships are coming at us fully loaded,” Rooney said. “The terminals are stretched to capacity because the empties are not moving back at the rate they should.”

Rooney said ocean carriers are sending in extra ships in the next two weeks to lift empties from the region. However, she said ocean carriers need to develop stowage plans that will more routinely sweep terminals for empties.

“One of our asks for the ocean carriers is that they increase the empty loading factor,” Rooney said.

Along with the extra ships, Rooney said the port authority is looking at finding additional space near the port to make up for the loss of Ironbound. Although the port has identified several possible parcels, Rooney said finding labor and equipment for the site adds another challenge.

She said the port authority is speaking with the Ocean Carrier Equipment Management Association on developing more long-term plans for double moves at marine terminals. It is also emphasizing the need for ocean carriers to not make last-minute changes to empty return instructions so that drayage operators can stick to their dispatch plans.

“We need to understand how the truckers need to plan their day,” Rooney said.

The BOC Blast 401 – Ocean carriers increasing Europe USA trade

Vestager to examine competition in red-hot container market

By Louise Wendt Jensen, Astrid Sturlason – Published: 08.03.21 at 14:59, ShippingWatch.com

EU Competition Commissioner Margrethe Vestager now plans to scrutinize the extreme situation unfolding in the global container market together with the industry. The EU will subsequently “consider ways forward,” a spokesperson tells ShippingWatch.

Copenhagen/Brussels

The European competition authorities will now – together with the industry – examine the current conditions in the global container market. Conditions that have so far been criticized by both US and Chinese authorities.

Rising freight rates, growing container shortages and major delays have long been the consequence of a red-hot market that has seen extraordinary demand for transporting goods from Asia to Europe and the US during the coronavirus pandemic.

“We are discussing with market participants, i.e. shippers, freight forwarders, port operators, carriers, to fully understand the current circumstances, and consider ways forward,” says a spokesperson for Margrethe Vestager, EU executive vice-president and competition commissioner, in a comment to ShippingWatch.

“It seems that these price increases were caused by a combination of factors, such as fluctuating high demand, port congestion, and shortage of containers, in markets which are intertwined at worldwide level,” the spokesperson continues.

This is the first time the EU exhibits such a clear reaction to the current situation in the container market, seeing as the EU’s stance is often more tentative and based on a requirement that evidence must first be presented – at least if it concerns a possible breach of the container liners’ particularly favorable competitive conditions.

The rate boom and current customer dissatisfaction with the low service levels have already led authorities in both the US and China to speak up. The Chinese authorities last year summoned the world’s largest container lines to a meeting in which they were urged to curb rates.

The Federal Maritime Commission in the US has also upped its surveillance of the three large container alliances, under which the world’s largest container lines have organized themselves.

Criticism of liner companies

Shipping companies such as Maersk have been under scrutiny from the US authorities, which now demand monthly updates from the carriers in order to monitor the market. Previously, these updates were only given quarterly.

Maersk has – like many of its competitors – acknowledged that its service is currently substandard, but the carriers also all refer to the extraordinary circumstances created by the Covid-19 pandemic.

“We’re actually dismayed by the level of service we’re forced to provide right now,” said Maersk CCO, Vincent Clerc, recently.

“It doesn’t feel like a big high five moment right now. It feels like a moment where too many customer promises are not being delivered on and we are all hands on deck in trying to alleviate the situation,” he said.

Maersk CEO Søren Skou has set a stated target of bringing the company’s reliability up to between 85 and 95 percent as early as 2021. In January this year, this figure sat at 46.3 percent for Maersk’s ships against 76.4 percent in January last year.

Criticism from US agriculture

In the US, associations like the Agriculture Transportation Coalition and transport associations such as HTA have voiced their opinions. Just last week, Global Shippers’ Forum also voiced its criticism.

In a new review, GSF criticized shipping companies for continuing to provide poor service while cashing in record-level rates.

The industry association’s quarterly survey, conducted by MDS Transmodal, examines eight key performance indicators (KPIs).

“Importers and exporters around the world are paying record high shipping rates but receiving appalling levels of service reliability,” asserts Global Shippers’ Forum in the review.

Difficult for shippers to resolve

Organizations the European Association for Forwarding, Transport, Logistics and Customs Services (CLECAT) and European Shippers’ Council (ESC) have previously urged the European Commission to take action against the container lines, which they believe to be taking advantage of their special position and special competition exemption.

But so far, this has not been possible.

Because in order to do something, the two associations must either submit a formal, well-founded complaint about the competitive conditions or wait for the EU to, at some point, begin their evaluation of the so-called Block Exemption Regulation (BER).

BER is a special competition regulation that allows the container majors to coordinate their efforts through alliances such as, for example, Maersk and MSC’s 2M alliance. With the alliances, container lines are able to coordinate their networks and utilize space aboard each others’ vessels, if their market share is lower than 30 percent, that is.

The BOC Blast 400 – Derailment Impacting Intermodal Operations in Southern California

Derailment Impacting Intermodal Operations in Southern California

BNSF RAILWAY, BNSF.com | March 04, 2021 

BNSF experienced a derailment yesterday afternoon at Ludlow, Calif., approximately 60 miles east of Barstow. As this incident occurred on the Southern Transcon, our primary route between Southern California and the Midwest, rail operations have been significantly impacted. Both main line tracks in this location are currently out of service.

Engineering crews and equipment were quickly deployed to the scene. The first main track is currently estimated to reopen this evening, with the second main line back in service early tomorrow morning. With the high volume of intermodal traffic to/from California, customers with shipments designated to move through this corridor should expect delays until operations have fully normalized.
Gate allocations are being utilized at our Southern California intermodal facilities to ease congestion due to elevated inventories and car supply issues. Limiting gate activity will help expedite the pace of our recovery efforts once the affected main line tracks reopen.
As always, we remind customers that prompt pick-up of shipments will help improve traffic flows, reduce lot congestion and provide the space needed for processing inbound freight as expeditiously as possible. BNSF has multiple tools available for customers to track their shipments.
We appreciate your cooperation and quick response as we work together to rebalance equipment flows. Our operating teams remain focused on safely restoring service to the level you expect from us.