ILA Threatening Another Strike in January

What It Could Mean for Global Logistics

As January approaches, whispers of a potential strike by the International Longshoremen's Association (ILA) are echoing throughout the logistics and supply chain industry. While no definitive action has been announced, the impasse centers on automation—a contentious issue between the ILA and the US Maritime Alliance (USMX). Despite reaching an agreement on compensation, the two parties remain at odds over how or whether automation should be integrated into port operations. This unresolved conflict has heightened fears of labor disruption at East and Gulf Coast ports.

Potential Impacts

1. Congestion at Alternative Gateways
   A strike could push shippers to divert cargo to West Coast ports or inland routes. However, these alternatives are already strained by backlogs and increased seasonal volumes.

2. Rising Costs
   Diversions, delays, and longer transit times may lead to skyrocketing freight costs for ocean and inland transportation. Businesses relying on just-in-time inventory systems could feel the pinch most acutely.

3. Market Uncertainty
   Uncertainty surrounding labor negotiations can disrupt planning cycles, forcing companies to secure additional warehousing space or shift procurement strategies.

What Shippers Should Do Now

Preparation is key. Companies should:

• Communicate with logistics partners to understand contingency plans.

• Diversify supply chain routes to mitigate potential bottlenecks.

• Build buffer inventories to avoid disruptions.

The possibility of an ILA strike serves as a reminder of the importance of agility and proactive planning in global logistics. For now, the industry waits to see whether negotiations can stave off what could be a turbulent start to 2025.

Stay tuned for updates as the situation develops.

https://www.uschamber.com/employment-law/unions/dock-workers-could-strike-again-what-you-need-to-know

ILA Strike Suspended

Dock workers are set to return under a tentative agreement reached between the ILA and USMX.

While the deal still requires ILA ratification, it is expected to be finalized, and the Union has committed to resuming work on Friday, October 4th.

However, the strike's impact has caused a backlog that may take up to a month to fully resolve.

Compass will continue to closely monitor the situation and work diligently to ensure all shipments proceed as smoothly as possible.

ILA Strike Shuts Down East/Gulf Coast Ports

NOTE: This Post will be updated wth more information as we get it. Additional information will be added at the bottom and date stamped.

Efforts for the U.S. Maritime Alliance (USMX) and the International Longshoremen’s Association (ILA) to reach a new labor agreement by today’s deadline have failed. Barring any surprise developments a dockworker’s strike will shut down US East and Gulf Coast ports effective 12:00am on October 1, 2024.

We’ve done a quick summary of answers to some frequently asked questions.

What does this mean for port operations?
All operations at cargo ports on the U.S. East and Gulf Coasts will cease on October 1. It will not be possible to pick up or drop off containers or cargo at terminal facilities. The loading and unloading of vessels will be suspended.

What are the implications for refrigerated cargo (reefer containers)?
With dockworkers on strike, there will be no personnel available at terminals to provide electrical power to reefer containers. Temperature control of any kind for in-gated, on-port reefer containers will not be possible.

What will happen to import freight currently on a vessel en route to an affected port?
Falcon is maintaining daily dialogue with the major steamship lines and will work with customers on diversion options as and if they become available.  As of right now, most carriers are taking a ‘wait and see’ approach, meaning that there is no concrete plan to divert cargo or ships.  

What do I do with off-port containers that need to be returned to the port?
Falcon has worked closely with clients to minimize the number of containers that are off-port pending return on or after October 1. Unfortunately, port facilities will be unable to in-gate either loaded export containers or empty import containers being returned to port. Any containers off-port during the strike will be subject to per diem as per the shipping line’s terms. Falcon will work with clients that still have containers off-port on temporary storage solutions, but this will be subject to per diem container and chassis use rates.

Some terminals have stated that they will extend free time and waive per diem charges. This should not be assumed unless verified by the terminal. The Falcon customer service team can work with you to evaluate the policies at the relevant terminal.

I have cargo that needs to ship now. What do I do?
Our customer service teams are working with clients on a variety of contingency plans tailored to client budgetary and timing needs. These range from seafreight sailings using unaffected ports, to airfreight options.

How do I stay ahead of developments?
Falcon will continue to keep clients posted on the status of the port strike on our website, and by e-mail.

UPDATES:

10/2: On the second day of the strike, little progress has been made. Some carriers have started declaring force majure which may allow carriers to offer alternative places of delivery; suspend and store deliveries; or “abandon the carriage of the goods and place the goods at the merchant’s disposal at any place or port which the carrier may deem safe and convenient, whereupon the responsibility of the carrier in respect of such goods shall cease”.

In such cases, legally, the voyage will be considered complete. It will be the beneficial cargo owners' responsibility to collect their Cargo from wherever the cargo is discharged at their own cost and redeliver it to their facility.

10/3: Dock workers are set to return under a tentative agreement between the ILA and USMX.

While the deal still requires ILA ratification, it is expected to be finalized, and the Union has committed to resuming work on Friday, October 4th.
However, the strike’s impact has caused a backlog that may take up to a month to resolve fully.

Compass will continue to monitor the situation closely and work diligently to ensure that all shipments proceed smoothly.

Update On Us East/Gulf Coast Port Strike

As of today, the International Longshoremen’s Association (ILA) and the US Maritime Association (USMX) have been unable to agree on a new contract before the September 30th deadline.

Barring an agreement before the deadline, dockworkers at US East and Gulf Coast ports are scheduled to strike on Tuesday, October 1. Efforts to avert a strike have failed to reach a solution, and port terminals have begun implementing contingency plans. Though these plans vary by port and terminal, generally gate hours are being extended to facilitate import containers being pulled off-pier prior to October 1.

Compass is working with import clients to minimize the impact of the strike by pulling as many containers off affected ports as possible before the terminals cease operations. We are also supporting our export clients with alternative routings for their cargo to avoid strike-affected ports.

For time-sensitive cargo, our airfreight team is standing by ready to assist customers with expediting options by air.

An increase in market rates across different modes of transportation in the US should be expected over the coming weeks due to the fallout of the strike.

Compass will continue monitoring this and supporting our customers and partners through these challenging times.

Global IT Outage Grounds Flights, Affects Ports, Causes Global Disruption

A recent global IT outage, caused by a faulty update from CrowdStrike’s Sensor software, has significantly disrupted various sectors, including shipping and logistics. This outage resulted in significant disruptions, such as grounded flights, port closures, and customs delays worldwide. The update caused Windows systems to crash, impacting numerous organizations, including airlines, banks, and media companies. CrowdStrike and Microsoft have acknowledged the issue, and efforts are underway to mitigate the residual impacts​.

This situation underscores the vulnerability of global supply chains to IT disruptions, highlighting the importance of robust cybersecurity measures.

Compass is working hard to stay ahead of these developments and minimize the impact of these issues on our customers’ supply chains.

Source: Associated Press

Update On The Situation In Baltimore

The Port of Baltimore remains closed following Tuesday morning’s collapse of the Francis Scott Key Bridge. The US Army Corps of Engineers have been tasked with clearing the entryway to the port that has been blocked by the collapsed bridge. It is unclear at this phase how long it will take for the port channel to become navigable again.

Carriers have begun re-routing vessels to ports elsewhere on the U.S. East Coast. Schedule fluctuations should be expected on East Coast services as a result of these diversions. Terminal congestion is also a possibility as other ports absorb Baltimore’s volumes.

We are committed to working with customers on contingency options for shipments routed to or from Baltimore. Please contact our customer service team if you have any questions about routing options for your cargo.

Additional updates will be provided.

PORT OF BALTIMORE BRIDGE COLLAPSE

Dali after collision with Bridge

Earlier this morning, the container ship DALI struck the Francis Scott Key Bridge in Baltimore, leading to the collapse of the bridge. The collapse has blocked access to the Port of Baltimore.

Falcon is closely monitoring the situation and working with steamship lines to keep our clients updated and explore contingencies as necessary. Due to the severity of the situation, vessel diversions should be expected.

Further updates will be provided once available.

Navigating the Seas of Risk: The Vital Role of Cargo Insurance

In the wake of recent events unfolding in the Red Sea, the maritime industry faces a stark reminder of the unpredictable nature of international logistics. As shippers grapple with the complexities of this dynamic environment, understanding the legal frameworks governing cargo transportation is more critical than ever. The Carriage of Goods by Sea Act (COGSA) and General Average are at the forefront of this regulatory landscape. This article delves into the implications of COGSA and General Average and underscores the pivotal role of cargo insurance, especially in light of the current challenges in the Red Sea.

COGSA: A Brief Overview

The Carriage of Goods by Sea Act (COGSA) provides a legal framework regulating the relationships between shippers (or beneficial cargo owners (BCO) based on the terms of sale) and carriers. Particularly significant in maritime legislation, COGSA applies to agreements involving the sea transport of goods between foreign and U.S. ports, where bills of lading are issued.

COGSA lays the groundwork for liabilities but, crucially, establishes limitations on carrier liability. §4(5) of COGSA limits carrier liability to $500 if a shipment is lost or its contents damaged or destroyed.

Limits of liability are enforced irrespective of the carrier used, the amount shipped with the carrier, or the value of the material. 

General Average

Recent incidents in the Red Sea also serve as a reminder that cargo loss is not the only risk. General Average (also known as the York-Antwerp Rules) states that in the event of an emergency resulting in the partial loss or total loss of a vessel or cargo onboard a vessel, all stakeholders (ship owner, carrier, as well as all beneficial cargo owners with cargo onboard the vessel) are each proportionately responsible for the resulting financial burden.

Since the year 2000, there have been seven notable instances where General Average has been declared, including:

• The Hyundai Fortune (2006) - Explosion and Fire off the coast of Yemen

• MSC Sabrina (2008) - Grounded in the Saint Lawrence River

• Hanjin Osaka (2012) - Explosion in Ship’s Engine Room

• Maersk Honam (2018) - Fire in the Arabian Sea

• Ever Given (2021) - Grounded and subsequent blockage of the Suez Canal

• Ever Forward (2022) - Grounded in the Chesapeake Bay

Since November 2023, there have been roughly 30 attacks on commercial shipping lanes in and around the Red Sea. Subsequently, the risk of an attack resulting in a situation that may result in a carrier declaring a General Average is exceptionally high.

Managing Risk with Cargo Insurance

Regardless of the factors causing cargo loss or damage, the only surefire solution is obtaining comprehensive maritime insurance. However, it's important to note that, like all insurance, there are many service providers with varying degrees of quality and a wide range of coverage options.

Choosing comprehensive coverage from a reputable insurance provider is paramount in managing risk.  Since insurance amounts to another cost factor for BCOs, the desire for low premiums is understandable; however, weighing the cost against the extent of your coverage and the insurance company’s rating is essential. 

Insuring with Compass

At Compass, we recognize the gravity of safeguarding cargo amidst the uncertainties of maritime operations and offer our clients a seamless solution for transportation and insurance. Subsequently, our commitment to excellence extends to our choice of insurance providers – only AAA-rated insurers make the cut.

Conclusion: Navigating with Confidence in Unpredictable Waters

Shippers must fortify their strategies as the maritime landscape evolves, particularly with the ongoing incidents in the Red Sea.

Carrier limits under COGSA and the increased threat of General Average underscore the need for risk management. Cargo insurance provides the critical safety net every shipper should embrace.

Air Freight Rates Navigate Year-End Volatility, E-commerce Impact, and Geopolitical Tensions

The air freight industry experienced fluctuating rates in the last quarter of 2023, with a steady rise leading up to December, followed by a significant drop during the Christmas and New Year period. The Baltic Air Freight Index (BAI00) ended 16.9% lower in the four weeks to January 1, contributing to a year-over-year decline of 31.7%. Despite expectations for a rate spike due to disruptions in ocean shipping, particularly in the Red Sea, air freight rates did not immediately rebound.

The peak season for air cargo, typically observed through the run-up to Thanksgiving, Black Friday, and Christmas, followed a normal course. The earlier rise in air freight rates was driven by increased e-commerce activity from China, while the subsequent fall in rates in the final two weeks of December correlated with a decline in spot volumes. Notably, Hong Kong saw a less significant decline in rates compared to other outbound centers, reflecting its role as a leading hub for e-commerce out of southern China.

Rates out of Europe showed diverse trends, with outbound routes from Frankfurt (BAI20) and London (BAI40) experiencing modest increases in December. However, the overall rates were still considerably lower year-over-year. The U.S., on the other hand, witnessed a slight softening of rates from Chicago (BAI50) in December.

While geopolitical concerns persisted, the global macroeconomic outlook brightened towards the end of 2023. Dovish's guidance on interest rates from US Federal Reserve Chairman Jerome Powell contributed to a surge in equity markets. Despite uncertainties, the air cargo industry anticipates potential capacity challenges driven by disruptions in ocean shipping, geopolitical issues, and increased demand, potentially leading to a surge in air freight during the upcoming Chinese New Year.

Source: https://www.tacindex.com/blog/air-freight-rates-january-2024-analysis/

Update On The Situation In The Red Sea

In our continued effort to provide up-to-date information at the highest level, we have an important update regarding the ongoing situation in the Red Sea.

Following the continued attacks on vessels in transit via the Red Sea, ocean carriers have adjusted their rates accordingly. Carriers still transiting the area near the Bab al-Mandeb and the Red Sea have implemented security fees due to the increased risk of operating in the region. Carriers avoiding the Red Sea have also increased their rates due to the dramatically longer transit times required to navigate around the tip of South Africa.

The situation remains fluid as carriers make week-to-week (even day-to-day) decisions on how to route vessels based on daily events. An international naval presence in the Red Sea under Operation Prosperity Guardian provides escort services to vessels. However, continued attacks on vessels have still deterred carriers from resuming regional operations.

Our commitment to providing you with the best possible service remains unwavering. We continue to offer clients options to suit their needs. We will continue to offer options to Red Sea locations such as Jeddah with whatever vessel services remain to the region – however limited they may be.

We understand that this may raise questions. Our team is prepared to answer any questions regarding the current situation. We maintain daily contact with all carriers and our local customer service teams in the region to ensure we remain abreast of the situation.

As always, we remain committed to providing our customers with the same excellent service you expect and depend on from Compass.

Please contact your account manager for clarification if you have any specific concerns or inquiries.

We appreciate your understanding and continued trust in our services.

Security Concerns Result In Servicr Suspensions In Red Sea

Recent weeks have seen the targeting of commercial vessels as they transit or approach the Red Sea by armed groups in Yemen. These attacks have included hijackings and attempted missile and drone strikes – some of which were successful. Several major carriers have suspended service in the region following several security incidents involving Maersk, MSC, and Hapag-Lloyd vessels off the Arabian Peninsula.

Maersk Line has stopped sailings through the Bab al Mandeb Strait – the chokepoint off the coast of Yemen linking the Gulf of Aden to the Red Sea. The strait serves as the southern entrance to the Red Sea – a vital access point for vessels transiting to or from the Suez Canal and any vessels calling the key ports of Jeddah, Port Sudan, and Aqaba.

Hapag-Lloyd has similarly suspended service through the Red Sea through at least Monday. MSC and CMA CGM have also been reported to have suspended Red Sea operations.

These developments will have implications not only for any vessels calling Red Sea ports but also for any vessels transiting the Suez Canal. Increased transit times and blank sailings should be expected.

Considering the persistent transit delays impacting the Panama Canal due to drought, service restrictions that limit access to the Suez Canal will leave the world’s two main passageways for trans-hemispheric shipments obstructed. This will lead to extended transit times and upward pressure on rates across trans-hemispheric services – such as services from Asia and the Middle East to the Americas and Europe.

Additionally, if other petroleum carriers follow the course of BP and suspend vessel operations in the Red Sea, there may be implications for global fuel prices as the transportation cost of oil climbs.

Compass is closely monitoring these developments and is working with customers on contingency planning as necessary.

Please monitor Compass newsfeeds for developments.

Major Backlog in Panama Canal

A substantial backup has occurred in the Panama Canal, triggering concerns over its impact on global trade. The canal, a pivotal conduit for maritime commerce, is currently facing operational constraints due to a combination of increased shipping traffic, maintenance work, and drought conditions resulting in low water levels.

The bottleneck has led to a considerable accumulation of vessels waiting to transit through the canal, causing delays in the delivery of essential goods and raw materials. Shipping companies are reporting prolonged waiting times, which in turn are disrupting supply chains and raising freight costs. Experts warn that if the situation persists, it could lead to shortages of goods in various parts of the world and result in economic repercussions.

The Panama Canal Authority is working diligently to address the issue, employing extra resources to expedite the clearance of the backlog. Additionally, they are collaborating closely with maritime agencies and international partners to find swift solutions to the crisis.

Global trade stakeholders are closely monitoring the situation, and contingency plans are being activated to divert shipments through alternative routes, such as the Suez Canal and the Cape of Good Hope. However, these alternative routes are not without their own challenges and may not be able to fully offset the disruptions caused by the Panama Canal backup.

The incident underscores the vulnerabilities of the interconnected global trade network, where even a single chokepoint can have far-reaching implications. As the world navigates this unexpected challenge, all eyes remain on the Panama Canal, hoping for a speedy resolution to alleviate the strain on international trade.

Advisory| Yellow Corp’s Suspension of Operations and Supply Chain Stability

Yellow Corporation – the third largest less-than-truckload (LTL) carrier in the United States – announced to its union Sunday that it will be filing for bankruptcy. Facing USD 1.3 billion in upcoming debt maturity, the nearly-century old company suspended operations the same day.

The Yellow Corporation consists of the national LTL carrier YRC Freight, as well as regional carriers New Penn, Holland, and Reddaway. Though the formal bankruptcy announcement is still pending, the work stoppage has forced many shippers to scramble for alternative service providers.

Compass’ trucking desk has been closely monitoring the situation at Yellow over the past several weeks to ensure our customers are minimally affected by these developments. We are working closely with reputable national and regional truckers to ensure coverage for our customers’ freight. With LTL demand set to rise as US peak shipping season begins this month, we forecast that LTL market rates will see an uptick given the elimination of Yellow’s capacity from the market.

Customers should be aware of these market challenges when planning out their supply chains and logistics budgets over the next several months. Our trucking specialists will continue to monitor these changes in the trucking market and will post updates to our newsfeeds as necessary.

Please feel free to contact a member of our customer service team if you have any questions about LTL trucking services.

Compass Expands Midwest Service with Chicago Facility

Chicago, IL. June 27, 2023 – Compass Forwarding has opened an office and warehouse in Chicago, growing the company’s footprint in one of the fastest growing logistics markets in the US. The customer service center and 16,800 sq. ft. warehouse are located in Elk Grove Village, IL – minutes from Chicago’s O’Hare International Airport and rail terminals.

The Chicago customer service center will coordinate air, land, and sea logistics for the Midwest and Great Lakes regions. The local team will drive Compass’ continued growth in one of the fastest growing logistics markets in the US. The area is home to the world’s fourth busiest airport and a major rail hub linking America’s extensive manufacturing base in the Midwest to coastal seaports.

“We’re excited to launch the newest Compass office in Chicago,” noted Compass’ Director, Richard J. Shelala. “The addition of our Chicago team provides us with an opportunity to better assist markets in the Midwest. Our proximity to O’Hare allows us to provide our airfreight and aerospace clients with enhanced services at a major US hub,” Shelala added.

Compass Forwarding is a family-owned boutique freight forwarder and customs broker with three generations of experience in specialty air, land, and sea transportation. The New York-based company is a leading global logistics provider to the aerospace, energy, healthcare, food service, automotive, and high-end retail sectors.

More details on Compass’ services can be found at http://www.compassfwd.com.

Advisory | Global Flight Disruptions Through February 17, 2023

Airport Issues in New York, Frankfurt, Munich Leading to Cancellations and Diversions.

Labor strikes in Frankfurt and Munich coupled with a power outage at New York/JFK have led to numerous cancellations and diversions on international flights from Thursday through Friday. All Lufthansa flights operating from the airline’s hubs at Frankfurt and Munich were canceled Friday due to a strike by the Verdi trade union. Over 1,300 flights were canceled as a result.

The strike follows an IT outage at the Frankfurt airport earlier in the week that led to a stoppage of flights.

In New York, a power outage at JFK Terminal 1 has caused widespread disruptions to inbound and outbound international flights since Thursday. Several major international airlines have either cancelled or diverted flights as a result of the terminal being inoperable. The airlines effected include Air France, EgyptAir, Lufthansa, Philippine Airlines, Saudia, Swiss, and Turkish Airlines. A complete list of airlines can be found at the Terminal One website.

The disruptions at JFK are expected to continue through Friday.

The Compass airfreight team is closely monitoring these developments and is working with customers on contingencies where possible. Customers should expect delays on any shipments involving Lufthansa this week, as well as any international shipments traveling through JFK this Thursday and Friday.

Sources: Terminal One, Reuters, Aviation Week

Severe Weather Advisory - Hurricane Ian

Hurricane Ian is currently striking the west coast of Florida as a Category 4 hurricane, yielding damaging winds and severe flooding. Winds of up to 150 mph (241 kmh) have been recorded, and storm surges are expecting of up to 12-18 ft in parts of the state.

This severe weather is causing logistical disruptions in the Southeast US. Widespread flight disruptions and cancellations have been reported at Florida’s airports – including Miami, Orlando, Tampa, Southwest Florida, and Ft. Lauderdale. Operations disruptions are also being felt at airports as far north at Atlanta and Denver. Some 23% of system-wide operations for American Airlines are reported to have been disrupted today.

Port terminal closures are also expected on both the west and east coasts of Florida as the storm moves north. This is expected to impact vessel schedules throughout the US East Coast.

Ground transportation is impractical in large portions of Florida due to evacuations and flooding.

The storm is projected to move northward as it losses power, crossing over the east coast of Florida and past Jacksonville and Savannah towards Charlotte.

If you have a shipment in the Southeast US at this time, our team will do our best to keep you informed of status. Transit disruptions should be expected in the effected areas though due to the storm.

Please stay tuned for further advisories.

Sources: The Weather Channel, FlightAware, Industry Sources

November 2021 Market Update

Ocean Freight

Measures taken by governments, carriers, and ports have thus far failed to remedy the capacity shortage and congestion crisis. Ocean carriers have recorded record-high Q3 profits at a time that they have failed to adequately add capacity, failed to control port congestion, and raised freight rates.

Company Q3 2021 Profits A.P. Moller-Maersk – Parent of world’s largest container carrier (Maersk Line) and a major global container port operator (APM Terminals) USD 5.9 billion (355% increase from Q2 – largest profit in 100+ year history of company) Hapag-Lloyd USD 3.92 billion (419% increase year-over-year) Zim Line USD 1.46 billion (913% increase year-over-year)

The backlog of vessels waiting to berth at Los Angeles / Long Beach has reached 105 ships recently according to Maersk Line – a substantial increase over levels seen in prior weeks and months. These ships will wait 2/3+ weeks at sea just for the opportunity to dock in Southern California. This is also affecting other ports as backlogs spread. Congestion has grown increasingly worse at other US ports – namely Seattle and Savannah. At least one major carrier has temporarily suspended service to Seattle due to port congestion. Congestion remains an issue at New York as well, where congestion surcharges are being levied due to the challenges of retrieving equipment from terminals.

A supply chain bottleneck has emerged in recent days at the Port of Vancouver following a severe storm that triggered flooding and landslides in British Columbia. Rail operations to and from the port have been suspended and road connections that link Vancouver to other parts of Canada were severed.

A 24/7 operating schedule has been rolled out for the country’s largest and most congested container port complex: Los Angeles/Long Beach. A fee for any containers dwelling at the port complex for more than nine days (drayage) or six days (intermodal) has been introduced in an effort to alleviate congestion. The fee is USD 100/day growing by USD 100 each subsequent day, and is set to go into effect Monday, November 22. Importers should factor these fees into their budgeting.

Airfreight

Limitations in ocean freight capacity have led many shippers to upgrade time-sensitive shipments to airfreight. This trend coupled with peak shipping season and the pre-holiday rush have created strong demand for what is still a limited amount of global air freight capacity.

In recent days the U.S. has eased COVID travel restrictions for international travelers, which has led airlines to increase passenger flight capacity. This increase in belly-hold capacity will provide much needed relief to the airfreight market. Airport congestion and backlogs still persist though. Major airports continue to have severe congestion at cargo terminals, with truckers waiting hours to pick up and deliver freight. The most congested airports require prior scheduling. Often appointments are only available in the middle of the night. Trucks will routinely wait at least 1.5 hours to be serviced at an airport terminal. Truckers have reported waiting 4-8 hours at some of the busiest airports.

Due to widespread airport congestion, trucker wait time is unavoidable in many circumstances. Waiting time charges should be anticipated by shippers and factored into any budgeting.

Trucking

A trucking market characterized by a long-term, systematic capacity shortage has been further strained by a spike in the price of fuel. Fuel prices increased over 50% year-over-year in October according to DAT  – driving up rates. Spot rates and demand levels for all trucking categories increased year-over-year in October.

An infrastructure bill passed by Congress and signed by President Biden includes measures to enhance trucking and rail systems. It is unclear though what the impact of the bill will be on the trucking market in the short-term.

FTL and LTL transit times continue to run longer than usual due to carrier staff shortages and high volumes. Delays amongst even the most reliable carriers have become unavoidable, and should be factored into lead time planning by shippers.

Severe Weather Advisory - Hurricane Ida

Hurricane Ida struck the state of Louisiana Sunday as a category 4 storm, causing severe weather through the Southeast US as the storm moves inland as a tropical storm. The storm is considered one of the worst in the region’s history, and is having numerous effects on logistics operations both in the Southeast and nationally.

• Infrastructure Outages: Significant power and cellular network outages in the effected area – specifically New Orleans, where there is reportedly a complete loss of electrical power city-wide. Some areas of the state are completely flooded with impassable roads. Any logistics operations in Louisiana should be considered disrupted at this time.

• Port Operations: Terminals have closed today at the Ports of New Orleans and Mobile

• Airport Operations: 90% of departures and 95% of arrivals to New Orleans International Airport have been cancelled today according to FlightAware. Cancellations and delays are also affecting operations at Houston Bush Intercontinental Airport

• National Impact: An already stressed trucking market in the US will be further strained by demand for trucking equipment to assist with emergency services, recovery, and relief operations. The availability and price of fuel elsewhere in the US are also likely to be affected by the storm.

Please continue to monitor the Compass newsfeed for the most recent information on logistics updates in the United States.

Image from U.S. National Oceanic and Atmospheric Administration, National Hurricane Center

USA Market Update

The Compass team is continuing to work closely with our clients to navigate the challenges of the current logistics market. As part of that effort, please find our most recent market assessment. We remain committed to helping all our clients and partners better understand these evolving challenges and working with them to ensure their supply chains remain stable.

Trucking and Container Drayage

The US is experiencing long-term disruptions to the trucking market caused by what has become a permanent shortage of drivers and equipment.

Prior to the COVID-19 pandemic, the US Government imposed stricter regulations on trucker drive time. These changes caused many truckers to leave the industry, causing a shortage of drivers that persists to the present time. To complicate this, the past year has seen unusually high demand for trucking services due to the growth of e-commerce and strong import volumes.

At this time, capacity remains very limited for all types of trucking services, including container drayage. It can easily take in excess of a week for containers to be pulled from any port or rail ramp due to the shortage of chassis and drivers. The chassis shortage is particularly severe at Midwest rail ramps.

Below is a snapshot of load-to-truck ratios based on the most recent data from DAT. As these figures indicate, demand for equipment is exponentially higher than the amount of equipment available. The demand for trucks is 30–70% higher than the strong levels seen a year ago.

Dry Vans:  5.5+ loads/1 truck for most states

Flatbeds: 18+ loads/1 truck for nearly all states

Refrigerated Trailer: 12+ loads/1 truck for most states

Less-than-truckload (LTL) networks are also being disrupted by the capacity shortages. Even amongst the most reliable carriers, transit delays of upwards of a week are not unusual as carriers struggle with limited trailers and drivers.

Ocean Freight

The global ocean freight market that has been severely stressed for the past year is poised for further stress as 2021 peak season starts this month.

Strong US demand for imports from East Asia has triggered a spike in global spot and contract rates, as well as a shortage of available empty containers in much of the world – including the inland US. Drewry’s global spot rate composite index is up 358% year-over-year as of last week. Rates from China are up 285% to the US East Coast and 241% to the West Coast.

Port congestion has spread beyond Long Beach to affect most major US ports and rail ramps. According to FreightWaves, vessels are waiting offshore for berthing space at Long Beach (125 vessels in waiting), Savannah (17 vessels), and New York (9 vessels). The shortage of drayage equipment is adding further fuel to the port congestion problem throughout the country.

Much attention has been drawn to the small number of ocean carriers controlling a growing portion of the global container freight market and accusations of unfair pricing practices by these companies. The world’s eight leading container carriers are responsible for over 80% of market share, according to current Alphaliner data. The Biden Administration recently ordered the Department of Justice and the Federal Maritime Commission (FMC) to investigate and take action against improper pricing practices amongst these carriers. Several of these carriers collaborated to form shipping alliances in years past, raising questions about possible noncompetitive pricing practices. Nine carriers are under audit by the FMC to identify possible improper detention and demurrage charges.

Historically, ocean freight peak season has run each year from August through December as retailers source merchandise from overseas in preparation for the holiday season. This year is unique in that strong volumes that started during the 2020 peak season still persist, with carriers levying peak season surcharges over the past several months. It is expected that these surcharges will increase over the next four months as shipping volumes rise.

Airfreight

While many passenger flights have resumed, bringing belly-hold capacity on-line, the airfreight market is still challenged by strong demand and structural constraints from within the industry.

Capacity continues to be tight, especially on services to East Asia and Oceania and with freighter services. Courier/integrator services have been disrupted by staff shortages, aircrew shortages, and severe summer weather – particularly in hub cities such as Memphis. Delivery schedules, including for premium overnight services, are routinely not being met by courier companies due to these issues.

All major US airports are experiencing congestion at cargo terminals. Trucks servicing these terminals are routinely forced to wait upwards of 4-8 hours to pick up or drop off cargo – including for premium bookings. At the most congested airports – such as Chicago O’Hare (ORD) – pickups require advanced scheduling and often must be made in the middle of the night.

These issues are exacerbated by the fact that there are a limited number of trucking carriers permitted to deliver to airports, and that airlines and airport handling companies are working at reduced staff levels. Several major airlines have completely divested of cargo customer service staff in the US. It is common for airlines to take several days to respond to correspondence and booking requests. Several carriers no longer monitor their phone lines. To mitigate these issues, the Compass team is utilizing online booking tools as much as possible.

Best Practices to Ensure Your Shipments Run Smoothly

• Planning Ahead: Plan your shipment out as far in advance as possible. Bookings for all methods of transportation require a much longer time to secure than in years past.

• Budget Flexibility: Spot rates for all services are fluctuating every few days with the market – in some instances by significant amounts. Shipping budgets should take into account fluctuations in rates on a week-to-week basis. With peak shipping season beginning this month, market rates should be expected to climb over the next four months.

• Understanding Lead Time Requirements vs. Transit Time Realities: It has become normal for actual air, land, and sea transit times to run longer than published schedules. Compass has no ability to control carrier transit times, and shipments typically cannot be expedited once already en-route. This must be kept in mind during lead-time planning. If a shipment has strict lead time requirements, this should be communicated to Compass at the time of quoting so an appropriate routing can be planned.

Global Seafreight Market Update

Although media reporting suggests that the incident involving the Ever Given in the Suez Canal is resolved, the fallout on the international seafreight market continues to be strong a month after the canal was cleared. For one, the Ever Given and its 18,000 containers remain off the coast of Egypt and have been impounded pending a reported USD $916 million fine over the incident.

More significantly, schedules for international container service continue to be disrupted as hundreds of ships were forced to stop their voyages due to the closure. This is also contributing to port congestion.

In the United States, the worst congestion continues to be at the Port of Los Angeles/Long Beach, where at any given time an estimated 20 container vessels are anchored off the cost of California awaiting berth. The congestion at Long Beach is also causing delays at other west coast ports as vessels waiting off Long Beach fall off schedule on subsequent port calls.

Coupled with existing capacity issues caused by strong import demand in the United States, seafreight market rates continue to climb on all major global routes. According to Drewry, market rates on the eight main global lanes have increased by anywhere from 37 to 342% year-over-year this week. The global composite rate increased by 234% this week versus last year.

These extraordinary increases in global market rates are expected to continue at least through May.

Compass is continuing to work with customers to find cost-effective seafreight solutions to meet the scheduling and budgetary needs of our clients. Our operations team holds weekly strategy meetings with the major global carriers to ensure we stay ahead of market conditions and are able to offer the best available options to our clients.

Source: Business Insider, FreightWaves, Drewry, industry sources