United States Archives | Page 23 of 24

Air cargo under pressure as peak season looms

Sep 4, 2024 | 4PL, Air, China, eCommerce, Foodstuffs, Hong Kong, International Trade, Retail, Supply Chain, United States

With capacity already strained and further challenges expected from potential labour strikes and reduced belly capacity in the final quarter, shippers are under increasing pressure to secure cargo space ahead of the peak season.

Strong demand
According to IATA’s latest figures global air cargo demand surged by 14% year-on-year in July, marking the eighth consecutive month of double-digit growth. This increase is largely driven by ongoing eCommerce expansion and disruptions such as the Red Sea crisis.

Despite the high demand, capacity only grew by 8%, pushing load factors up significantly and intensifying the pressure on available space.

The Asia Pacific region has seen particularly strong growth, with demand up 18% year-on-year in August, while North American carriers recorded an 9% increase, even amid disruptions like Hurricane Beryl. The Asia-North America trade lane experienced an 11% rise, and transatlantic routes also saw rates climb in August compared to July, with expectations of further increases as the year progresses.

Preparing for peak season
With the peak shipping season starting in September, air cargo demand is expected to remain robust, particularly in high-demand regions like Asia Pacific. However, capacity constraints are already evident, with flights on many lanes fully booked. The market faces potential additional pressure from reduced belly capacity in Q4 and the possibility of strikes at US East Coast ports, which could exacerbate the existing challenges.

Shifting capacity
The ongoing Red Sea crisis has disrupted traditional shipping routes, leading to a shift towards air freight as shippers seek more reliable alternatives. This shift, combined with the seasonal reduction of capacity on other lanes, has left the market vulnerable to further disruptions, potentially causing backlogs and price spikes.

As carriers redirect freighter capacity to the high-demand Asia market and reduce capacity on other routes, the market’s fragility increases. The anticipation of a strong peak season, coupled with the current tight capacity, means that shippers must act quickly to secure space and avoid significant disruptions.

Outlook and recommendations
Given the current market conditions, shippers are strongly advised to plan ahead and secure air freight space as soon as possible. The combination of high demand, potential capacity shortages, and the risk of labour disruptions could lead to an overheated market towards the end of the year, with rates likely to continue rising.

Early booking and careful planning are essential to navigate the challenging air freight landscape in the coming months, so please share your forecasts with us as early as possible so that we can ensure there are no disruptions to your supply chain.

For urgent, valuable and sensitive shipments we have a range of airfreight, charter and sea/air solutions, with block space agreements (BSA) and capacity purchase agreements (CPA) to protect space and capacity on the busiest routes.

Regardless of your cargo type, size and requirements, we have extremely competitive rate and service combinations, to meet every deadline and budget.

EMAIL Elliot Carlile, Operations Director, for insights, prices and advice.

Ongoing labour disputes threaten global supply chains

Sep 4, 2024 | EU, India, International Trade, Labour unrest, News, Retail, Sea, Supply Chain, United States

While recent developments in India and Canada suggest some relief from labour disputes, the threat of strikes continues to loom over port operations and global supply chains. The situation remains precarious, especially with the added complications from Red Sea diversions, which could magnify the impact of any further industrial action.

Typically, strikes at ports and other supply chain hubs cause only localised disruptions. However, the current climate is fraught with uncertainty. Sea-Intelligence has warned that even a single day of strike action on the U.S. East Coast could create a six-day backlog to clear containers.

If a strike were to last a week in early October, its effects might not be fully resolved until mid-November, while a two-week strike’s impact might be felt well into 2025, further straining already fragile supply chains.

Recent resolutions

Canada
The Canadian government acted within a day to end a rail strike that began on 23rd August, ordering Canadian Pacific Kansas City (CPKC) and Canadian National (CN) to resume operations and enter binding arbitration with the Teamsters Union. The Canada Industrial Relations Board extended expired collective agreements until new ones are finalised, temporarily safeguarding the supply chain.

However, the union has challenged this decision by filing four separate appeals with the Federal Court of Appeal, suggesting that the risk of further strike action may not be entirely averted.

India
Potential nationwide strike action involving 12 major ports from the 28th August was avoided when the government agreed to wage increases and additional benefits for around 20,000 port workers. Union leaders insist that the strike threat played a crucial role in securing the deal, preventing significant disruption during the peak export season.

Ongoing threats

Germany
The threat of strikes at major ports remains, as the trade union ver.di has rejected the latest offer from the Central Association of German Seaport Operators (ZDS). With the contract now expired, warning strikes have already occurred in key ports such as Hamburg and Bremerhaven. Ver.di is pressing ZDS to return to negotiations with a more substantial offer, raising concerns about potential disruptions if an agreement is not reached soon.

United States
The risk of strikes at East and Gulf Coast ports is growing, with the International Longshoremen’s Association (ILA) threatening action from 1st October. Container spot rates from Asia to the U.S. have remained high, and carriers acknowledge that a strike could sustain these elevated rates through the end of the year.

The ILA has been holding ‘wage scale meetings’ in New Jersey this week, where delegates are reviewing master contract demands and preparing strike committees from Maine to Texas in anticipation of the 1st October deadline.

East Coast port employers, represented by the United States Maritime Alliance (USMX), have stated that they have been unable to secure a meeting with the ILA but remain committed to negotiating a new agreement with the union’s leadership.

The early peak season, driven by shippers eager to front-load holiday goods, has already caused concerns about overcapacity. A strike could exacerbate these issues, leaving carriers with limited options to mitigate the impact.

As negotiations remain tense and the risk of disruptions continues to grow, businesses and supply chain managers must stay vigilant and proactive in their planning. Unresolved labour disputes could have significant consequences for global trade, particularly as the year-end approaches.

We have contingency plans in place to avoid ports likely to be most affected by strikes, as well as alternative routes and entry points. Please share your forecasts as early as possible so that we can mitigate possible issues ahead of time.

To discuss these issues and how Metro can protect your supply chain, please EMAIL Andrew Smith, Chief Commercial Officer.

Challenges in ocean freight: Capacity, congestion, and resilience

Sep 4, 2024 | Chemical, China, Exports, Foodstuffs, International Trade, Sea, Supply Chain, United States

The ongoing disruption in the Red Sea and Gulf of Aden, which started with the hijacking of a vessel nearly ten months ago, has led to a substantial reduction in available container vessel capacity, driving up freight rates, intensifying port congestion, and exacerbating equipment shortages.

The impact of this crisis, second only to the pandemic, has caused widespread disruptions, with global ocean freight continuing to grapple with significant challenges.

Blanked sailings
To counter the drop in demand and falling container spot rates, ocean carriers are implementing a high number of blanked sailings, particularly ahead of China’s Golden Week holiday. The cancellation rate for scheduled sailings in September is currently 10% across major trade routes, with the transpacific accounting for 51%, Asia-Europe 28%, and the transatlantic 21%.

Despite the recent softening, freight rates remain significantly higher than last year – +350% on the Asia-North Europe route and +150-180% on Transpacific routes. Events such as the looming threat of port strikes, the introduction of new import tariffs and an early Chinese New Year could keep rates elevated, even in the face of softer demand.

US West coast volume surge
As the peak shipping season approaches, the US West Coast ports of Los Angeles and Long Beach are preparing for a surge in import volumes.
Ocean carriers are deploying 28 additional “extra-loader” vessels to handle the expected influx, driven by strong consumer demand and the diversion of cargo from the US East and Gulf coasts due to potential labour disruptions.

Economic resilience is likely to sustain high import levels through the end of the year, further increasing activity at these key ports.

Ongoing Port congestion
Global port congestion remains challenging with hot spots in Asia and India in particular. The delivery of new container ships and fewer overall blank sailings in recent weeks, along with the Red Sea diversions, are absorbing the added capacity and demand remains high, resulting in vessel bunching and berthing delays at major ports in China, the USA and South America.

The risk of further supply chain disruptions persists, with potential threats from labour strikes and the increasing impact of severe weather events linked to climate change.

Red Sea diversions soak up equipment
Container equipment situation in Asia, and China in particular, remains challenging but is improving with India now becoming the main hotspot.
Ocean carriers and container leasing companies have booked all available container production slots at Chinese manufacturers until mid-October, following record-high deliveries earlier in the year. In the first seven months of 2024 alone, container deliveries increased tenfold compared to the same period in 2023.

The availability of 40ft high-cube containers has tightened significantly, putting additional pressure on carriers and manufacturers to meet delivery schedules amid strong export growth from Asia and ongoing port congestion.

As the industry navigates these complex challenges, the focus remains on managing capacity, stabilising operations, and mitigating the risks posed by economic and environmental factors.

Ongoing demand for ocean freight and challenges in capacity suggest a complex and potentially turbulent peak season ahead.

We recommend talking to us now, if you have high-priority orders and sharing your shipping forecasts, so that we can secure your space, on the services that meet your deadlines, at the best possible rates.
To learn how we can safeguard and enhance your ocean supply chain, please EMAIL our Chief Commercial Officer, Andy Smith.

US supply chains face multiple threats

Aug 19, 2024 | Air, Chemical, Exports, Foodstuffs, Hazardous, Sea, United States

Importers are entering a critical period, with looming labour disputes, capacity pressures, and surges in maritime and airfreight volumes are creating challenges that could disrupt supply chains well into the fourth quarter.

Demand surge
The Port of Los Angeles handled a record-breaking 940k TEU in July, up 37% YoY, with the US’ largest container gateway 18% ahead of 2023 volumes.

US imports from Asia have been climbing for 10 consecutive months, with no sign of slowing down. A surge in import volumes is expected in August as businesses have been front-loading shipments ahead of a potential ILA strike.

Analysts had originally predicted a tapering of imports during the traditional peak season from August to October, but the market is now expecting year-over-year increases in monthly imports through the end of 2024.

The increase in trans-Atlantic import volumes has not completely eased pressure for space, with a 7% growth in volume during H1 2024 and the container shipping lines announcing peak season surcharges (PSS) for 1st September.

Ocean capacity
Since early July, capacity constraints on the West Coast have begun to ease, thanks to the launch and reintroduction of at least ten services. This shift has widened the rate differential between East and West coast ports, with East Coast rates now nearly 50% higher, the largest gap seen since October 2022.

However, East Coast spot rates may soften in the latter half of August if demand drops, because importers have been front-loading shipments to leave Asia in time for Black Friday sales and to avoid disruption posed by a looming strike. The International Longshoremen’s Association (ILA) contract with East and Gulf Coast maritime employers is set to expire on 30th September, and nothing has been agreed to take its place.

ILA strike
The potential for an ILA strike has become a major concern for the shipping industry. The ILA is demanding a nearly 80% wage increase over the next six years, a proposal that maritime employers have yet to agree upon.

With the union issuing a 60-day strike notice, the possibility of industrial action is growing, with ILA locals from the East and Gulf coasts expected to meet early September to finalise strike strategies. ILA President Harold Daggett has made it clear that members will not continue working beyond the contract’s expiration if their demands are not met.

Canadian rail strike
Canada faces potential industrial action at its two main freight rail companies, Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC), starting Thursday 22nd August. Both companies plan to lock out union workers due to stalled labour negotiations.

The Teamsters union has issued strike notices, and without last-minute agreements, a work stoppage is expected. US operations will continue.

From 20th August, CPKC has said it will stop all shipments that start in Canada and all shipments originating in the US that are headed for Canada, while CN, meanwhile, has barred container imports from US partner railroads.

Both rail companies have said that their trains running in the US will continue to work.

The shutdown will disrupt freight movements to and from the West Coast ports of Vancouver and Prince Rupert. Contingency plans include using long-haul trucks or rerouting cargo through US railroads via Seattle.

Airfreight pressure
If port strikes do occur, they will inevitably spill over into the airfreight sector, leading to a significant spike in demand. However, with airfreight is already under massive pressure from heightened eCommerce activity driven by platforms like Shein and Temu.

Shein alone now accounts for about 20% of global fast-fashion sales, filling 50 to 80 freighter aircraft daily with shipments from China to the US.

An ILA strike would likely exacerbate these capacity constraints, as “distressed” ocean cargo seeks expedited transport, further tightening airfreight capacity. Rates are already surging, with trans-Pacific spot rates up 70% year over year, levels typically seen during Q4 and carriers considering peak season surcharges at the beginning of September.

With all these factors in play, Q4 is shaping up to be a challenging period for US supply chains. If you have any concerns about these potential disruptions, we are available to review your situation, explore your options, and develop contingency plans where necessary.

To learn how we can support your trade with the United States or for more information about our ocean solutions, please EMAIL our Chief Commercial Officer, Andy Smith.