United States Archives | Page 24 of 24

US market update: Navigating high demand and looming strikes

Aug 7, 2024 | Air, Exports, International Trade, News, Sea, Supply Chain, United States

Shippers in the US are currently navigating a particularly challenging landscape, marked by elevated air cargo demand and looming threats of labour strikes on the East and Gulf coasts.

Air Cargo
Air cargo on the main trade lanes out of Asia remains in peak season mode. The situation is driven by distressed cargo from the Red Sea and sustained eCommerce demand, keeping spot rates high. The recent global IT outage at Microsoft, which caused massive flight delays, cancellations, and cargo backlogs, did not significantly impact the air freight market. Cargo load factors returned to normal levels within ten days.

Air freight rates from Shanghai to North America are currently 25% higher than last year. Growth in air cargo demand is expected to continue into August and September, with potential for further increases if the peak season extends into the fourth quarter.

Sea freight and the threat of East and Gulf coast strikes
The International Longshoremen’s Association (ILA) is seeking an 80% wage increase over its next six-year contract with maritime employers on the East and Gulf coasts. The ILA has issued a 60-day strike notice to the United States Maritime Alliance (USMX), warning of strike action by its 45,000 members if a new deal is not reached before the current contract expires at the end of September.

The ILA’s wage demand is significantly higher than previous agreements and follows other union victories in contract negotiations. Shippers using container ports along the US East and Gulf coasts have limited options if the ILA begins strike action on 1st October. Importers are advised to front-load cargo to these ports as outbound capacity from Asia has been tight for several weeks. Space on vessels needs to be booked immediately to ensure arrival by 30th September.

Canadian routings for inbound cargo are increasingly uncertain due to the threat of a country-wide rail strike, while diversions through Mexico present significant logistical challenges, including limited vessel space. Short ILA stoppages can be managed with East Coast ports capable of clearing backlogs quickly. However, prolonged stoppages of a week or more could take a month to recover from, causing widespread disruption.

Diverting services to avoid the US East and Gulf coasts poses its own challenges. West Coast capacity and container equipment shortages are likely to worsen, with US imports expected to increase by 14% year-on-year in August and resilient consumer spending maintaining demand. The current rate differential between East and West coasts is the widest since October 2022 but is expected to narrow as East Coast spot rates decline ahead of the potential ILA strike.

Carriers are booked through mid-August to the East Coast, keeping rates high at least for the next few weeks. However, this will change rapidly if the ILA takes action. Spot rates to the West, East, or Gulf coasts are unlikely to fluctuate significantly in the event there is no ILA strike. Additionally, no significant drop in rates is expected during the traditionally slow months of November and December.

Canadian Railways and unions resume contract talks
Canadian National Railway and Canadian Pacific Kansas City have resumed separate contract talks with the Teamsters Canada Rail Conference, representing nearly 10,000 railroad workers. Negotiations began last November but have yet to produce a new contract to replace the agreement that expired at the end of last year.

The Canada Industrial Relations Board is investigating whether a work stoppage would impact Canadians’ health and safety, with an announcement expected by Friday. While railroad workers cannot legally strike until 72 hours after the board’s ruling, the union has indicated that a work stoppage is likely by the end of August. A strike by Canada’s railroad workers would disrupt the daily movement of more than 900,000 metric tons of goods on Canada’s railways.

The US market is experiencing significant challenges in both air and sea freight sectors. With elevated air cargo demand and potential labour strikes on the East and Gulf coasts, strategic planning is more crucial than ever for shippers.

We are here to keep you informed and act proactively to help you navigate these turbulent times, ensuring the smooth movement of goods through your supply chain.

If you have concerns about potential ILA strike action, we can assess your situation and, if necessary, develop contingency plans to safeguard your import traffic. By exploring alternative access ports and adopting a collaborative approach, we will provide optimal solutions to meet your supply chain needs.

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.

Record volumes raise concerns for peak season

Jul 24, 2024 | 4PL, Automotive, Chemical, China, eCommerce, Exports, Foodstuffs, General, News, Retail, Sea, Sea/Air, Supply Chain, United States

Global demand for ocean freight container shipping has surged to unprecedented levels, surpassing even the peak during the Covid pandemic and comes when available capacity is already strained due to diversions around Africa, leading to concerns that any peak season demand could be calamitous.

Chinese exports reached a record high of 6.2 million TEU in May and while there is hope that early shipments will reduce volumes during the traditional peak season in the third quarter, other factors could keep demand high.

Nervous shippers are re-stocking and seeking to avoid potential future tariffs on imports from China, which could sustain high demand in the coming months.

Approximately 19% of US shippers and 26% of European customers are advancing their shipping schedules due to fears of supply chain disruptions.

Planned US tariff increases on goods, including electric vehicle-related materials, battery parts, and solar cells, could further elevate freight costs as exporters rush to front-load shipments. The Hong Kong Small and Medium Enterprises Association noted that many manufacturers are struggling with tighter deadlines and increased overtime pay in mainland China, jeopardising profitability.

With importing customers asking for orders to be shipped earlier than usual, Chinese manufacturers are increasingly struggling to meet the shortened schedules necessary for timely festive season deliveries. The average cost of moving a 40ft container between Asia and northern Europe has more than doubled in two months, with a roughly fivefold increase from the same period last year.

Recent spot rate indexes for sea freight have shown the smallest gains in months, with some main east-west routes seeing a pause in growth. The slowdown suggests the market might be reaching an equilibrium of supply and demand. However, it remains unclear whether this is a temporary early peak season or if demand from front-loading shippers will persist, particularly with potential US tariff increases looming.

While Asia-to-Market routes have stabilised, others continue to show week-on-week rises, with the WCI’s Shanghai-Rotterdam leg and XSI’s Asia-Europe component both increasing. Monitoring space availability closely, there are reports that vessel utilisation might be slipping, potentially making bookings easier to acquire. However, rates are expected to remain high throughout the peak season, especially for shipments ex-China.

Equipment shortages
Please be aware that we are seeing more reports from carriers that intra-Asia routes are experiencing equipment shortages, particularly out of China. This is an industry-wide issue that initially affected long-haul shipping but now has extended to intra-Asia routes. The demand for export containers in China means that carriers have to decide whether to prioritise carrying empty containers back to China or carrying laden containers to other destinations.

We are monitoring the station closely, as it could possibly push rates up, potentially cascading into the backhaul trades to Asia and regional trades.

The unprecedented demand for ocean freight and ongoing challenges in capacity and costs suggest a complex and potentially turbulent peak season ahead.

We recommend talking to us now, if you have any urgent or high-priority orders forthcoming 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 enhance your ocean freight solutions, please EMAIL our Chief Commercial Officer, Andy Smith.

US port strike threats on East and Gulf Coasts

Jul 22, 2024 | News, Sea, United States

The International Longshoremen’s Association (ILA) contract with maritime employers, represented by the United States Maritime Alliance (USMX), is set to expire on the 30th September 2024 and with under 10 weeks remaining, negotiations have stalled, making a strike increasingly likely.

Any strike that potentially impacts all Atlantic and Gulf Coast ports would cause significant disruption to containerised US import and exports, especially with West Coast port workers potentially refusing to handle diverted cargo in solidarity.

However, the ILA has a record of resolving contracts without strikes, with the last major disruption occurring in 1977 and had planned to resolve local jurisdiction contracts before starting master contract talks but these negotiations were cancelled due to a dispute at the Port of Mobile. The USMX has expressed a desire to move forward productively but acknowledges that time is running out.

Despite time running out to sign a new contract before the current deal’s expiration the ILA is unwilling to extend the current contract or accept intervention from outside agencies.

The ILA is also seeking recognition for the longshore workers’ efforts during the pandemic, similar to the West Coast’s International Longshore and Warehouse Union (ILWU), which secured a significant pay increase in their recent contract.

The union’s firm stance against port automation, particularly the use of an auto gate system at the Port of Mobile, has been a significant sticking point. This system processes trucks without ILA labor, which the union claims violates the current master contract and resulted in the stalling of the most recent negotiations.

The ILA alleges that increasing the number of IT personnel at marine terminals undermines traditional dockworker roles and they will not resume talks until these issues are resolved.

The looming strike poses a significant threat to maritime operations along the East and Gulf coasts, but there are questions as to whether the union would proceed with a potentially devastating strike just five weeks before the presidential elections in the United States.

If you are shipping to or importing through the US East or Gulf Coasts and have concerns about potential ILA strike action, we can assess your situation and, if necessary, develop contingency plans to safeguard your supply chains.

By exploring alternative access ports and adopting a collaborative approach, we will provide optimal solutions to meet your supply chain needs.

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.

New US demurrage and detention regulations in force

Jun 27, 2024 | Automotive, Chemical, Exports, Foodstuffs, Hazardous, International Trade, Sea, Supply Chain, United States

The Federal Maritime Commission (FMC) final rule on demurrage and detention billing requirements came into force on the 28th May, except for two provisions that are delayed.

The rule applies to ocean common carriers trading to or from the US, including vessel-operating common carriers (VOCCs) and non-vessel-operating common carriers (NVOCCs), and to marine terminal operators (MTOs).

The rule mandates that common carriers and MTOs include specific minimum information on demurrage and detention invoices, with set timeframes for issuing invoices, disputing charges, and resolving disputes.

Financial Impact
The FMC reports that between 2020 and 2022, nine of the largest carriers serving US liner trades charged a total of approximately USD 9 billion in demurrage and detention fees and collected roughly USD 7 billion.

Background
Demurrage and detention refer to charges assessed by ocean carriers and terminals for the use of shipping containers and marine terminal space, in addition to agreed freight charges.

During pandemic-related supply chain delays, many cargo shippers were surprised by large bills, leading to numerous complaints to the FMC.

Final rule
The final rule follows a notice of proposed rule-making published in October 2022, and incorporates changes based on feedback from shipping industry stakeholders. The FMC has been considering these rules since at least 2021, when its Fact Finding Investigation No. 29 recommended industry input on minimum requirements for demurrage and detention billing.

The US Congress addressed this topic in the Ocean Shipping Reform Act of 2022 (OSRA 2022), which listed the minimum information that common carriers must include in a demurrage or detention invoice. OSRA 2022 authorised the FMC to revise these requirements and to define practices for assessing charges. The final rule announced on the 26th February 2024, implements these provisions.

New Regulation Details
The new regulation will appear in the Code of Federal Regulations at 46 CFR Part 541—Demurrage and Detention. For now, it is published in the Federal Register at 89 Fed. Reg. 14362-14363.

Compliance Highlights
Applies to invoices issued by VOCCs, MTOs, or NVOCCs for demurrage or detention charges, excluding the billing relationship between MTOs and VOCCs.

If an invoice fails to include all required information, the billed party does not have to pay it.

The detailed information that must be included in any invoice, such as identifying details, timing, rate, dispute procedures, and certifications, will be specified at a future date.

Invoices must be issued within 30 days of the last incurred charge; otherwise, the billed party is not required to pay.

NVOCCs receiving invoices from VOCCs or MTOs must issue their invoices within 30 days.

The billed party has 30 days to contest charges, and the billing party must attempt to resolve disputes within 30 days.

Purpose
The primary purpose of the new regulation is transparency, allowing billed parties to understand and verify the accuracy of demurrage or detention invoices and the origins of the charges.

Detention and demurrage (D&D) cases handled by the Federal Maritime Commission (FMC) in the United States have trebled since the pandemic and are set to reach historical highs by the end of the year.

This briefing is not legal advice and does not address any specific situation. Should you have any questions about this topic or FMC regulations in general, please EMAIL our Chief Commercial Officer, Andy Smith.