Radiant's Freight Market Update

Red Sea attacks cause shipping lines to avoid Suez Canal, Carriers announce peak season surcharges due to capacity constraints, CBP shuts down rail operations at two Texas border crossings.

Ocean

Red Sea attacks cause shipping lines to avoid Suez Canal. Major shipping lines are steering clear of the Suez Canal due to increased Houthi-led attacks on cargo ships. MSC and Hapag-Lloyd, whose vessels have been directly targeted, declared last week that they will avoid the canal. Similarly, CMA CGM and Maersk Line have instructed their ships to halt transit until further notice, and Evergreen and OOCL have temporarily suspended cargo shipments to and from Israel. Evergreen specified that regional service ships bound for Red Sea ports will sail to nearby safe waters and await further instructions, while container ships scheduled to pass through the Red Sea will be rerouted around the Cape of Good Hope.

Carriers announce peak season surcharges due to capacity constraints. In response to the prolonged disruption caused by ships being rerouted via Southern Africa instead of the Suez Canal, ocean carriers are implementing emergency peak season surcharges (PSSs). Japanese carrier ONE announced a $500 per TEU PSS on the Asia-Europe westbound trade starting from January 1. This move aims to address sustained high demand and ensure space provision, equipment supply, and service levels. The emergency PSS adds to challenges for Asia-North Europe shippers already grappling with new FAK rates of $3,000 per 40ft on January 1. Despite the recent establishment of the US-led 'Operation Prosperity Guardian' naval task force in the Red Sea, carriers are expressing intentions to avoid the Suez Canal until further notice.

Ports

Port of Los Angeles saw cargo volume surge YoY in November. Cargo volumes at the Port of Los Angeles surged by 19% year over year to reach 763,262 total TEUs in November, marking the highest YoY increase in 2023. Port of Los Angeles Executive Director Gene Seroka attributed the year-end growth to the robust U.S. economy, driven by strong consumer activity. “Black Friday and Cyber Monday sales were strong, and the forecast for overall holiday sales is 3 to 4% above last year, another high mark.” The port experienced significant YoY increases of 25% for loaded imports, 24% for loaded exports, and 10% for empties in November. Notably, empties saw their first YoY growth in 16 months, as shippers and carriers strategically positioned assets for upcoming months of imports.

Trucking

Cargo thefts rose in Mexico during Q3. Cargo thefts targeting trucks transporting auto parts and pharmaceuticals increased in Mexico during the third quarter, reaching 5,239 incidents – a 7% YoY rise from 2022 and a 1.2% increase from the second quarter, according to a report from Overhaul. The daily average for cargo thefts in Mexico during this period was 56.7 incidents. The three most targeted product types were food and drinks (29% of cases), miscellaneous goods (11%), and building and industrial materials (10%). Notably, auto and parts thefts increased by 7%, with 54% involving automotive parts and liquids, 29% tires, and 17% assembled vehicles. In the U.S., there were 123 reported cargo thefts during the second quarter, with California, Texas, and Georgia having the highest theft rates, according to Overhaul's data.

Rail

CBP shuts down rail operations at two Texas border crossings. In response to heightened migrant smuggling activities, U.S. Customs and Border Protection (CBP) temporarily halted freight rail operations at three Texas-Mexico border bridges in El Paso and Eagle Pass. CBP officials cited reports of smuggling attempts using trains in Mexico to transport migrants into the U.S. Although the suspensions are temporary, no specific reopening time frame was provided. El Paso's two railroad bridges (BNSF Railway and Union Pacific) and Eagle Pass's single rail bridge (serving Union Pacific and BNSF) are affected. Union Pacific, responding to the suspensions, imposed an embargo on its U.S.-Mexico freight operations in Eagle Pass and El Paso, impacting 60 trains and nearly 4,500 rail cars. Union Pacific has been vocally against the suspensions.

Air

Southwest Airlines faces major penalty over 2022 meltdown. Southwest Airlines is facing a $140 million civil penalty for the 2022 holiday travel disruption that led to the cancellation of nearly 17,000 flights and stranded over 2 million passengers. The Department of Transportation said that this penalty is 30 times larger than any previous fines and serves as a strong deterrent. The penalty includes over $600 million in passenger refunds, a $35 million payment to the government, and a three-year mandate for Southwest to provide $90 million in travel vouchers of $75 or more to passengers experiencing significant delays due to airline-related issues or cancellations.

International

Vietnam increasingly becoming destination for manufacturing. As manufacturers shift away from China, Vietnam is becoming an attractive destination for investment. The country is witnessing a rise in the establishment of factories, driven by the utilization of free trade agreements, tax incentives, and favorable labor costs. In October, chip packaging maker Amkor revealed plans for its largest facility to date, a $1.6 billion factory in Vietnam. Additionally, in September 2022, Google announced intentions to manufacture its Pixel smartphones in Vietnam, while semiconductor developer Marvell disclosed plans to set up a design center in Ho Chi Minh City in May of the same year. Read more from Supply Chain Dive here.

Other

Top Canadian supply chain stories of 2023. The Canadian transportation industry faced significant events in 2023 – from port strikes in British Columbia to truck driver protests demanding unpaid wages and a major railroad merger. FreightWaves has compiled five stories that had the most impact on the Canadian transportation industry over the last year. Read them here.

Futuristic cargo drone could be in use by 2030. Droneliner is pioneering the development of computerized cargo aircraft with the potential for indefinite flight, promising a revolutionary impact on the aviation sector, according to SimpleFlying. The DL200 and DL350 models boast substantial cargo capacities and extended ranges, prioritizing fuel efficiency and carbon emission reduction. The autonomous and roomy design of the Droneliner holds the potential to reshape the online shopping industry. Design Director for Droneliner, Mike Debens, believes that getting the Droneliner into service will “cost billions of dollars”, but still believes that the aircraft will “be in the sky by the decade's end.”

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The Radiant Network's supply chain and logistics updates provide valuable insights on freight trends, customs regulations, global news, economics, tech, and more. The Radiant Network includes the brands Radiant World Trade Services, Radiant Global Logistics, Radiant Canada, Radiant Road & Rail, Adcom, Airgroup, SBA, and Distribution By Air.

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Radiant World Trade Services is a part of Radiant Logistics, Inc. [linked] (NYSE American: RLGT), a publicly traded third-party logistics company that provides technology-enabled global transportation and value-added logistics solutions to a diverse account base. They offer comprehensive services including freight forwarding, truck and rail brokerage, warehouse and distribution, customs brokerage, order fulfillment, inventory management, and technology services. Radiant has an extensive network of offices throughout North America and other key markets worldwide.