Radiant's Freight Market Update

This week: Red Sea crisis expected to persist amid rate surge; Hurricane Beryl disrupts Texas port and rail operations; Federal regulators delay trucking rules.

Current Critical Industry Trends

Red Sea crisis expected to persist amid rate surge. The Red Sea crisis has severely impacted global ocean markets, leading to longer transit times and significant congestion at ports worldwide. Following vessel attacks, routes around the Cape of Good Hope have added 2-3 weeks to transit, driving up operational costs and prompting ocean carriers to increase blank sailings to manage capacity. As a result, freight rates spiked, with Asia to U.S. rates reaching $7,052 per FEU to the West Coast and $8,253 to the East Coast. Shippers are advised to enhance visibility, forecast accurately, and plan shipments strategically to navigate these volatile conditions, which are expected to persist well into late 2024.

Ocean

Panama plans to expand canal capacity with new reservoir. Panama's government, spurred by a recent court ruling, plans to bolster the resilience of the new Panama Canal against droughts that have hampered operations. The canal relies on freshwater from Gatun Lake, crucial for ship transits but vulnerable to rainfall variations. Reduced lake levels in 2023 led to transit restrictions, causing congestion. To mitigate future disruptions, the Panama Canal Authority aims to construct a $2 billion reservoir on the Indio River, assisted by the U.S. Army Corps of Engineers. This project includes a dam and tunnel to augment Gatun Lake's water supply, potentially increasing daily transits by 15 vessels during droughts. The initiative, expected to take six years and $1.2-1.6 billion, aims to ensure operational reliability amid climate challenges, pending community relocation negotiations.

Ports

Hurricane Beryl disrupts Texas port and rail operations. Ports in Houston and Galveston, Texas, including Freeport Harbor Channel, closed early this week following Hurricane Beryl's Category 1 landfall early Monday. Port Houston resumed normal operations and with extended gate hours on Wednesday after the storm caused widespread power outages affecting over 2.5 million homes and businesses in southeast Texas. Seven fatalities in Texas and one in Louisiana have been attributed to the storm. Rail and shipping operations may continue to be impacted, with operations pending restoration as conditions improve.

South Carolina Ports Authority resolves Leatherman Terminal dispute. The South Carolina Ports Authority (SCPA) and the International Longshoremen’s Association (ILA) have agreed to reopen the Hugh K. Leatherman Terminal swiftly. Under the new framework, SCPA will maintain equipment ownership and operational management while collaborating with ILA for training and certification. Affected port employees may opt to retain their roles or join the ILA through a third-party contractor. The agreement resolves a longstanding dispute that halted operations at the terminal since January 2023, aiming to meet Southeast market demands with expanded capacity up to 2.4 million TEUs and connectivity to the Navy Base Intermodal Facility by next summer.

Trucking

Federal regulators delay trucking rules, including speed limiters. Federal regulators have postponed several key trucking rules, including a controversial speed limiter rule. The Federal Motor Carrier Safety Administration's (FMCSA) proposed rule, requiring trucks over 26,000 pounds to have electronic speed governors, has been delayed until May 2025. Originally set for mid-2023, the rule has generated nearly 16,000 comments. Other delays include changes to electronic logging device (ELD) operations, now due in June 2025, and a joint rule on automatic emergency braking systems, postponed to January 2025. Additionally, rulemakings on automated driving systems, female truck driver safety, and qualifications for drivers with epilepsy have been delayed. Revised Drug & Alcohol Clearinghouse procedures are expected this month, after a previous delay. FMCSA has not provided reasons for these delays.

Canadian border agents ratify new four-year labor agreement. Canadian border agents ratified a new four-year labor agreement with the government of Canada and the Public Service Alliance of Canada and Customs and Immigration Union last week. Over 90% of voting members approved the deal, which spans from June 2022 to June 2026. The tentative agreement, reached on June 11 after nine days of mediated talks, ended a two-year period without a contract for the Canada Border Services Agency employees. A strike planned for June 7 was averted as negotiations continued.

Rail

Environmental impact study for Texas rail line project moves forward. The Surface Transportation Board (STB) has announced the final scope of study for the environmental impact statement (EIS) related to Green Eagle Railroad LLC’s proposed 1.3-mile rail line in Maverick County, Texas. This rail line is part of the Puerto Verde Global Trade Bridge project, aiming to establish a new trade corridor between Piedras Negras, Coahuila, Mexico, and Eagle Pass, Texas, for freight rail and commercial motor vehicles. The STB’s Office of Environmental Analysis will draft an EIS to assess the project's potential environmental impacts and suggest mitigation measures. Public input will be sought once the draft EIS is issued.

Air

Surge in global air cargo rates amid e-commerce growth and ocean disruptions. Global air cargo spot rates surged 17% year over year in June to $2.62 per kilogram, driven by growing e-commerce demand, ocean disruptions from Red Sea conflicts, and increased manufacturing activity, according to Xeneta. This double-digit growth is expected to continue in July and August, but demand may ease in Q4 2024 compared to the strong Q4 2023. The Southeast Asia to U.S. corridor saw the largest rate jump, up 14% to $5.32 per kilogram, while Northeast Asia to U.S. increased 4% to $4.00 per kilogram. Spot rates from China to the U.S. dipped 1% to $4.80 per kilogram. Shippers are adjusting contract lengths to avoid peak season rate spikes, with contracts over six months rising to 28% in Q2 2024.

Amazon expands air cargo operations with Sun Country Airlines. Amazon has revised its agreement with Sun Country Airlines to operate eight additional Boeing 737 freighters, according to a June 20 press release. This contract, originally implemented in 2019, has been extended through 2030 with options for further extensions until 2037, bringing Sun Country’s total Amazon air freight operations to 20 freighters. The first of the new aircraft is expected to begin service in Q1 2024, with all eight operational by Q3 2025.

International

German port strikes threaten disruption ahead of key negotiations. The German trade union ver.di has initiated 'warning strikes' at German seaports to pressure employers before the fourth round of negotiations with the Central Association of German Seaport Operators (ZDS) on 11 and 12 July in Bremen. Strikes are scheduled for three days, affecting ports in Hamburg, Bremerhaven, Emden, Bremen, and Wilhelmshaven, with significant participation reported. Maersk has warned customers of potential delays due to the strikes. Ver.di emphasizes the seriousness of their demands, seeking a €3 hourly wage increase for port workers and higher shift bonuses, while ZDS urges the union to moderate its strike actions, citing constructive negotiations and a fair offer.

Rising port congestion across Asian ports. Asian ports, especially in China and Singapore, face significant backlogs due to containerships diverting from Red Sea routes, spreading congestion to regional ports. Reports indicate delays and increased shipping costs similar to pandemic levels. Analysts highlight Shanghai/Ningbo and Singapore as major congestion hotspots, with Port Klang in Malaysia also affected, where 20 containerships are anchored. This congestion is likely to persist through August, the high season for Asian container shipping, due to off-schedule arrivals and longer berthing times to optimize loads. Singapore's role as a transshipment hub means its congestion impacts global operations. Maersk warns of ongoing disruptions and advises shippers to diversify supply chains, citing reduced container capacity and increased uncertainty in global supply chains.

Other

New Jersey Senate passes bill to limit oversized e-commerce packaging. The New Jersey Senate has passed a bill (S226) prohibiting large online and major retailers from shipping products in boxes exceeding twice the product's volume. Approved by a 21-15 vote, the bill now moves to the Assembly's Commerce, Economic Development, and Agriculture Committee. This bill is part of a broader legislative effort in New Jersey addressing packaging and plastic use, including extended producer responsibility for packaging and bills related to recyclability, plastic reduction, and toxic restrictions.

⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯

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.

⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯⎯

Radiant World Trade Services is a part of Radiant Logistics, Inc. (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.