Radiant's Freight Market Update

This week: Trucking industry sees first 2024 tonnage increase, Canadian rail strike unlikely to impact essential services, Port of Savannah sees strong growth in container volumes due to robust retail market.

Current Critical Industry Trends

Logistics costs decline as supply chains stabilized in 2023. U.S. business spending on logistics dropped 11% to $2.4 trillion in 2023 as supply chains stabilized post-COVID, according to the Council of Supply Chain Management Professionals' report. Logistics costs remain high after previous sharp increases, but the cost-to-GDP ratio improved to 8.7%, reflecting greater efficiency. The report emphasizes the need for flexible logistics networks to handle ongoing volatility. Trucking faced overcapacity and low rates, the parcel market declined, and rail traffic saw mixed results. Rising air and ocean freight demand, coupled with geopolitical and environmental disruptions, led to increased shipping rates.

Ocean

FMC launches investigation into OCEMA's compliance with chassis provisioning order. The Federal Maritime Commission (FMC) announced this week that it has launched an investigation to assess whether the Ocean Carrier Equipment Management Association (OCEMA) and its members are adhering to a February 2024 decision affirming shippers' and truckers' rights to choose chassis providers for merchant haulage in Los Angeles/Long Beach, Chicago, Memphis, and Savannah. This follows reports of non-compliance with a cease-and-desist order from the case Intermodal Motor Carriers Conference, American Trucking Associations, Inc. v. OCEMA (Docket No. 20-14). The Commission's Bureau of Enforcement, Investigations, and Compliance (BEIC) will lead the non-adjudicatory investigation. Findings of non-compliance may lead to federal injunctions or enforcement actions with potential civil penalties. Individuals are encouraged to report relevant information to BEIC, with protections in place against retaliatory actions.

Ports

Port of Savannah sees strong growth in container volumes due to robust retail market. The Port of Savannah experienced significant growth in container volumes due to a robust retail market and new customers. In May, the Georgia Ports Authority (GPA) handled 490,330 twenty-foot equivalent units (TEUs), a 22% year-over-year increase and an 11% rise from April. GPA President Griff Lynch attributed this surge to major retailers rebuilding inventories and increased trade among Tier 1 suppliers for the new Hyundai Meta Plant. The National Retail Federation expects a significant rise in U.S. retail import volumes this summer, driven by increased consumer spending.

Potential labor strike looms for East and Gulf Coast ports. The International Longshoremen’s Association (ILA), representing approximately 85,000 port workers, indicated a labor strike on the East and Gulf Coasts is becoming "more likely" in October. This follows heightened tensions with the United States Maritime Alliance (USMX) over alleged automation violations and wage concerns. The ILA canceled talks with USMX over automation issues and cited financial records showing substantial profits for ocean carriers like CMA CGM, COSCO, Hapag-Lloyd, and Evergreen, while worker pay remained stagnant. The union demands wage increases in line with these profits and refuses to negotiate until the automation issue is resolved. USMX expressed a desire to resume negotiations.

ILWU rejects BCMEA's revised offer, no strike notice issued. British Columbia's ILWU Local 514 members have rejected the BCMEA's revised four-year agreement proposal, which aimed to increase wages and benefits without employer concessions. Despite this, no 72-hour strike or lockout notices have been issued, and cargo and passenger operations at British Columbia ports remain unaffected. The Canada Industrial Relations Board will hold a hearing on July 2, 2024, to address the BCMEA’s complaint against ILWU Local 514’s bargaining conduct.

Trucking

Canadian Border agents to vote on new labor agreement. Canadian border agents will vote from June 20 to July 4 on a new four-year labor agreement with the government, as announced by the Public Service Alliance of Canada and the Customs and Immigration Union. The union's negotiating committee has recommended ratification of the deal, which follows nine days of intense negotiations and covers June 2022 to June 2026. The agreement includes a compounded wage increase of 15.73%, additional raises, and a one-time $2,500 payment. This tentative deal prevents a strike that could have disrupted border operations.

Trucking industry sees first 2024 tonnage increase. In May, the trucking industry recorded its first increase in tonnage this year, with the ATA For-Hire Truck Tonnage Index rising 1.5% year-over-year to 115.9, marking a 3.6% increase from April. This growth is the first year-over-year gain in 15 months. ATA Chief Economist Bob Costello noted that while freight volumes surged before Memorial Day, it remains uncertain if this signals a sustained recovery in the truck freight market.

Small truck owners sue EPA over zero-emissions rule. The Owner-Operator Independent Drivers Association (OOIDA) and the American Petroleum Institute (API) have sued the Biden administration over new zero-emissions standards for heavy-duty vehicles. The lawsuit, filed in the U.S. Court of Appeals for the District of Columbia Circuit, challenges the EPA's rule, claiming it exceeds the agency’s authority and imposes unfeasible costs on small trucking businesses. The rule, which targets 2027-2032 truck models, is seen as a de facto electric truck mandate. Critics argue it will drive up costs and disrupt supply chains. Meanwhile, federal subsidies are promised to ease the transition.

Rail

Canadian rail strike unlikely to impact essential services. Final submissions to the Canada Industrial Relations Board (CIRB) indicate that neither rail companies nor the union believe a strike would disrupt essential services. On June 14, Canadian National (CN), Canadian Pacific Kansas City (CPKC), and the Teamsters Canada Rail Conference (TCRC) submitted that rail services are not essential. CN stated alternative transportation exists for affected commodities, and TCRC argued concerns about essential services were driven by industry interests, not communities. Both CN and CPKC said operating only essential goods is impractical due to network challenges. Requests for a 30-day cooling-off period before a strike were opposed by the union, which felt it would hinder their bargaining rights. Despite ongoing negotiations, the union has vowed to strike after five months of failed talks. A planned strike on May 22 was paused pending CIRB’s assessment of public safety threats.

Air

New e-commerce rules have minimal impact on airfreight rates. The U.S. Customs and Border Protection (CBP) agency’s new e-commerce import rules and increased scrutiny have not impacted airfreight rates, which have remained stable despite some planned e-commerce-focused services stalling. Air cargo continues to perform well this summer, with significant market volumes and potential double-digit growth, particularly for outbound rates from China. E-commerce currently occupies over 50% of airline capacity, with stable rates from China and full bookings from Asia to the U.S., although general cargo rates are still available for Asia to Europe. Some industry experts express concern over e-commerce’s dominance, noting it adversely affects commercial cargo availability and local economies, with e-commerce logistics squeezing margins for commercial carriers. Despite these challenges, e-commerce volumes are expected to remain strong throughout the year, maintaining high demand for airfreight.

International

Container lines expand India services amid export growth. Major container lines are enhancing their India trade routes to meet rising export and import demand in Asia. CMA CGM has launched BIGEX 2, linking Jebel Ali, Djibouti, Aden/Berbera, Colombo, Mangalore, Nhava Sheva, and Mundra, alongside adjusting its Indamex route to include Savannah and Charleston from August 15. They are also starting a Chennai-Colombo-Singapore shuttle to ease transhipment congestion. Hapag-Lloyd's expanded IOS service and Maersk's ME2 extension to Rotterdam, Felixstowe, and Bremerhaven aim to benefit Indian exporters with faster transit times and broader market access. Despite growth, challenges like port congestion affect schedule reliability for imports from China and the Far East.

Intra-Asia carriers return to Trans-Pacific trade amid high demand. Intra-Asia carriers like SeaLead Shipping, BAL Container Line, and TS Lines have reentered the Trans-Pacific trade after 18 months, driven by strong demand and high rates. Long-haul carriers are also launching new services between Asia and the Americas to capitalize on the booming market. U.S. retailers anticipate robust imports through September, with China-U.S. rates approaching a 20-month peak. SeaLead has introduced a new Asia West Coast service, BAL Container Line is restarting China-Mexico Express and China Pacific Express routes, and major carriers like Wan Hai, Cosco, OOCL, Maersk, and MSC are enhancing services to the U.S. West Coast, South America, and Latin America markets.

Technology

U.S. lawmakers target Chinese influence in chipmaking. U.S. lawmakers are pushing bipartisan legislation to prevent recipients of federal chipmaking funds from using Chinese-made equipment in government-backed U.S. factories. The bill, introduced on June 18, aims to safeguard domestic semiconductor production from foreign influence, particularly from China, Russia, North Korea, and Iran. The legislation restricts equipment purchases for U.S. facilities funded under the 2022 CHIPS and Science Act, excluding overseas operations. This effort underscores ongoing global competition in semiconductor manufacturing, spurred by the CHIPS Act's $39 billion grants and significant industry investments aimed at revitalizing U.S. chip production.

Other

Gulf states sue U.S. government over offshore oil rule. Louisiana, Texas, and Mississippi have sued to block a new Biden administration rule requiring the offshore oil and gas industry to secure nearly $7 billion for decommissioning costs, effective 2024. The lawsuit argues the rule disproportionately impacts smaller firms lacking financial ratings or adequate reserves, while major companies are less affected. It aims to shift decommissioning costs from taxpayers to industry, citing risks from bankruptcies and overdue wells.

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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. (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.