Radiant's Freight Market Update

This week: Potential Border Delays Loom for U.S.-Canada Freight Due to Labor Dispute, Port Congestion Disrupts Asia-Europe Sailings, Air Cargo Demand Surges Despite Seasonal Trends.

Current Critical Industry Trends

Early peak season in container trades causes rate spike amid operational challenges. The main east-west container trades have entered an early peak season, causing a spike in spot rates due to equipment shortages, port congestion, and schedule volatility. Recent rate increases have slowed, indicating possible easing. Predictions suggest Asia-North Europe rates may reverse in June, while transpacific rates could stabilize later in 2024. Shippers face rolled cargo and new surcharges, with carriers prioritizing those paying higher rates. The rate surge is partly due to shippers front-loading imports, with surveys showing increased traffic. Operational constraints and inconsistent schedules have worsened the situation. However, new ships from Asian shipyards may alleviate the issues. Analysts note a demand data gap, leading to market uncertainties, but current volumes are manageable based on past experiences.

Shipping container rates from China surge amid tariff and disruption fears. Shipping container rates from China have surged to a two-year high as exporters rush shipments ahead of potential U.S. tariff increases and ongoing Red Sea disruptions. The Shanghai Containerized Freight Index rose 12.6% last week to 3,044.77, its highest since August 2022. The cost to ship a 20-foot container from Shanghai to Europe now exceeds $7,000, up by $1,000 from last month. This spike reflects exporters' efforts to front-load shipments for the holiday season amid mounting trade uncertainties.

Potential border delays loom for U.S.-Canada freight due to labor dispute. Freight shippers between the U.S. and Canada may face significant border delays starting Friday if Canadian border agents and the government fail to reach a new labor agreement. The border agents, represented by the Public Service Alliance of Canada, have been without a contract for over two years and recently authorized a strike. While essential workers cannot fully shut down the border, logistics experts warn that failed negotiations could severely impact productivity, causing delays at key crossings.

Ocean

FMC clarifies new detention and demurrage rule. The Federal Maritime Commission (FMC) has implemented a revised rule for detention and demurrage, providing non-vessel operating common carriers (NVOCCs) an additional 30 days to issue invoices. The rule aims to streamline billing and dispute processes but has raised concerns about added complexity and potential delays in dispute resolution. Truckers fear they might be disadvantaged as they rely on shippers for payment, which can lead to disputes exceeding the 30-day limit. The FMC acknowledges these challenges but has yet to provide specific solutions.

Ports

Port congestion disrupts Asia-Europe sailings. Nearly half of Asia-Europe westbound sailings are delayed due to severe congestion in Asian ports, particularly in Singapore, Tanjung Pelepas, and Shanghai. Ships are facing extended waiting times, with some delayed by up to five days. Despite efforts to alleviate congestion, such as reopening the Keppel Terminal in Singapore, significant delays persist. This situation has led to high liner capacity utilization and reduced scheduled capacity for June. Consequently, freight rates are expected to remain elevated into the third quarter.

Full Port of Baltimore channel to reopen by June 10. The full 700-foot-wide channel into the Port of Baltimore is set to reopen by June 10. Crews are removing large steel truss sections and other debris using cranes and dredging equipment. While larger vessels have used a limited-access channel, the full reopening was delayed due to the complexity of the cleanup. The reopening will restore normal port operations, with final debris removal and surveys underway to ensure safety and efficiency.

Customs

CBP tightens enforcement on low-value e-commerce imports due to non-compliance. U.S. Customs and Border Protection (CBP) has suspended several customs brokers from the Entry Type 86 program, which was designed to expedite low-value e-commerce imports, due to repeated non-compliance with classification and valuation rules. The de minimis threshold, raised to $800 in 2016, has led to a surge in e-commerce shipments, primarily from China, overwhelming CBP's ability to inspect parcels and detect contraband. To enhance enforcement, CBP requires brokers to submit more detailed data for expedited clearance but has struggled with the accuracy and timeliness of these filings. This enforcement action aims to prevent the exploitation of the de minimis process and protect the integrity of the supply chain.

Trucking

U.S. diesel demand hits 26-year low amid economic slowdown. In March, U.S. diesel demand fell to its lowest seasonal level in 26 years due to slowing economic growth. The U.S. Energy Information Administration reported that distillate supply dropped to 3.67 million barrels per day, a decline from previous estimates. Refining margins are weakening in Asia and have decreased from earlier highs in the U.S.

Rail

BLET members approve agreement for CN's acquisition of Iowa Northern. Members of the Brotherhood of Locomotive Engineers and Trainmen (BLET) have approved an implementing agreement concerning CN's acquisition of Iowa Northern. The agreement is contingent on federal Surface Transportation Board (STB) approval and merges operations and workforces, placing Iowa Northern locomotive engineers under BLET’s CN-IC contract. The acquisition, signed by CN on December 6, 2023, and filed with the STB on January 30, 2024, aims to create single-line service to North American destinations and boost local business growth.

Air

Air cargo demand surges despite seasonal trends. As airlines gear up for the summer travel season, additional belly capacity hasn't reduced air cargo demand, keeping prices from Asia to the U.S. and Europe high. E-commerce is driving early peak season demand on Asia-Europe and Trans-Pacific routes. According to IATA, global air freight demand grew by 11.1% at the start of Q2, defying the usual late spring slowdown. The Baltic Air Index reports a 34% rise in spot rates from China to the U.S. and a 41% increase to North Europe. Rates from Hong Kong and Shanghai rose by 12.3% and 41.5%, respectively. Ocean shipping disruptions have further boosted air trade between South Asia, the Middle East, and Europe, with rates up 119% year-over-year in mid-May.

International

Concerns rise over Chinese high-tech overcapacity. This year, a surge in cheap Chinese high-tech goods has sparked concerns globally about unfair competition. While Chinese officials deny overcapacity issues, evidence suggests otherwise, particularly in solar panels, autos, and steel, driven by excessive manufacturing investment despite weak demand. The resulting oversupply has slashed profit margins and flooded global markets, impacting prices and competition. The situation, exacerbated by China's property market slump, poses ongoing challenges, especially in solar-cell production, with potential consequences for various industries worldwide.

Technology

Amazon's Prime Air drone program gains regulatory approval. Amazon's Prime Air drone program has received U.S. regulatory approval to fly beyond the visual line of sight of pilots, expanding its delivery range. This approval will enable Prime Air to scale up deliveries across the U.S., starting with College Station, Texas, and integrate drone shipments into its same-day delivery network this year.

Other

USPS network overhaul advances despite consolidation pause. Despite pausing further consolidation of mail processing operations, the U.S. Postal Service (USPS) will continue its network overhaul as part of its 10-year “Delivering for America” plan. The plan aims to reduce costs by centralizing operations in regional plants. Lawmakers have raised concerns about the impact on delivery reliability, as seen in markets like Atlanta. The pause, announced on May 9, seeks to restore confidence in the plan, with ongoing investments and scheduled work at 59 sites across the country. USPS will proceed with changes at several existing facilities, including 13 regional and 20 local processing centers, and plans to establish a total of 60 regional and 190 local centers.

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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.