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Radiant's Freight Market Update

May 23, 2024

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This week: Red Sea Diversions Cause 30% Surge in Container Freight Rates, Equipment Shortages in China Worsen Amid Rising Export Demand, & South Carolina Ports Resume Operations After Software Issues.

Current Critical Industry Trends

Red Sea diversions cause 30% surge in container freight rates. Container freight rates have surged 30% due to ship diversions from the Red Sea following attacks by Iran-backed Houthi rebels. Large container ships now detour around the Cape of Good Hope, extending travel times and increasing costs. This impacts importers, especially smaller shippers, while major retailers manage with prearranged contracts. The National Retail Federation has reported a rise in imports, with U.S. ports handling more containers, reflecting strong consumer demand and higher transport costs. Shipping lines are adjusting networks and increasing capacity to cope with the longer routes. According to the Wall Street Journal, operators like Maersk have added more than 10% to container capacity on various routes as the companies use more ships to compensate for the longer sailing times.

Equipment shortages in China worsen amid rising export demand. Shippers in China are facing severe equipment shortages due to surging export demand and vessel diversions around southern Africa. Ports like Ningbo, Dalian, and Guangzhou, along with inland hubs like Wuhan and Chongqing, are being hit the hardest. Shortages are particularly acute for 40-foot containers. The diversions have delayed the return of empty containers, exacerbating the issue. The shortages have led carriers to impose surcharges, restrict equipment for contracted clients, and adjust volume allocations. Container leasing rates have soared, with significant increases in one-way leasing costs from major Chinese ports to destinations like Savannah and Long Beach.

Truckload contract rates remain high compared to spot rates, indicating potential market disruption. Truckload contract rates remain significantly higher than spot rates indicating a potential disparity that could leave some shippers without trucks when the market shifts. Currently, contract rates are about 30% higher than spot rates, compared to 12% in 2019. Contract rates are typically negotiated annually but can be adjusted midterm in volatile markets. Spot rates, determined on a transactional basis, offer immediate capacity but are less reliable. The truckload market, oversupplied post-pandemic, has been in recession since early 2022 but is slowly balancing as capacity falls and demand stabilizes. The current ratio of active operating authorities to tender volume is 31:1, moving toward a tighter market. Spot rates have risen slightly as capacity decreases, suggesting the spot market is the floor for pricing. Recent inspection blitzes temporarily reduced capacity, causing a 7% spike in spot rates and increased tender rejection rates. This indicates a fragile market that may face significant service failures in the fourth quarter, particularly for shippers relying on low spot market rates. The environment has been challenging for many carriers. Although volumes are improving, market rates and volatility remain. The full-load market has been hit hard, but we remain optimistic that the market is slowly improving.


UN tribunal rules countries must act to prevent marine pollution from greenhouse gas emissions. An international tribunal under the United Nations has ruled that countries are legally obligated to take all necessary actions to prevent marine pollution from greenhouse gas emissions. Although the decision is not legally binding, it is seen as a significant step following the UN High Seas Conservation Treaty. The case was brought by small island nations, led by Tuvalu and Antigua and Barbuda, arguing they are disproportionately affected by climate change. The tribunal unanimously supported the small island states, affirming that parties to the UN Convention on the Law of the Sea must adopt and enforce laws to prevent marine pollution. This decision is expected to influence future international legal actions on climate change.


Dali cargo ship removed from crash site. The MV Dali was moved to shore on Monday, almost two months after colliding with Baltimore’s Francis Scott Key Bridge. The Unified Command announced the ship was floated at 7 a.m. ET and relocated to a local marine terminal for temporary repairs before heading to a shipyard for extensive repairs. The vessel, a 1,000-foot-long NeoPanamax with a capacity of 9,971 TEUs, still has 21 crew members on board, according to FreightWaves.

South Carolina ports resume operations after software issues. The South Carolina Ports Authority has resumed operations at its marine terminals and Inland Port Greer following a pause due to software issues. Gate and yard operations are open, with extended gate times until 7 p.m. at Wando and North Charleston terminals.

Los Angeles and Long Beach ports receive $112M for repairs. The ports of Los Angeles and Long Beach have been awarded $112 million from the U.S. Army Corps of Engineers for maintenance and repair projects. The funding will address public health and environmental issues at the Salton Sea and support crucial infrastructure upgrades at the ports. This investment aims to enhance seismic safety, wharf and fender repairs, pile replacements, and improvements to slips and channels. The Port of Long Beach also plans a $2.3 billion investment in capital improvements over the next decade to increase capacity.


Used truck prices show mixed trends with significant declines since February. In April, vehicle prices at both retail and auction levels were slightly down from March but showed more significant drops compared to February. 2022 Class 8 tractors saw a retail price decrease of 5.4% from March and a sharp 26% decline from February, dropping to $95,365. J.D. Power did not report auction prices for 2022 models due to low sales volume. Auction prices for 2021 vehicles were up 0.7% from March but down 7.9% from February. Other models showed mixed changes, with some stability month-to-month but notable declines from February, reflecting normal depreciation trends averaging 2.3% per month.


CN Railway makes revised offer amid labor dispute. Canadian National Railway made a revised offer to the Teamsters Canada Rail Conference last week on May 16, raising hopes for a settlement in a labor dispute that could disrupt North American logistics. The revisions remove hourly rates and scheduling proposals. Talks between Canadian Pacific Kansas City Railway and TCRC also restarted on May 17 with federal mediators, while CN planned further discussions the same day. Read more from Transport Topics here.


Congress extends Boeing 767 freighter production. The U.S. House of Representatives has passed a bill allowing Boeing to produce 767 freighters until 2033, extending the deadline beyond the 2028 cutoff for cleaner engine standards. This extension, lobbied for by Boeing, FedEx, and UPS, awaits President Biden's signature. While the split from international standards may limit these freighters to domestic U.S. operations, there is potential for some international access. Aircraft produced before the 2028 standards will not face new restrictions.


Hamburg pioneers shore power for containerships. Hamburg has become the first European port to offer shore power for containerships, part of a €13 million investment to reduce berth emissions. Following successful tests, the 18,000 TEU containership CMA CGM Vasco de Gama was the first to connect. This initiative aligns with Hamburg's net zero goals and European regulations mandating shore power to cut port emissions.


Average age of U.S. vehicles hits record 12.6 years. The average age of cars, trucks, and SUVs in the U.S. has reached a record 12.6 years in 2024 as high new vehicle costs lead people to keep their vehicles longer. S&P Global Mobility reported the average age increased by two months from last year. Although new vehicle sales are recovering from parts shortages, the high average price of new vehicles is over $45,000, forcing many to retain their current vehicle longer.


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.