Radiant's Freight Market Update

This week: Global shipping industry grapples with unprecedented challenges, Intense peak season pressures global shipping routes, FMC’s new detention and demurrage rules come into effect.

Current Critical Industry Trends

Global shipping industry grapples with unprecedented challenges. The global shipping industry is facing unprecedented challenges due to disruptions in maritime trade routes, with significant congestion at key ports like Algeciras and Tanger Med. These issues stem from security threats in the Red Sea, which have forced ships to reroute around Africa, adding delays and costs. Compounding the problem are increased piracy off Somalia, drought-related constraints at the Panama Canal, and congestion in European ports from an influx of Chinese vehicles. These factors are straining logistics, particularly for time-sensitive goods, and raising concerns about potential economic impacts as the industry heads into the peak pre-Christmas season.

Intense peak season pressures global shipping routes. Asia-Europe routes are experiencing an early and intense peak season, driven by unexpected high demand and port congestion in Asia. This has resulted in increased transit times, tighter capacity, and soaring spot rates. Carriers are reducing weekly allocations to shippers, using tactics like blank sailings and rollovers, while prioritizing more profitable spot bookings. Rates have sharply increased, with North Asia to Europe and Mediterranean rates rising significantly. The surge in demand, coupled with congestion at ports like Singapore and in China, is causing equipment shortages and delays. Industry experts warn that if this demand spike continues, it could lead to severe disruptions similar to those experienced during the pandemic.

FMC’s new detention and demurrage rules come into effect. The US Federal Maritime Commission’s (FMC) new rules for detention and demurrage (D&D) charges, came into effect on May 28, 2024. These rules require D&D invoices to be issued only to specific parties, within 30 days of the charge, and provide 30 days for disputes. Invoices must contain detailed information, and any lacking mandatory details are invalid. These changes aim to enhance transparency and efficiency in the supply chain.

Ocean

Sea-air shipping struggles amid port congestion crisis. Sea-air shipping is becoming unviable due to severe congestion at transshipment hubs like Port Klang, Singapore, and Jebel Ali, which face delays up to seven days. Increased vessel traffic rerouted from the Red Sea has caused high yard density and reduced productivity. Alternative routes around the Cape of Good Hope result in longer transit times. Flexport advises smaller shipments to avoid split arrivals, but experts argue this doesn't alleviate the delays. Despite claims of normal operations by Dnata at Dubai International Airport, shippers face significant delays, especially when not using Emirates.

Ports

Surge in cargo volumes at Port of Los Angeles. The Port of Los Angeles processed 770,337 TEUs in April, a 12% increase year-over-year. Imports rose 21% to 417,181 TEUs, and exports surged 51% to 353,155 TEUs. Executive Director Gene Seroka noted gains in commodities such as recycled paper, animal feed, iron, steel, and aluminum, marking 11 consecutive months of export growth.

Reduced dwell times at LA-LB ports. Container dwell times at the Los Angeles-Long Beach port complex hit their lowest in 2024 in April, averaging 4.55 days for rail and 2.5 days for trucks. This reduction, attributed to improved rail equipment availability from BNSF and Union Pacific, positions the terminals to handle an anticipated early peak season, with imports from Asia rising 17% from March.

Trucking

Canadian border agents prepare for potential strike. Over 90% of Canadian border agents voted to strike as early as next month, potentially disrupting billions in cross-border trade. The strike threat follows possible simultaneous strikes at Canadian National Railway and Canadian Pacific Kansas City in July, posing significant risks to the North American supply chain. According to the Wall Street Journal, 9,000 members of the Public Service Alliance of Canada who work at the Canada Border Services Agency would be “in a legal strike position” once a federal labor-board committee delivers a report recommending how the employer, the Canadian government and the union can settle differences on a new agreement. The union said that report could be published in early June.

Rail

CPKC and Teamsters contract talks continue to stall. Canadian Pacific Kansas City Railway and the Teamsters Canada Rail Conference remain deadlocked in contract negotiations. With no new talks scheduled, the potential for a strike looms as the Canada Industrial Relations Board reviews essential commodity submissions. A ruling is expected by mid-July, which could delay any strike or lockout.

Air

Air cargo demand rises in April. Global air cargo demand increased by 11.1% year-over-year in April, driven by robust e-commerce and maritime shipping constraints, according to IATA. Although this represents a 6.5% month-on-month decline, the overall trend remains strong. Capacity grew by 7.1%, with Asia Pacific airlines leading regional performance.

International

Ukraine rejoins global container trade. Global carriers are resuming container services to Ukraine after over 800 days of conflict. Hapag-Lloyd and MSC are among the first to offer services, despite ongoing port attacks. Shipping traffic from Ukraine, including grain and iron ore exports, has significantly increased, nearing pre-war levels, according to Splash 24/7.

Technology

Toyota and FuelCell Energy launch renewable energy system. Toyota Motor North America and FuelCell Energy have launched "Tri-gen," a renewable energy system at the Port of Long Beach. The innovative system produces renewable electricity, hydrogen, and usable water from biogas, marking it as a unique facility globally. The electricity powers Toyota's logistics center, with surplus energy supplied to a local utility. Tri-gen generates up to 1,200 kilograms of hydrogen daily for Toyota's Mirai vehicles and nearby heavy-duty trucks. Additionally, it produces 1,400 gallons of water daily, repurposed for car washing, significantly reducing local water usage.

Other

Heightened hurricane season threatens Texas ports. This year's hurricane season is expected to be more active than usual, with experts predicting up to 25 named storms. Despite Texas experiencing below-average storm risk last year, this season is anticipated to bring severe weather. Texas ports maintain their readiness for the 2024 hurricane season, emphasizing their approach of constant preparedness. Port leaders say they stay in “a state of readiness for whatever happens,” according to FreightWaves.

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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.