Radiant's Freight Market Update

This Week: Panama Canal Auctions Slots as Backlog Grows, Airfreight Rates Rose in November, White House Unveils DOT Multimodal Freight Office.

Ocean

Panama Canal auctions slots as backlog grows. The Panama Canal Authority has announced its intention to introduce additional slots for ships willing to pay significant premiums for expedited transit through the canal. This measure aims to address congestion caused by an ongoing drought. Special auctions will enable vessels that have endured prolonged wait times to pay a one-time fee, often amounting to several million dollars, to navigate the canal promptly. Eligibility for participation is limited to vessels with waiting periods of 10 days or more, as outlined in an advisory. In response to the canal's backlog, Stolt-Nielsen, the world's largest chemical tanker operator based in London, has opted to redirect its fleet to the Suez Canal. Experts suggest that the canal's capacity may not see a substantial increase until the onset of the rainy season in mid-2024. This situation has led to extended waiting times, with some ships experiencing delays of up to 20 days this year.

Ports

British Columbia ports sign rail deal. Ashcroft Terminal Ltd and Vancouver Fraser Port Authority have signed a letter of intent for a long-term collaboration on Canadian imports and exports transportation, according to World Cargo News. Together, they will invest, construct, and manage rail infrastructure at Ashcroft Terminal, BC's largest inland terminal, situated approximately 300 kms east of Vancouver. This initiative aims to alleviate congestion at the Port of Vancouver, foster capacity growth, and bolster resilience in the vital Asia-Pacific Gateway trade corridor. The anticipated operational launch of the railcar storage program is set for fall 2024. “This partnership will advance the efficient movement of imports and exports in Western Canada and help deliver goods to market faster,” said the partners.

Trucking

FMSCA warns drivers that a positive drug test will result in CDL loss. Federal trucking regulators have issued a cautionary notice, stating that in the latter part of next year, truck drivers testing positive for drug use will not only face a ban on driving but will also have their commercial driver licenses revoked, according to Transport Topics. Moreover, they will not be eligible for learner's permits until they successfully undergo the federal return-to-work process. “A driver with a drug-and-alcohol program violation is prohibited from performing safety-sensitive functions, including operating CMVs, for any DOT-regulated employer until the return-to-duty process is complete,” said a Federal Motor Carrier Safety Administration notice on Nov. 28. “By November 18, 2024, as part of new federal regulations, drivers with a ‘prohibited’ status in the Drug and Alcohol Clearinghouse will lose or be denied their state-issued commercial driving privileges.”

Rail

FRA advises railroads to increase preparedness for winter weather conditions. The Federal Railroad Administration is advising U.S. railroads to enhance their procedures for addressing adverse weather conditions. The agency suggests exploring the integration of weather-related technologies into positive train control and fostering collaboration among railroads to establish best practices, according to FreightWaves. The aim is to reduce the frequency of weather-related accidents. The advisory notes 123 rail incidents since the beginning of 2021, where severe weather conditions might have played a role. Over half of these incidents were main-track derailments, though the severity levels are not specified in the advisory.

STB extends comment period for reciprocal switching rule. The Surface Transportation Board (STB) has extended the reply comment period for Docket No. EP 711 involving a Notice of Proposed Rulemaking (NPRM) centered on offering rail service access to reciprocal switching as a solution for inadequate service, following extensive feedback. The extension is for two weeks, now concluding on December 20. The STB's NPRM, titled "Reciprocal Switching for Inadequate Service," was unanimously released on September 7, addressing the provision of reciprocal switching as a remedy for poor freight railroad service.

Air

Airfreight rates rose in November. Airfreight rates on major east-west trade routes continued to rise in November due to factors such as weather conditions, e-commerce demand, and capacity constraints. According to the Baltic Exchange Airfreight Index (BAI), considering both spot and contract rates, forwarders paid an average of $6.15 per kg from Hong Kong to North America, up from $5.80 per kg in October. Rates from Hong Kong to Europe increased to $4.64 per kg in November compared to $4.26 per kg in October. Despite weak expectations for peak season demand, this year's November prices were influenced by heightened e-commerce demand before Black Friday and Cyber Monday, along with disruptions to capacity caused by various factors. Monthly rates from Hong Kong to North America have reached their highest level this year, and to Europe, prices are the second-highest.

International

Maersk diverts vessels from the Middle East. The escalating security challenges in the Middle East Gulf and Red Sea region are impacting container supply chains. Maersk Line has recently announced the withdrawal of two vessels from operations in the area, echoing similar measures taken by Israeli shipping line Zim. While Maersk did not disclose the specifics of any received threat, the company cited "unforeseen and unavoidable circumstances" as the reason for the temporary diversion of two vessels—the 4,250 TEU Lisa and the 5,300 TEU Maersk Pangani, both owned by Israeli shipowner XT Shipping. The carrier told customers: “This decision has been made with careful consideration of various factors, prioritizing the safety of crew, the vessel and your cargo. While we strive for seamless operations, these circumstances have necessitated this deviation from our usual route. Regrettably, the temporary route diversion is anticipated to result in a delay exceeding one week from the initial delivery schedule.”

Beijing considering mega-port project to rival Singapore. Beijing is considering a proposal for the construction of an extensive integrated super port spanning islands south of Hong Kong. This initiative aims to consolidate regional port resources, posing a challenge to Singapore's shipping hub dominance. Estimated to cost over $20 billion, the infrastructure project is envisioned not only as a strategic facility to boost trade and economic growth in the southern part of the country but also to promote integration within the Greater Bay Area (GBA). The GBA is a mega-region encompassing nine cities in the Pearl River Delta, including Hong Kong, Macau, Shenzhen, and Guangzhou.

Other

White House unveils DOT Multimodal Freight Office. The Biden administration has introduced the Office of Multimodal Freight Infrastructure and Policy within the Department of Transportation, which is aimed at enhancing and managing national supply chains, according to an announcement from the White House earlier this week. Established by the Bipartisan Infrastructure Law, the office received $2 million in funding for the 2023 fiscal year, with a requested budget of $7.3 million for FY2024. Allison Dane Camden, a former Washington State Department of Transportation official, will lead the office as the deputy assistant secretary for multimodal freight infrastructure and policy. The office's objectives include developing a National Multimodal Freight Network, assessing state freight plans, and advancing the Freight Logistics Optimization Works program in collaboration with the Bureau of Transportation Statistics.

President Biden hosts first meeting of new supply chain council. President Joe Biden cautioned companies against price gouging and emphasized his administration's efforts to reduce costs for U.S. families during the inaugural meeting of his supply chain resilience council. Biden acknowledged the persistently high prices for many goods, attributing them to ongoing challenges but noting progress. In response to inflation concerns linked to supply chains and Russia's 2022 invasion of Ukraine, Biden announced 30 initiatives aimed at enhancing access to medicine, economic data, and programs related to the production and shipment of goods. The council builds on an earlier task force addressing supply chain issues contributing to elevated inflation in 2021 as the U.S. recovered from the COVID-19 pandemic.