Radiant's Freight Market Update

This Week: Idle Containership Tonnage Passes 1 Million TEU, California Trucking Association Files Lawsuit to Block Advanced Clean Fleets Rule, CSX and CPKC Submit Plans for Routes Between U.S. Southeast and Mexico.

Ocean

New report warns that swift action is needed for zero emission shipping goals. A recent report warns that while scalable zero-emission fuels could constitute 5% of global shipping fuels by 2030, the industry must act swiftly as the window of opportunity is closing. The report, titled “Climate Action in Shipping, Progress towards Shipping’s 2030 Breakthrough,” was released by the University Maritime Advisory Services (UMAS), Getting to Zero Coalition, and Race to Zero. According to the report, the current pipeline for zero-emission fuel production may only cover a quarter of the required fuel. However, if more projects succeed, production could exceed the necessary amount, even when factoring in other sectors’ fuel demands.

Idle containership tonnage passes 1 million TEU. The number of idle containerships has risen significantly, with the latest Alphaliner survey revealing 315 vessels (1.18 million teu) in lay-up, which accounts for 4.3% of the global fleet. This marks a substantial increase from the previous count of 271 ships (942,035 teu) two weeks ago, according to The Loadstar. The surge in idle tonnage can be attributed to the inclusion of several larger vessels, including four in the range of 12,500 to 18,000 teu and three exceeding 18,000 teu, all either anchored or undergoing surveys and repairs at shipyards.

Ports

Discover cargo trends by tracking port volumes. Port volumes offer valuable insights for supply chain managers looking to understand demand patterns. In 2022, maritime gateways managed 40% of the international freight value, according to the Department of Transportation. Monitoring seaport volumes serves as a reliable gauge for discerning trade trends that span years and months across the nation. In 2023, volumes have largely returned to pre-pandemic levels, but the question remains: how will containerized trade compare to 2019 levels? Continuously tracking monthly data can provide clarity. Check out this tracker from SupplyChainDive that shows the total volumes for the top twelve ports as they are released.

Trucking

Convoy Inc. shuts down operations. Convoy Inc.announced to its employees on Thursday that the company is “closing down its core business operations,” just one day after uncertainties regarding the company’s future became public. In a letter penned by Dan Lewis, the CEO and co-founder of the Seattle-based digital brokerage, there was no mention of an impending acquisition of Convoy’s digital brokerage operations, despite numerous speculations circulating earlier this week. The company will maintain a limited team tasked with concluding ongoing operations and exploring potential future strategic avenues. All other employees were released from their positions, reportedly without severance. Read more from FreightWaves here.

New-entrant trucker out-of-service orders to hit all time high. The issuance of new-entrant out-of-service (OOS) orders to carriers is set to reach an all-time high in 2023, per the latest government data. This surge parallels the significant increase in new-carrier operating authorities issued since 2020. The Federal Motor Carrier Safety Administration has been tracking new-entrant OOS orders since 2012. After reaching a record of 24,363 in FY2022, these orders had already exceeded that number by June 30 in FY2023, with 25,955 according to FMCSA’s Motor Carrier Management Information System (MCMIS). Data for the full fiscal year, which concluded on September 30, will be available in December. However, it’s likely that OOS orders in FY2023 surpassed 35,000 based on trends observed over the past eight quarters.

California Trucking Association files lawsuit to block advanced clean fleets rule. As the initial requirements of California’s Advanced Clean Fleets (ACF) rule are set to take effect in a matter of weeks, the California Trucking Association (CTA) has filed a lawsuit in the U.S. District Court for the Eastern District of California, seeking both preliminary and permanent injunctions to halt the California Air Resources Board (CARB) from enforcing the regulation. The CTA had hinted at such legal action in recent months and argues that California has overstepped its authority in establishing the ACF. This rule mandates a phase-out of internal combustion engines (ICE) in trucks by 2040, with an immediate requirement that no ICE-powered trucks can be added to the state’s drayage registry after January 1, 2024; they must be zero-emission vehicles (ZEVs). Read the CTA’s arguments here.

Rail

CSX and CPKC submit plans for routes between U.S. Southeast and Mexico. Class I railroads CSX and Canadian Pacific Kansas City (CPKC) have submitted a request to the Surface Transportation Board for approval to acquire segments of a southern U.S. short line, with the aim of optimizing rail freight routes between Mexico, Texas, and the southeastern United States. Specifically, they are looking to acquire parts of the Meridian & Bigbee Railroad, which is currently under the ownership of short line operator Genesee & Wyoming. Both CPKC (NYSE: CP) and CSX (NASDAQ: CSX) are keen on enhancing transportation efficiency in these regions and establishing a “new direct connection and corridor” that links Mexico, Texas, and the southeastern United States, according to FreightWaves.

Air

United Airlines saw drop in cargo revenue in Q3. United Airlines saw its cargo revenue drop by 33% year-over-year in the third quarter to $333 million due to a weak air cargo market. However, this dip did not significantly impact investors, as the airline reported a $1.1 billion profit, beating analysts’ estimates. United’s cargo revenue for the nine-month period through September was $1.1 billion, down by 35.7% from the previous year.

Maersk opens LAX freight hub. A.P. Moller – Maersk has opened a freight hub in close proximity to Los Angeles International Airport (LAX) as part of its expansion strategy for its air cargo network in North America, according to an Oct. 3 release. This 130,000-square-foot air facility significantly increases its capacity on the West Coast, creating room for “more supply chain integration opportunities and better scaling to care for seasonal peaks as well as market driven volume spikes for breakout product launches,” according to the release.

International

India looks to become a top shipbuilding nation within a decade. Despite currently holding less than 1% of the global shipbuilding market share, India has ambitious plans to become a top-five shipyard hub, according to Splash 24/7. Speaking at the Global Maritime India Summit 2023, Prime Minister Narendra Modi stated, “In the next decade, India will become one among the top-five shipbuilding and repairs nations of the world.” He encouraged investors and stakeholders at the summit to collaborate with India, emphasizing this as a “great opportunity” to participate in the country’s maritime growth journey. As Japan and South Korea grapple with demographic challenges affecting their shipyard workforces, shipowners are exploring alternative shipyard destinations to avoid excessive reliance on China, the world’s largest shipbuilding nation.

Other

Canadian auto workers’ union sets strike deadline for Stellantis. The Canadian auto workers’ union, Unifor, has set an October 29, 11:59 p.m. strike deadline to secure a tentative agreement with Stellantis NV, the maker of Chrysler, Dodge, Jeep, and Ram. Unifor represents over 8,200 members at Stellantis facilities in Canada, including the Chrysler Pacifica minivan plant in Windsor, Ontario, the Dodge muscle car and Chrysler 300 plant in Brampton, Ontario, and various parts distribution centers. This would be the third deal for Unifor following contracts with General Motors Co. and Ford Motor Co. that followed a similar pattern, according to Transport Topics.