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Container Rates

Container Rates Rising, Capacity Tightens; West Coast Volume Increasing

Nathan McGuire
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July 8, 2024
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Container Rates Rising, Capacity Tightens; West Coast Volume Increasing
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With ocean freight capacity shrinking and rates rising, bookings rejected and containers hard to come by, it’s seeming like a bit of deja vu all over again in the supply chain. While global production and manufacturing orders are on the rise (good news for economic growth), they are causing shipping issues on the back end. Companies are already planning volume diversion to the West Coast and are not waiting to see what comes of East Coast labor negotiations. Here’s more on this week’s industry news.

Supply Chain Issues Resurfacing

Just when shippers thought the supply chain snafus of 2021 were a relic of the past, it appears that container capacity is getting squeezed again, and rates are rising – with some saying ocean carriers are price gouging. Shippers tell The New York Times that containers are hard to come by, sailings are getting longer, and bookings are being canceled.

Xeneta reports the average price of shipping a 40-foot container from China to Europe has risen from $1,200 to $7,000 since October. It’s below the $15,000 peak in late 2021 but still 5x average pre-pandemic rates. The Shanghai to Los Angeles rate is $6,700, and nearly $8,000 for Shanghai to New York; both were around $2,000 in December, according to Xeneta.

The COO of New Balance told the NYT that spot rates it paid for 40-foot containers have risen 40% month-over-month, similar to the phenomenon during the pandemic.

Volume Diverted From East Coast Filling Up LA/Long Beach, SeaTac

Container volumes are expected to increase significantly at West Coast ports, particularly Los Angeles/Long Beach and Seattle/Tacoma, as shippers address concerns of labor issues at East Coast and Gulf Coast ports this fall. This is according to the latest US Port/Rail Ramp Freight Index from ITS Logistics.

The International Longshoreman Association (ILA), representing 85,000 port workers at 36 East Coast and Gulf Coast ports, is reportedly seeking wage increases in excess of the 32% gained last year by the International Longshore and Warehouse Union (ILWU) on the West Coast. The union cited high profits earned by container lines since the pandemic, the NYT reported.

Efforts to automate port operations are a particular sticking point in contract negotiations between the ILA and the US Maritime Alliance (USMX), representing port operators. In fact, talks between the ILA and USMX broke down earlier this month when the union alleged APM Terminals and Maersk are using automated gates to replace workers at the Port of Mobile and other locations.

E-Commerce, Red Sea Diversion Driving Air Freight Growth

Growth in e-commerce imports, especially from China, and ongoing disruption of ocean freight is driving a shift in air freight cargo, according to data platform WorldACD. From January through May, total worldwide chargeable weight in air freight was up 12% from 2022, with general cargo up 13% while special cargo lagged at +10%. This was a change from 2023 when general cargo was down, but special cargo gained. The two main drivers: e-commerce growth out of China, as well as ongoing ocean freight diversion around the Red Sea due to rebel activity.

Those same factors, and the higher ocean rates that have resulted, have been responsible for keeping global air freight rates strong, according to the Baltic Air Freight Index from TAC. It was down 0.2% for the week ended June 24 but is up 9.2% for the trailing 12 months.

Growing volume, naturally, is what’s behind those rates. After declines in January and February, market research firm Transport Intelligence noted a strong 17.4% month-on-month gain in global air freight volume in March. For the year to date, volume is up 7.3% vs. 2023, mostly due to an 11.3% increase in European volumes, followed by Asia (up 7%) and North America (up 4.5%).

Trucking Costs, Volume Rising

For-hire trucking saw a boost in May, according to two different indices. The American Trucking Associations noted a 3.6% tonnage increase in May after decreasing in April by 1%. The ATA index was at 115.9 in May (from a 100 baseline in 2015), up from 111.9 in April.

“May was the first month since February 2023 that tonnage increased both sequentially and from a year earlier,” said ATA Chief Economist Bob Costello. “While there was clearly an increase in freight before the Memorial Day holiday, it is still too early to say whether this is the start of a long-awaited recovery in the truck freight market.”

Dat Freight & Analytics Spot saw spot truckload rates increase sequentially in May across van and reefer, both up 4% and at all-time highs, with a slight decline in flatbed (-2%). Van and reefer were up 13% and 25%, respectively, from a year earlier, with flatbed dropping for the first time since December.

NMFTA Updating, Simplifying Its LTL Classification System

The National Motor Freight Traffic Association (NMFTA) plans a major overhaul of its National Motor Freight Classification system (NMFC). Beginning in 2025, the new system will create a standardized approach to LTL pricing based on density, handling, stowability, and liability.

The changes will happen in a phased approach, starting with a standardized density scale for LTL freight when there are no handling, stowability, or liability issues. It will progress from there to a set of unique identifiers for special needs freight, condensed and modernized commodity listings, and improved usability of the NMFC classification tool. In all, 3,500 single-class items will be condensed into one of 13 subcategories. The NMFT will hold separate information sessions in August for 3PLs, LTL carriers, and shippers.

Shipping, Supply Chain Tightening With Q4 Approaching

Even if spot rates for containers don’t approach $30,000 again as they did in 2021, the type of pricing escalation currently taking place, along with tightening capacity, is doubtless causing pain for shippers. All eyes are on port traffic buildup on the West Coast, with the heaviest wave of peak season reloading yet to come.

In the midst of this upheaval, shippers need a reliable logistics partner who can help alleviate the pressure and high cost of insourced logistics and transportation. Wicker Park Logistics, a woman-owned logistics company and WBENC-certified business, is an end-to-end 3PL, transportation, and logistics services provider. Leveraging deep expertise, a cloud-based platform, and a consultative approach, Wicker Park offers on-demand transportation across modes (FTL, LTL, flatbed, hot-shot, expedited, etc.) and end-to-end visibility into every shipment. Get in touch for a quick quote today!                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

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