MARKET BRIEF | August 2022
A BRIEF look at what’s happening in the logistics and shipping industry.
PROGRESS MADE IN WEST COAST LABOR TALKS
West Coast dockworkers and their employers reached a tentative deal on health benefits, a couple of weeks ago, which is an encouraging sign for an eventual agreement on a new contract. The tentative terms for health benefits are subject to agreement being reached on other issues that are part of the negotiations. Talks between the two sides began in early May. The prior contract expired July 1. The general consensus is that a deal will be reached in August or September. To the dockworkers’ credit — even while working without a contract — there has been minimal disruption at ports. (The only disruption to cargo handling on the West Coast were truckers protesting California’s AB5 worker classification law at the Port of Oakland.)
SHIPPING REFORM PROMPTED BY MARKET EXTREMES
Although the Federal Maritime Commission (FMC) stated, in March, that there was “no evidence” of collusion among carriers, there was still the first rewrite of U.S. shipping law in nearly 25 years. There was also an effort to revoke the antitrust immunity that allows carriers to operate within alliances. Such efforts to rewrite U.S. shipping law suggest the effects of the COVID-19 pandemic fundamentally changed an industry that functioned for years without any meaningful regulatory reform. What happened last year was an extreme example of the way business normally functions in container shipping. For years prior to the pandemic, the contract rates signed by shippers and carriers were merely a starting point. Experienced logistics directors have long been hesitant to pay freight rates that are too low, knowing that their cargo will be more likely to be left behind if capacity tightens. A minority of the contracts on file with the FMC do not get amended. For those shippers, alternatives have emerged like the New York Shipping Exchange, which creates contracts with mutual non-performance fees that are usually adhered to by, both, shippers and carriers. Additionally, some carriers claim they deliberately avoided taking full advantage of the spot market last year to invest in long-term customer relationships.
EMPTY CONTAINERS ADDING TO CONGESTION
Both, West Coast drayage carriers and their East Coast counterparts face challenges in returning an empty container to a marine terminal. Those include unexpected notices from ocean carriers stating that a marine terminal will not be able to take an empty container, even while a driver is in route. When a trucker cannot return an empty, they hold on to it, or rent storage space at a yard. Truckers have tried to bill ocean carriers for the use of chassis and yard space for storing empty containers. Currently, trucking companies have no way to recoup any of the losses or expenses related to the storage of unreturned containers. Billing efforts to ocean carriers for container storage services and chassis usage have not been successful. Any bills sent to ocean carriers have either been ignored or rejected. Empty containers sitting on chassis, preventing the equipment from being retrieved or utilized, means shippers must pay more demurrage at marine terminals, while also adding to the backlog at ports.
AERONET CHICAGO MOVES TO A LARGER FACILITY
Aeronet Worldwide’s Chicago, Illinois, station has upgraded to a larger facility. With this move, they increase their warehouse capacity 40% (totaling 48,000 square feet). This allows more space for operations such as storage, transloading, eCommerce fulfillment, and distribution services. The new facility is located within 14 miles of O’Hare International Airport (ORD) and within 28 miles of Chicago Midway International Airport (MDW) … READ MORE
West Coast dockworkers and their employers reached a tentative deal on health benefits, a couple of weeks ago, which is an encouraging sign for an eventual agreement on a new contract. The tentative terms for health benefits are subject to agreement being reached on other issues that are part of the negotiations. Talks between the two sides began in early May. The prior contract expired July 1. The general consensus is that a deal will be reached in August or September. To the dockworkers’ credit — even while working without a contract — there has been minimal disruption at ports. (The only disruption to cargo handling on the West Coast were truckers protesting California’s AB5 worker classification law at the Port of Oakland.)
SHIPPING REFORM PROMPTED BY MARKET EXTREMES
Although the Federal Maritime Commission (FMC) stated, in March, that there was “no evidence” of collusion among carriers, there was still the first rewrite of U.S. shipping law in nearly 25 years. There was also an effort to revoke the antitrust immunity that allows carriers to operate within alliances. Such efforts to rewrite U.S. shipping law suggest the effects of the COVID-19 pandemic fundamentally changed an industry that functioned for years without any meaningful regulatory reform. What happened last year was an extreme example of the way business normally functions in container shipping. For years prior to the pandemic, the contract rates signed by shippers and carriers were merely a starting point. Experienced logistics directors have long been hesitant to pay freight rates that are too low, knowing that their cargo will be more likely to be left behind if capacity tightens. A minority of the contracts on file with the FMC do not get amended. For those shippers, alternatives have emerged like the New York Shipping Exchange, which creates contracts with mutual non-performance fees that are usually adhered to by, both, shippers and carriers. Additionally, some carriers claim they deliberately avoided taking full advantage of the spot market last year to invest in long-term customer relationships.
EMPTY CONTAINERS ADDING TO CONGESTION
Both, West Coast drayage carriers and their East Coast counterparts face challenges in returning an empty container to a marine terminal. Those include unexpected notices from ocean carriers stating that a marine terminal will not be able to take an empty container, even while a driver is in route. When a trucker cannot return an empty, they hold on to it, or rent storage space at a yard. Truckers have tried to bill ocean carriers for the use of chassis and yard space for storing empty containers. Currently, trucking companies have no way to recoup any of the losses or expenses related to the storage of unreturned containers. Billing efforts to ocean carriers for container storage services and chassis usage have not been successful. Any bills sent to ocean carriers have either been ignored or rejected. Empty containers sitting on chassis, preventing the equipment from being retrieved or utilized, means shippers must pay more demurrage at marine terminals, while also adding to the backlog at ports.
AERONET CHICAGO MOVES TO A LARGER FACILITY
Aeronet Worldwide’s Chicago, Illinois, station has upgraded to a larger facility. With this move, they increase their warehouse capacity 40% (totaling 48,000 square feet). This allows more space for operations such as storage, transloading, eCommerce fulfillment, and distribution services. The new facility is located within 14 miles of O’Hare International Airport (ORD) and within 28 miles of Chicago Midway International Airport (MDW) … READ MORE
For more information on Aeronet Worldwide, visit Aeronet.com.
