Logistically Speaking - Hot Sheet Week 10


Logistically Speaking - Hot Sheet Week 10


New Norfolk Southern Service


Norfolk Southern Railway will launch a new intermodal service between the Port of Virginia and Memphis in an attempt to capture more trans-Atlantic business from Asia and Europe as more freight moves to U.S. East Coast ports. The train route will take five days, which is a day longer than the Savannah route but a day shorter than trips from Charleston. Norfolk Southern currently serves Memphis via Charleston, South Carolina, and Savannah, Georgia. The company also targets cotton exporters in Memphis, which have experienced congestion issues transporting their goods to Houston, Charleston, and Savannah in the past year. Norfolk Southern aims to keep the equipment flowing in both directions and will place chassis in Memphis to prevent additional strain on third-party chassis pools.


Alexander Luc, Group Vice President of International Intermodal for Norfolk Southern, said the company was targeting freight that is potentially hitting the West Coast from beneficial cargo owners looking to shift their overall services and diversify their port pairings and logistics solutions. Three of every four import loads moving to Memphis come from ports other than Charleston and Savannah, with many coming from the West Coast. As the share of Asian imports shifts from the West Coast to the East and Gulf coast ports, new opportunities may arise to capture Memphis business through Virginia and other East Coast ports. The West Coast market share of Asian imports dropped to 54.1% in January from 57.2% in January 2022, while the East Coast share of 36.2% in January was up from 34.8% a year ago.


Maersk Shifts Detention Billing


Shipping giant Maersk is to begin billing container detention charges directly to consignees on "merchant haulage moves" as the U.S. Federal Maritime Commission (FMC) considers new rules about billing practices. Merchant haulage involves container moves where the importer manages a box's pickup and empty return with its own drayage providers. Detention fees are assessed when a container is returned to a terminal after contractual free time expires. Maersk's move means that shippers can indicate whether they prefer to still have drayage providers billed first for detention.


Maersk's move comes as the FMC considers rulemaking processes around detention and demurrage billing, which is mandated by the passage of the Ocean Shipping Reform Act of 2022. The FMC has proposed that a "properly issued invoice is only issued to the person that has contracted with the billing party for the carriage of goods or space to store cargo, and the billed party is responsible for the payment of any incurred demurrage or detention charge." However, there are potential unintended consequences of the FMC's proposed rules, and industry players are urging the agency to consider all aspects of the issue.


President Biden's Budget Proposal


President Biden's fiscal year 2024 budget proposals released today will be a political document designed to reveal what GOP conservatives seek to take away and the potential U.S. default they threaten if the House keeps insisting on significant reductions in spending. The president's blueprint will not become law. Instead, it is an opening bid at the start of lengthy negotiations heading into the summer and fall, if not longer. President Biden says nearly $3 trillion in proposed measures would reduce deficits over ten years. But, as expected, proposed tax increases, opposed by conservatives, play a big role in the president's revenue math. 

  • President Biden wants a 5.2% pay raise for federal workers. It would fall short of the 8.7% raise called for in legislation introduced in the House and Senate and backed by several Democrats and federal employee unions.
  • President Biden will push a 25% billionaire tax on the richest 0.01% of Americans, levies on rich investors and companies. 
  • The budget would close a loophole that allows some wealthy investors with "passthrough businesses" to avoid paying tax on their investments.
  • It would increase the top tax rate for Americans making $400,000 a year to 39.6% from 37%, reversing a Trump-era tax bill.
  • The budget sets the corporate tax rate at 28%, still well below the 35% rate that prevailed prior to the 2017 tax law, a White House official said.
  • The president's budget plan includes hundreds of billions of dollars in proposed savings through lower drug prices, some higher business taxes, anti-fraud vigilance and less "wasteful" spending, according to White House aides.
  • The president will propose a defense budget of $835 billion, higher than last year's due to the ongoing war in Ukraine and rising tensions with China.


Waning U.S. Shale Boom


The U.S. shale industry's oil production is showing signs of waning, which could suggest that the era of shale growth is nearing its peak. In the Permian Basin, America's busiest oil patch, frackers find fewer large oil wells. In addition, the shale companies' largest and most productive wells are producing less oil, according to data that The Wall Street Journal reviewed. The reduction of once-thriving sweet spots has significant implications for the global oil market, which previously relied on the rapid growth of U.S. oil production to offset supply disruptions and rising demand. Without successful exploration or technological advancements, the oil industry's inventory constraints are expected to push companies to tap lower-quality wells that require higher oil prices to attract investment, according to industry executives.


The recent degradation in well performance has fueled executives' and investors' concerns about the shale industry's runway for growth, resulting in companies considering mergers this year. Chevron, Devon Energy, and others that have relied on the Permian as a central pillar of their future plans saw top wells yield less crude last year than the previous year. One of the Permian's largest landholders, Chevron brought online some of the region's most productive wells in Culberson County, Texas, but some of its newer wells have seen productivity decline. Chevron CEO Mike Wirth said the production growth rate and drilling activity that the U.S. shale industry witnessed ten years ago is unlikely to be repeated. However, the Permian still has undeveloped areas, and Chevron plans to boost its production to 1 million barrels per day by 2025, plateauing at 1.2 million later in the decade.

Posted by Katie Elizabeth Carpenter at 16:11