Will Freight Rebound in 2nd Half of the Year?
According to FreightWaves' ocean container bookings data from SONAR, US containerized import volumes in 2023 have been trending alongside 2019 levels, which was the last freight recession. However, the irregular pattern of import volumes during the traditional peak season in the second half of 2019 suggests caution in assuming a rebound in import volumes in the second half of 2023. The continued weakness in US import demand is also confirmed by the latest contraction in April of Chinese manufacturing data. Without a rebound in the manufacturing sector of the United States' largest trading partner for containerized ocean imports, a second half-rebound in US import volumes seems improbable.
One of the primary headwinds against import demand is the inventory glut carried over from 2022 by US importers. Although it appeared likely that these importers would be able to burn through these excess inventories in the first six months of 2023, enabling them to begin a typical seasonal replenishment cycle that would boost second-half volumes in time for peak season, the latest inventory data from the Logistics Managers' Index (LMI) shows that inventory levels and costs are still registering above 50 and still in expansion. The difficulty US importers are having in burning through excess inventories is being exacerbated by weakening consumer demand, as indicated by the latest credit card data from the Bank of America (BOA). Consumer debt via the utilization of "buy now, pay later" options proliferating throughout the e-commerce space is also becoming a concern as there are increasing risks surrounding US consumers that may soon be pushing the upper limits of their spending power.
Dunavant Solution: If you are looking to take advantage of import container pricing, our global import team is continually adjusting pricing to match the market movements and provide our customers with the least cost and best service options.
Rail Storage Fee Disputes
A coalition of 75 US shippers has called on Congress to clarify that railroads should be billing ocean carriers, not shippers, for overseas import containers that the railroads transport and store at rail yards. The shippers' group, led by the National Customs Brokers & Forwarders Association of America, National Industrial Transportation League, and National Retail Federation, wants regulations to be changed to make it clear that storage fees should be subject to the demurrage and detention invoicing requirements of the Ocean Shipping Reform Act of 2022. This Act comes under the jurisdiction of the Federal Maritime Commission (FMC), which shippers believe should have more authority over rail storage fees. Currently, the charges have been difficult for shippers to dispute and recover because of the jurisdictional gap between the FMC and the Surface Transportation Board, which regulates railroads, over railroad storage fees. The shipper coalition’s proposed legislative fix would cause FMC authority to overlap with the STB and make the confusing situation worse, argued John Butler, President and CEO of the World Shipping Council, representing ocean carriers on Capitol Hill.
Butler said that the STB had the statutory authority to act on rail storage charges and was the right agency to handle this issue. He added that the shipper coalition's proposal would disincentivize ocean carriers from offering through bills using rail, causing more confusion. Shippers believe that the "gap must be clarified" by giving more authority to the FMC. Although the FMC has not taken up its authority on rail storage charges, Roche, Senior Vice President at Mohawk Global Logistics, said that the STB told him that the Staggers Act, which deregulated the railroads in 1980, does not give the STB authority over railroad contract carriage agreements or international intermodal moves that can involve railroad storage fees.
If Russia Blocks Black Sea Grain?
According to commodity price-reporting agency Argus, global trade flows have adjusted in the 14 months since Russia's invasion of Ukraine, mitigating the threat of a new food inflation crisis. The basic food security of tens of millions globally was thought to be hanging by a thread with Russia threatening to block the Black Sea Grain Initiative on May 18, which would have blocked Ukrainian seaborne exports of corn and wheat; however, ocean shipping has been plying new routes from bulkers carrying wheat, corn, and fertilizers to liquefied petroleum gas carriers loaded with ammonia to product tankers transporting sunflower oil. Shipping has become a significant factor in helping to stave off a food security crisis, while new threats to Ukrainian exports have not raised commodity prices.
According to Argus, the share of Ukraine in the supply of global markets has reduced, and its exports have moved overland to neighboring countries, meaning a loss of Ukrainian exports would have much less impact on buyers than it did when the war broke out. While the situation in Ukraine has had a large impact on the grains, oilseeds, and vegetable oil markets over the last year or so, the markets are well supplied, and the concerns and uncertainties about whether Ukraine will be able to continue exporting are not currently sufficient to lift prices. Even if Ukrainian seaborne exports go to zero, Argus says there are no real concerns on whether the global market could cope without Ukrainian volumes; for the current marketing year, there are “ample [wheat] volumes left to be exported” from Russia, Romania, Bulgaria, Canada, and Australia.
New Depths for Jacksonville Port
The Jacksonville Port Authority in Florida, US, has welcomed the largest container ship ever to call at the port. The One Stork, which has a carrying capacity of 14,000 twenty-foot equivalent units (TEUs), is the first of nine larger vessels to be used by The Alliance, which also includes shipping lines Hapag-Lloyd, HMM and Yang Ming, in the EC5 container service. The deepening of the federal shipping channel from 40 feet deep to 47 feet enabled the upgraded vessel sizes, which offer a 60% increase in container carrying capacity over the previous EC5 ships.
LA/LGB Update
Neither parties have released a statement since the tentative agreement was announced. They agreed not to disclose the terms of the tentative agreements, with key issues being wages and the role of automation, as negotiations continue. Dunavant continues to monitor the situation.