Maersk and MSC Split Up
The 2M alliance between shipping giants MSC and Maersk, which was formed in 2015, has recently ended. The 2M alliance was formed to provide more efficient and cost-effective customer shipping services by pooling resources and vessels. MSC can now stand alone. MSC grew far faster than any other ocean carrier over the past two years, taking over the top slot from Maersk. MSC has acquired 271 secondhand ships since August 2020, with capacity of just over 1 million twenty-foot equivalent units. MSC's recent secondhand acquisitions exceed the entire capacity of HMM, the world's eighth-largest carrier. The split of the 2M alliance will likely have significant implications for the shipping industry. The alliance had a considerable market share in the global container shipping market, and their absence could lead to more intense competition among other carriers.
Additionally, customers who have relied on the services of the 2M alliance may have to find new shipping partners and re-evaluate their supply chain strategies. Some experts predict that the end of the 2M alliance may lead to more consolidation in the shipping industry as carriers look to increase their market share and competitiveness. The uncertainty has cut down the duration of fixed-rate contracts that shipowners are offering from one year to as short as three months. That is because daily spot rates are on a downward spiral, allowing cargo owners to pick spot deals for some shipments rather than committing to longer contracts.
Dunavant Solution: With spot rates declining, Dunavant updates rates every two weeks. Please contact your Dunavant Global import/export specialist to discuss more.
West Coast Labor Talks
The ongoing labor negotiations at ports along the West Coast of the United States have been causing disruptions to the supply chain for several months as they are showing no signs of progress. The negotiations began in May 2022 and involved the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA), the group representing terminal operators and shipping lines at 29 West Coast ports. The ILWU, representing around 20,000 dockworkers, is seeking higher wages, better benefits, and improved safety conditions at the ports. People familiar with the talks say the sides are hung up on work-related issues in Seattle. Some importers have been diverting furniture, clothes, and electronics to East Coast and Gulf Coast ports in case the labor talks break down and lead to work disruptions or a strike.
Dunavant Solution: We are watching the situation closely and are able to reroute cargo at your request should negotiations fall through
Georgia Ports Record Year
In 2022, the Georgia Ports Authority handled 5.9 million twenty-foot equivalent units — more containers than ever before and a 5% increase over 2021, but this did not come without headwinds. Those challenges included widespread port backups as imports overwhelmed the supply chain. In January 2022, about 150 container ships were stuck off North American ports waiting to berth. The Port of Savannah had almost 50 ships waiting at midyear, and there were still close to 30 in late November. As of Jan. 6 this year, eight vessels were waiting to unload in Georgia. As discussed above, the Port of Savannah has seen an uptick in container traffic as shippers look for alternatives to the West Coast. However, it's important to note that the East Coast ports cannot fully accommodate the diverted cargo as they have their own capacity constraints, and the infrastructure and supply chains are not fully geared to handle the sudden influx of cargo. That being said, the Port of Savannah is set to increase its annual capacity from 6 million to 7.5 million TEUs in 2023 and 9 million by 2025.
Dunavant Solution: Dunavant continues to grow its footprint in Savannah as the port experiences growth. Please contact our office in Savannah for drayage solutions.
Demand for Rail Shipments is Slowing
U.S. railroad operators have tepid outlooks for 2023 as they brace for a slowdown in demand for manufactured goods, among other products, and higher costs. Executives from Norfolk Southern Corp., CSX Corp., and Union Pacific Corp. said inflation is hurting manufacturers and the housing market, among the biggest rail customers. CSX CEO Joe Hinrichs said in an earnings call that coal and merchandise shipments are expected to help volumes recover this year, but "international intermodal volumes are likely to be soft, particularly over the first half as imports have slowed." In addition, major freight railroads are projecting wage costs to increase in 2023 following a new labor agreement that required intervention from Congress and the Biden administration. For example, Union Pacific projected that cost per employee this year will increase by a mid-single-digit percentage.
India and Vietnam will be the big beneficiaries as companies move toward a "China-plus-one" strategy. The withdrawal of manufacturing and supply chain operations from China to India has been a gradual trend in recent years, driven by factors such as rising labor costs in China and political tensions between the two countries. As a result, India has seen an increase in investment in its manufacturing and logistics sectors, as well as the creation of new export-oriented jobs. Global manufacturers are looking beyond China, with Prime Minister Narendra Modi stepping up to seize the moment. The government is spending nearly 20% of its fiscal year's budget on capital investments, the most in at least a decade. Hapag-Lloyd on Wednesday signed a binding agreement to acquire a 35% stake in J M Baxi Ports & Logistics Ltd. (JMBPL), a private terminal and inland transport service provider in India. The company employs about 5,400 and handles approximately 1.6 million twenty-foot equivalent units annually. While multinational corporations are turning to India, the process of shifting operations from China is not without its challenges. India's infrastructure, particularly in terms of transportation and logistics, is not as developed as China's, and there are also issues with bureaucracy and corruption that can make it difficult for companies to do business in the country.
Dunavant Solution: Dunavant is working closely with our Indian agent to secure favorable pricing with multiple ongoing projects.