Los Angeles and Long Beach Ports Reopen After Brief Job Action

Terminal operations at the ports of Los Angeles and Long Beach were closed for Thursday’s night shift and Friday’s day shift. Work resumed with Friday’s night shift.

The Pacific Maritime Association (PMA), representing the terminals said port facilities were closed because of coordinated action taken by the International Longshore and Warehouse Union (ILWU) Local 13 as protracted contract talks continue.

“These actions undermine confidence in West Coast ports and threaten to further accelerate the diversion of discretionary cargoto Atlantic and Gulf Coast ports. The health of the Southern California and state economy depend on the ability of the Ports of Los Angeles and Long Beach to stem this market share erosion,” PMA said.

Union workers at the port have not received an employment contract since the old agreement expired on July 1, 2022.

Lars Jensen, CEO of consultancy Vespucci Maritime wrote on a LinkedIn post, “Ever since the old contract failed to get renewed in the middle of 2022, the spectre of labour disruptions on the U.S. West Coast has been a constant risk factor. A risk which has kept some U.S. importers from shifting parts of their supply chain back from the East Coast to the West Coast even though the pandemic-induced issues had been largely resolved.”

Source: American Shipper, splash247.com

Cargo Shift to U.S East Coast Will Continue

With 76% of the U.S. population living closer to the East, it is no surprise that more cargo will head there, industry experts say. Subsequently, ocean freight will continue to move from ports in the Pacific to ports on the East Coast of the United States, John McCown, founder of Blue Alpha Capital noted.

February was the 21st straight month that East Coast ports had outperformed Western ports. “This is an underlying shift that has been going on for a long time. By my calculations, from 2000 to 2015 there has been a 57 basis point shift a year from West Coast to East Coast,” McCown said. He added that East Coast ports handled 57% of U.S. freight, and 43% goes through Pacific gateways.

Port of Los Angeles executive director Gene Seroka made the same point at the recent TPM conference. He noted the LA/Long Beach port complex handled 36% of all U.S. cargo, which was still a significant level, but it has been reducing year-on-year since the turn of the century.

McCown pointed out that cargo delivered to West Coast ports often faced long inland journeys to reach its final destination, sometimes using double-stacked trains to head as far as the Eastern seaboard. “From a cost and an emissions – and even from a congestion – standpoint, shipping to the East Coast is the most efficient,” he said. However, he agreed that if speed was essential, intermodal was still the quicker way to reach the East, rather than the all-water route.

Emily Stausbøll, market analyst at Xeneta, said many shippers the company has spoken to indicated they have investments in warehousing and other infrastructure in the East and would not return to the West Coast.

“We shouldn’t overestimate how many shippers will return to the West Coast,” she said, pointing out that investments by the government into port infrastructure had been weighted in favour of East Coast facilities. “The investments are not just because of the congestion and west coast talks, it’s a more structural shift,” she added.

Source: The Loadstar

Air Cargo Returning to “More Normal Demand Patterns”?

The air cargo market recorded an improvement in demand and capacity in February and March. According to IATA's February analysis, global demand, measured in cargo tonne-km, was 2.9% higher than pre-pandemic levels and surpassed February 2019 for the first time in eight months. The demand drop of -7.5% on February 2022 was half the annual decline in the previous two months at -14.9% and -15.3%, respectively, marking a substantial performance improvement (see Table 1).

Capacity measured in available cargo tonne-km increased by 8.6% on February 2022. IATA says the uptick reflects the addition of belly capacity as the passenger side recovers. International belly capacity grew by 57% in February, year-on-year, reaching 75.1% of 2019 capacity.

March recorded the most significant year-over-year increase of 16%, according to analysts at Clive Data Services. The shifting volume and capacity balance is reflected in the global dynamic load factor, which was 60%. This is 6% lower compared to a year ago, but it is up 6% on January’s seasonal low.

Global cargo volumes have been falling for the past 13 consecutive months but registered their smallest drop, of -3% year-on-year in March, the lowest monthly decline in over a year.

Longer-term contracts between shippers and freight forwarders may also signal a stabilizing global air cargo market. “I think we’re seeing signs that some forwarders are willing to take a little more risk on what airfreight rates might do. Everybody wants to achieve growth, but if the market is not growing, you have to grab a share from someone else,” said Niall van de Wouw, chief airfreight officer at Xeneta.

Meanwhile, Willie Walsh, IATA’s director general said, “An optimistic eye could see the start of an improvement trend that leads to market stabilization and a return to more normal demand patterns after dramatic ups-and-downs in recent years.”

Source: The Loadstar

China's Port Dominance a Barrier to Manufacturing Relocation

While Western countries are keen to move parts of its manufacturing out of China, India and Southeast Asian countries do not have enough ports to handle large container ships. Changing the current Asian set up where most parts of export goods are produced and shipped from China will be expensive and challenging.

According to the Financial Times, it reports that Western importers have considered moving some production out of China, given the geopolitical tensions between China and the United States. However, for this to happen, it will require significant investment in Indian ports and Southeast Asian ports.

China has a total of 76 container terminals, each capable of handling vessels above 14,000 TEU. Other Southeast Asian countries such as India, Vietnam, South Korea and Bangladesh have just a total of 31 terminals.

Overall, China has invested at least US$40 billion in expanding and modernizing port infrastructure between 2016 and 2021, the Financial Times wrote, citing data from analytics firm Qianzhan Industrial Research.

Significantly greater investment is require in ports located in competing countries and even then, it will be some time before they are able to reach the capacity of the Chinese ports.

Source: ShippingWatch

WTO Projects Global Trade Growth to Slow to 1.7% in 2023

WTO economists say trade growth in 2023 is expected to slow to 1.7%, following a 2.7% growth in 2022. According to the “Global Trade Outlook and Statistics” report, the pace of expansion is being dampened by the effects of the war in Ukraine, persistently high inflation, tighter monetary policy, and financial uncertainty.

The WTO’s trade projections estimate real global GDP growth at market exchange rates of 2.4% for 2023. Both trade and output growth projections are below the averages for the past 12 years of 2.6% and 2.7% respectively.

The 1.7% trade growth forecast in 2023 is above the previous estimate of 1% last October. The relaxation of COVID-19 pandemic measures in China is expected to release pent-up consumer demand in the country, boosting international trade.

WTO Chief Economist Ralph Ossa said: “The lingering effects of COVID-19 and the rising geopolitical tensions were the main factors impacting trade and output in 2022 and this is likely to be the case in 2023 as well. Interest rate hikes in advanced economies have also revealed weaknesses in banking systems that could lead to wider financial instability if left unchecked. Governments and regulators need to be alert to these and other financial risks in the coming months.”

Looking ahead to 2024, trade growth should rebound to 3.2% as GDP rises to 2.6%. However, significant risks such as geopolitical tensions, food supply shocks, and the possibility of unforeseen fallout from monetary tightening makes this estimate more uncertain than usual.

Source: Hellenic Shipping

Global Schedule Reliability at 60.2% in February

Vessel schedule reliability improved by 7.7 percentage points month-on-month (M/M) in February 2023. Globally, vessels arrived on schedule 60.2% of the time in February, marking a 26% improvement in performance compared to a year ago.

The average delay for LATE vessel arrivals also improved to 5.29 days in February, decreasing by -0.07 days M/M and -2.30 days, year-on-year. “In relative terms, the average delay for LATE vessel arrivals is now closer to the 2019 level than to the highs of 2021-2022,” noted Sea-Intelligence CEO, Alan Murphy.

Maersk was the most reliable carrier at 64.9%, followed by MSC at 64.4%. Hamburg Süd was the only other carrier with on-time performance above 60%. The remaining carriers recorded schedule reliability of 50%-60%. ZIM was the least reliable carrier in February 2023, with schedule reliability of 52%.

Source: Sea Intelligence


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