<div class="phx-topic abstract-wrapper">Back-to-back increases in freight rates on the Asia-Europe trade lane the past two weeks and the announcement of proposed increases in the eastbound Pacific to the U.S. indicate that peak-season volumes are finally starting to materialize in the important east-west trade lanes. And spot rates are rising, albeit from a low level.
 </div>

Back-to-back increases in freight rates on the Asia-Europe trade lane the past two weeks and the announcement of proposed increases in the eastbound Pacific to the U.S. indicate that peak-season volumes are finally starting to materialize in the important east-west trade lanes. And spot rates are rising, albeit from a low level.

<div><a>Back-to-back increases</a> in freight rates on the <a>Asia-Europe</a> trade lane the past two weeks and the announcement of proposed increases in the eastbound Pacific to the U.S. indicate that peak-season volumes are finally starting to materialize in the important east-west trade lanes. In the Asia-Europe trade, carriers are using intentionally-cancelled sailings, known also as void or <a>blank sailings</a>, to prop up freight rates due to significant over-capacity. In the eastbound Pacific, carriers are relying on the normal increase in imports that takes place in late September and October each year to fill up their ships and nudge rates higher.These developments...

Back-to-back increases in freight rates on the Asia-Europe trade lane the past two weeks and the announcement of proposed increases in the eastbound Pacific to the U.S. indicate that peak-season volumes are finally starting to materialize in the important east-west trade lanes. In the Asia-Europe trade, carriers are using intentionally-cancelled sailings, known also as void or blank sailings , to prop up freight rates due to significant over-capacity. In the eastbound Pacific, carriers are relying on the normal increase in imports that takes place in late September and October each year to fill up their ships and nudge rates higher. These developments imply a return to normal seasonal developments. European imports of holiday season merchandise usually leave Asia first, followed by U.S. imports a few weeks later as retailers prepare for the official start of the holiday shopping season the day after Thanksgiving. Hapag-Lloyd, which has a large presence in the Asia-Europe trades, announced Tuesday its intention to implement a general rate increase of $550 per 20-foot container unit for all shipments from East Asia (excluding Japan) to all destinations in North Europe and the Mediterranean. At the same time, Hapag-Lloyd advised its customers of two blank sailings on its Europe-Asia loop (EUM) that will take place in coming months. The void sailings, which are tied to its vessel maintenance schedule, include one westbound voyage scheduled for Nov. 23 and an eastbound voyage scheduled for Dec. 26. These are just the latest announcements by carriers and carrier alliances of void sailings, and continue a trend that has been underway all year. In fact, carries have had so many blank sailings since January that they ran full schedules in only four of the first 25 weeks of the year. While these blank sailings affected individual voyages on an ad-hoc basis, the Ocean Three Alliance of China Shipping Container Line, CMA CGM and United Arab Shipping in June announced that it was suspending an entire weekly service, which removed about 4 percent of the total capacity in the Asia-Europe trade. These reductions in capacity, combined with the normal seasonal increase in cargo volumes, are beginning to produce results for carriers in the Asia-Europe trade. The spot rate of $763 per TEU from Shanghai to North Europe was up 29.1 percent from the previous week, according to the Shanghai Containerized Freight Index of Sept. 4 available on the JOC.com Market Data Hub. However, as an indication of just how weak the carrier negotiating position is this year, the Sept. 4 spot rate was down 32.4 percent from the same week last year, when the rate was $1,129 per TEU. At least a half-dozen carriers had previously announced proposed increases to take place in September, ranging from $550 to $1,000 per TEU, in the Asia-North Europe trade. Carriers this year have announced about 10 GRIs, only to watch the increases deteriorate rapidly. Similarly, in the Asia-to-Mediterranean trade lane, the Sept. 4 spot rate from Shanghai of $865 per TEU was 25 percent higher than in the previous week, but down 41.8 percent from $1,487 during the same week of 2014. Activity also is picking up in the U.S. import trade from Asia, indicating that carriers may be able to implement some rate increases later this month and in October. NYK Line on Tuesday announced a GRI from Asia to the U.S. and Canada. NYK announced a proposed increase of $540 per TEU and $600 per FEU, effective Oct. 1. Over-capacity continues to plague carriers in the eastbound Pacific, just as it has done all year in the Asia-Europe trades.The spot rate to the U.S. West Coast in the week ending Sept. 4 was $1,456 per 40-foot container, according to the Shanghai Containerized Freight Index displayed on the JOC.com Market Data Hub. That was down 1.7 percent from $1,481 the previous week and $36.8 percent less than during the same week last year. The spot rate from Shanghai to the East Coast was $2,672, down 2.2 percent from the previous week and 42.4 percent lower than the $4,636 spot rate in effect in September 2014. With the annual beginning of the holiday shopping season on the weekend following Thanksgiving now in sight, carriers in the eastbound Pacific could be announcing more GRIs. Higher-value merchandise including apparel and electronics normally moves from late September into early November. Much of the lower-priced holiday merchandise such as Christmas tree ornaments may have already arrived in the U.S. Truckers and warehouse operators in Southern California report that the warehouses are full and they are awaiting instructions from retailers to begin moving the product to regional distribution facilities and stores. Contact Bill Mongelluzzo at bill.mongelluzzo@ihs.com and follow him on Twitter: @billmongelluzzo .

Container lines

Peak season takes hold on Asia-Europe, trans-Pacific lanes

<div class="phx-topic abstract-wrapper">A wide-ranging report commissioned by Canada’s Labor Ministry says British Columbia’s ports are vulnerable to strikes in part because of disparate longshore unions involved in contract talks. </div>

A wide-ranging report commissioned by Canada’s Labor Ministry says British Columbia’s ports are vulnerable to strikes in part because of disparate longshore unions involved in contract talks.

Feature image

<div class="phx-topic">Fragmented union bargaining and government backstops during contract talks are factors behind the longshore strikes and other labor unrest that have gripped Canada’s West Coast ports during the last two years, a report commissioned by the Labor Ministry report has found. The report, released Thursday, suggests British Columbia’s longshore unions need to bargain with employers on a province-wide basis, rather than a port- or employer-specific basis, to avoid further unrest that jeopardizes Canada’s supply chains. It also urged early government intervention to head off strikes. The 156-page report, which was commissioned by the Labor Ministry and developed by Canadian labor relations experts Vincent Ready and Amanda Rogers, looks into the labor disputes that have hit British Columbia’s ports. It was commissioned in July 2023 by Labor Minister Steve MacKinnon after <a href="https://www.joc.com/article/ilwu-canadas-contract-rejection-thrusts-bc-ports-in-limbo-5216091">longshore workers rejected</a> a contract proposal that led to a <a href="https://www.joc.com/article/ilwu-canada-contract-ratification-ensures-bc-port-peace-5220992">13-day strike at Vancouver and other Canadian West Coast ports</a>. The inquiry found that while “there exists a mature bargaining relationship among the parties, it is far from healthy, and is marred by ongoing conflicts, misaligned priorities and a fiercely protectionist stance by the union.” Mike Leonard, president of the British Columbia Maritime Employers Association (BCMEA), said in a statement that if the report’s findings are put in place, it “will advance long-term stability at Canada’s West Coast ports to the benefit of all parties.” ILWU Canada could not immediately be reached to comment on the report. <h3>ILWU locals control talks </h3>The BCMEA negotiates contracts with the Canadian affiliate of the International Longshore and Warehouse Union (ILWU). ILWU Canada represents five separate, regional ILWU locals, which are the recognized bargaining agents with employers at different ports. While ILWU Canada is ostensibly the main negotiator, it is the locals who direct contract talks, vote on tentative agreements and determine whether to strike. ILWU Canada is not recognized by employers as a union and its president does not have a vote on contract matters. The report said that longshore labor negotiations would be more efficient if maritime employers could negotiate on a province-wide basis as “the current model of collective bargaining with different bargaining units is contributing to the frequency of labor disruptions.” It noted that other longshore unions in Canada negotiate province-wide contracts. The ILWU locals have maintained that different work conditions at each employer and port necessitate the need for regional representation. However, the report noted that ILWU local members can work at different ports throughout the province, indicating that work conditions at each location are similar enough for a province-wide contract. “While it is true each ILWU local maintains its own independent leadership and union members, the issuance of a geographic certification will not interfere with those arrangements,” the report said. It added that recognizing ILWU Canada or another entity as the main union representative “will bring stability and certainty to future rounds of bargaining.” <h3>Foremen role not distinct </h3>The Labor Ministry’s inquiry coincided with another work stoppage in November 2024, when the BCMEA shut out ILWU Local 514, which represents port foremen, <a href="https://www.joc.com/article/bc-container-ports-set-for-shutdown-after-foremen-begin-strike-5785499">after it took an illegal strike vote</a> during protracted negotiations with maritime employers. Local 514 has separate bargaining agreements with each of the province’s maritime employers and can negotiate with each one separately. However, Local 514 has “voluntarily” negotiated with the BCMEA for decades, the report said. Even though it started the last negotiations with the BCMEA, <a href="https://www.joc.com/article/dp-worlds-centerm-project-at-heart-of-employer-union-dispute-in-vancouver-5225162">Local 514 targeted one employer — DP World</a> — for a separate deal that led to the illegal strike vote. “The union’s conduct was an attempt to single out one employer, just as the parties acquired their right to strike or lock out, and subverted the collective bargaining process that was underway,” the report said. “The union cannot ride two horses at the same time and then pick the one that best suits its interests late in the race.” Local 514 maintains the foremen role is different enough than other longshore crafts for a separate union and contract. However, the report said foremen could also be rolled up into a province-wide contract because their jobs are not that different than other longshore workers. “We do not accept that the interests of ILWU Local 514 members are so distinct that they cannot effectively be advanced as part of a geographic certification that also includes longshore workers,” the report said. <h3>Government overshadows talks </h3>The report also took to task the default move of maritime employers and longshore unions to look to government intervention when contract negotiations break down. The report noted that the federal government has intervened in nine of 13 British Columbia port disputes since 1972. “This reliance on government intervention has created an environment where the safety net of binding arbitration overshadows the collective bargaining process,” the report said. The inquiry suggested that a “special mediator” be appointed early in the bargaining process. The special mediator would monitor the progress of talks and help usher them through before the government needs to force a deal on both sides. Contact Michael Angell at <a href="mailto:michael.angell@spglobal.com">michael.angell@spglobal.com</a>.</div>

Fragmented union bargaining and government backstops during contract talks are factors behind the longshore strikes and other labor unrest that have gripped Canada’s West Coast ports during the last two years, a report commissioned by the Labor Ministry report has found. The report, released Thursday, suggests British Columbia’s longshore unions need to bargain with employers on a province-wide basis, rather than a port- or employer-specific basis, to avoid further unrest that jeopardizes Canada’s supply chains. It also urged early government intervention to head off strikes. The 156-page report, which was commissioned by the Labor Ministry and developed by Canadian labor relations experts Vincent Ready and Amanda Rogers, looks into the labor disputes that have hit British Columbia’s ports. It was commissioned in July 2023 by Labor Minister Steve MacKinnon after longshore workers rejected a contract proposal that led to a 13-day strike at Vancouver and other Canadian West Coast ports . The inquiry found that while “there exists a mature bargaining relationship among the parties, it is far from healthy, and is marred by ongoing conflicts, misaligned priorities and a fiercely protectionist stance by the union.” Mike Leonard, president of the British Columbia Maritime Employers Association (BCMEA), said in a statement that if the report’s findings are put in place, it “will advance long-term stability at Canada’s West Coast ports to the benefit of all parties.” ILWU Canada could not immediately be reached to comment on the report. ILWU locals control talks The BCMEA negotiates contracts with the Canadian affiliate of the International Longshore and Warehouse Union (ILWU). ILWU Canada represents five separate, regional ILWU locals, which are the recognized bargaining agents with employers at different ports. While ILWU Canada is ostensibly the main negotiator, it is the locals who direct contract talks, vote on tentative agreements and determine whether to strike. ILWU Canada is not recognized by employers as a union and its president does not have a vote on contract matters. The report said that longshore labor negotiations would be more efficient if maritime employers could negotiate on a province-wide basis as “the current model of collective bargaining with different bargaining units is contributing to the frequency of labor disruptions.” It noted that other longshore unions in Canada negotiate province-wide contracts. The ILWU locals have maintained that different work conditions at each employer and port necessitate the need for regional representation. However, the report noted that ILWU local members can work at different ports throughout the province, indicating that work conditions at each location are similar enough for a province-wide contract. “While it is true each ILWU local maintains its own independent leadership and union members, the issuance of a geographic certification will not interfere with those arrangements,” the report said. It added that recognizing ILWU Canada or another entity as the main union representative “will bring stability and certainty to future rounds of bargaining.” Foremen role not distinct The Labor Ministry’s inquiry coincided with another work stoppage in November 2024, when the BCMEA shut out ILWU Local 514, which represents port foremen, after it took an illegal strike vote during protracted negotiations with maritime employers. Local 514 has separate bargaining agreements with each of the province’s maritime employers and can negotiate with each one separately. However, Local 514 has “voluntarily” negotiated with the BCMEA for decades, the report said. Even though it started the last negotiations with the BCMEA, Local 514 targeted one employer — DP World — for a separate deal that led to the illegal strike vote. “The union’s conduct was an attempt to single out one employer, just as the parties acquired their right to strike or lock out, and subverted the collective bargaining process that was underway,” the report said. “The union cannot ride two horses at the same time and then pick the one that best suits its interests late in the race.” Local 514 maintains the foremen role is different enough than other longshore crafts for a separate union and contract. However, the report said foremen could also be rolled up into a province-wide contract because their jobs are not that different than other longshore workers. “We do not accept that the interests of ILWU Local 514 members are so distinct that they cannot effectively be advanced as part of a geographic certification that also includes longshore workers,” the report said. Government overshadows talks The report also took to task the default move of maritime employers and longshore unions to look to government intervention when contract negotiations break down. The report noted that the federal government has intervened in nine of 13 British Columbia port disputes since 1972. “This reliance on government intervention has created an environment where the safety net of binding arbitration overshadows the collective bargaining process,” the report said. The inquiry suggested that a “special mediator” be appointed early in the bargaining process. The special mediator would monitor the progress of talks and help usher them through before the government needs to force a deal on both sides. Contact Michael Angell at michael.angell@spglobal.com .

Container Shipping News

Port News

North American ports

Longshore labor

Maritime

BC ports, longshore unions need new bargaining process: report

<div class="phx-topic abstract-wrapper">It is reasonable to assume the larger container carriers are now going to earn above historical returns, but they will not be immune from significant dips when supply significantly exceeds demand, writes Jeremy Masters.</div>

It is reasonable to assume the larger container carriers are now going to earn above historical returns, but they will not be immune from significant dips when supply significantly exceeds demand, writes Jeremy Masters.

<div class="phx-topic">For the early decades of container shipping, it was almost inconceivable that carriers could deliver a consistently good return on capital. Today, we see several carriers making profits that are the envy of other industries, and as recently reported by Alphaliner, six publicly-listed container carriers have a market valuation over $10 billion. Has the industry matured to the point where carriers can expect good returns to be the norm? <div class="wrapper-narrow float-right-element"><img src="/images/phoenix/6025533_0.1.jpg"></img></div>The answer is a qualified one. The major carriers are in a much stronger position to control the supply lever than they were <a href="https://www.joc.com/article/current-market-allows-top-ocean-carriers-to-strengthen-long-term-position-6016964">because of consolidation in the industry and reduction in the non-operating fleet</a>. The increase in vertical integration — which will take a dramatic step forward if the <a href="https://www.joc.com/article/panama-canal-mulls-developing-corozal-to-allay-neutrality-fears-over-hutchison-deal-6023330">acquisition of Hutchison Ports Holdings by Mediterranean Shipping Co.’s terminals subsidiary proceeds</a> — means that the big carriers are increasingly controlling an integral part of their product as well as its cost. The purchase of large amounts of new and secondhand tonnage in smaller sizes means that these carriers can also run their own regional and feeder systems off these acquired terminals — again controlling quality and cost. This becomes a powerful combination to compete against, and if a carrier outside the big league or a new entry wanted to emulate this set-up, the investment would be very large. That means there are some real barriers to entry. The position is different for operators in selected deep-sea trades, regional carriers and feeder specialists. These carriers can’t contend with volatile individual trades, have less control of supply and don’t have the resources available to ride out extended storms without withdrawing, or worse. They also have less control of their overall product because they don’t have the means to integrate vertically. Those who are agile and find the right niches can make a good return, but the stronger the big guys get, the more they can marginalize smaller operators or simply acquire them. We have a broadly two-tier industry then — the truly global carriers (and within them the bigger ones pursuing vertical integration who are getting stronger) — and the rest. And the punching power is widening. The picture is reasonably rosy for the big carriers, but they do not have it entirely their own way: <h3>Control of supply, not demand </h3>Trade growth does not follow the clear patterns seen in early containerization, and geopolitics makes it increasingly unpredictable. There are good reasons to believe that global demand for container space will stay up — even if there is a redistribution — but carriers cannot rely on robust trade growth. Newbuild orders in recent years have considerably exceeded anything that could be expected on the demand side, and at some point, the gap between supply and demand will be unbridgeable with major downward pressure on rates. <h3>High profits are an attraction </h3>Up until comparatively recently, many potential investors and operators in other transport modes could have looked at the containerized shipping industry as a bit of a basket case. As the fundamentals change in favor of the carriers, players with deep pockets may take another look. The purchase and upscaling of an existing player become possible. <h3>New business model </h3>Carriers have innovated considerably with physical products but have been rather conservative about adopting new ways to market their products. This could become a backdoor way for a smaller carrier to emerge into the big league or a company using a different model in another mode to make a significant entry. <h3>Environmental factors </h3>Carriers can be commended for making some tough decisions to invest in more environmentally friendly tonnage when the ultimate winners in the alternative fuels race are unclear. This could be quite damaging for those who have made less-than-optimal picks, or beneficial for a later entrant. Meanwhile, the purchase of considerable amounts of old secondhand tonnage may become a dubious investment for some carriers if environmental regulations and fees tighten further. There are clearly other factors, such as how individual companies are run, that could enter the picture. But the above are tangible threats that are difficult for carriers to quantify and even harder to control. Looking at the whole picture, it is reasonable to assume that the bigger container carriers are now going to earn above historical returns, but they will not be immune from significant dips when supply significantly exceeds demand. By virtue of their own recent success, they will also be facing fresh interest from aspirants within and outside the industry harboring ambitions to be at the top table — potentially touting a different business model. Perhaps not a golden age yet, but certainly an emergence from the dark ages. Contact Jeremy Masters at <a href="https://www.joc.com/article/jeremy@shippingmastershk.com">jeremy@shippingmastershk.com</a>.</div>

For the early decades of container shipping, it was almost inconceivable that carriers could deliver a consistently good return on capital. Today, we see several carriers making profits that are the envy of other industries, and as recently reported by Alphaliner, six publicly-listed container carriers have a market valuation over $10 billion. Has the industry matured to the point where carriers can expect good returns to be the norm? The answer is a qualified one. The major carriers are in a much stronger position to control the supply lever than they were because of consolidation in the industry and reduction in the non-operating fleet . The increase in vertical integration — which will take a dramatic step forward if the acquisition of Hutchison Ports Holdings by Mediterranean Shipping Co.’s terminals subsidiary proceeds — means that the big carriers are increasingly controlling an integral part of their product as well as its cost. The purchase of large amounts of new and secondhand tonnage in smaller sizes means that these carriers can also run their own regional and feeder systems off these acquired terminals — again controlling quality and cost. This becomes a powerful combination to compete against, and if a carrier outside the big league or a new entry wanted to emulate this set-up, the investment would be very large. That means there are some real barriers to entry. The position is different for operators in selected deep-sea trades, regional carriers and feeder specialists. These carriers can’t contend with volatile individual trades, have less control of supply and don’t have the resources available to ride out extended storms without withdrawing, or worse. They also have less control of their overall product because they don’t have the means to integrate vertically. Those who are agile and find the right niches can make a good return, but the stronger the big guys get, the more they can marginalize smaller operators or simply acquire them. We have a broadly two-tier industry then — the truly global carriers (and within them the bigger ones pursuing vertical integration who are getting stronger) — and the rest. And the punching power is widening. The picture is reasonably rosy for the big carriers, but they do not have it entirely their own way: Control of supply, not demand Trade growth does not follow the clear patterns seen in early containerization, and geopolitics makes it increasingly unpredictable. There are good reasons to believe that global demand for container space will stay up — even if there is a redistribution — but carriers cannot rely on robust trade growth. Newbuild orders in recent years have considerably exceeded anything that could be expected on the demand side, and at some point, the gap between supply and demand will be unbridgeable with major downward pressure on rates. High profits are an attraction Up until comparatively recently, many potential investors and operators in other transport modes could have looked at the containerized shipping industry as a bit of a basket case. As the fundamentals change in favor of the carriers, players with deep pockets may take another look. The purchase and upscaling of an existing player become possible. New business model Carriers have innovated considerably with physical products but have been rather conservative about adopting new ways to market their products. This could become a backdoor way for a smaller carrier to emerge into the big league or a company using a different model in another mode to make a significant entry. Environmental factors Carriers can be commended for making some tough decisions to invest in more environmentally friendly tonnage when the ultimate winners in the alternative fuels race are unclear. This could be quite damaging for those who have made less-than-optimal picks, or beneficial for a later entrant. Meanwhile, the purchase of considerable amounts of old secondhand tonnage may become a dubious investment for some carriers if environmental regulations and fees tighten further. There are clearly other factors, such as how individual companies are run, that could enter the picture. But the above are tangible threats that are difficult for carriers to quantify and even harder to control. Looking at the whole picture, it is reasonable to assume that the bigger container carriers are now going to earn above historical returns, but they will not be immune from significant dips when supply significantly exceeds demand. By virtue of their own recent success, they will also be facing fresh interest from aspirants within and outside the industry harboring ambitions to be at the top table — potentially touting a different business model. Perhaps not a golden age yet, but certainly an emergence from the dark ages. Contact Jeremy Masters at jeremy@shippingmastershk.com .

Are we entering a ‘golden age’ for major ocean carriers?

<div class="phx-topic abstract-wrapper">While just 2% to 3% of global container traffic transits the key chokepoint, any restrictions would further tie up global vessel capacity and cut off the ports of Jebel Ali and Abu Dhabi. </div>

While just 2% to 3% of global container traffic transits the key chokepoint, any restrictions would further tie up global vessel capacity and cut off the ports of Jebel Ali and Abu Dhabi.

<div class="phx-topic">The Iranian government’s threat to close the Strait of Hormuz amid Israel’s attack on the country would tie up already stretched global container capacity, cut off Jebel Ali and Abu Dhabi ports and put upward pressure on bunker fuel costs. Just 2% to 3% of global container traffic moves through the vital chokepoint for crude oil transport, according to data from Container Trade Statistics (CTS). Nonetheless, a restriction on container traffic through the strait, making deployed tonnage ineffective, would put upward pressure on freight rates and extend transit times. Sea-Intelligence Maritime Analysis warned of major problems for container shipping should the strait be closed. “At the time of writing this, the two countries are exchanging continuous barrages of missiles and drones,” Sea-Intelligence CEO Alan Murphy wrote in the Sunday Spotlight newsletter. “For now, this has not led to any impact on commercial shipping in the Strait of Hormuz, and we should hope this to not become the case. If that happens, it will have a significant impact on container shipping flows to the major transshipment hubs in the region.” Dubai’s Jebel Ali was the 10th largest global container port as measured by volume in 2024, according to Alphaliner, while Khalifa is Abu Dhabi’s flagship container port. The container shipping market had already been stretched due to hostilities in the region, with container lines diverting away from the Gulf of Aden and Red Sea since late 2023 because of attacks from Houthi militants operating in Yemen. Most recently, carriers have repositioned capacity back to the trans-Pacific to handle rebounding Asia import volumes amid a pause in US tariffs. The idling of the global fleet is under 1% and the charter market for container ships remains elevated, according to analyst Alphaliner, reflecting stretched container capacity from not just Red Sea diversions, but port congestion in Europe, and, to a lesser degree, in Asia. According to Platts, a sister company of the Journal of Commerce within S&amp;P Global, more than 17 million barrels of crude oil each day move through the Strait of Hormuz, coming not just from Iran, but from Saudi Arabia, Kuwait, the UAE and Qatar. That is more than 20% of daily global crude production. “If the Strait of Hormuz was to close, in the midterm it would be disruptive to the oil and bunker industry if they’re not able to get crude product transported out of the Persian Gulf, which is going to lead to a price disruption,” said Michael Aldwell, Kuehne +Nagel’s executive vice president of sea logistics. “But stockpiles are not low, and I think overall, it would have to be closed for a longer period of time before it impacted prices in the longer term.” Crude oil prices, which jumped 7% Friday after Israel’s initial attack on Iran, were softer in early trading Monday. Benchmark Brent crude was trading at $71.37 per barrel, down about 4%, according to Bloomberg. Contact Mark Szakonyi at <a href="mailto:mark.szakonyi@spglobal.com">mark.szakonyi@spglobal.com</a>. </div>

The Iranian government’s threat to close the Strait of Hormuz amid Israel’s attack on the country would tie up already stretched global container capacity, cut off Jebel Ali and Abu Dhabi ports and put upward pressure on bunker fuel costs. Just 2% to 3% of global container traffic moves through the vital chokepoint for crude oil transport, according to data from Container Trade Statistics (CTS). Nonetheless, a restriction on container traffic through the strait, making deployed tonnage ineffective, would put upward pressure on freight rates and extend transit times. Sea-Intelligence Maritime Analysis warned of major problems for container shipping should the strait be closed. “At the time of writing this, the two countries are exchanging continuous barrages of missiles and drones,” Sea-Intelligence CEO Alan Murphy wrote in the Sunday Spotlight newsletter. “For now, this has not led to any impact on commercial shipping in the Strait of Hormuz, and we should hope this to not become the case. If that happens, it will have a significant impact on container shipping flows to the major transshipment hubs in the region.” Dubai’s Jebel Ali was the 10th largest global container port as measured by volume in 2024, according to Alphaliner, while Khalifa is Abu Dhabi’s flagship container port. The container shipping market had already been stretched due to hostilities in the region, with container lines diverting away from the Gulf of Aden and Red Sea since late 2023 because of attacks from Houthi militants operating in Yemen. Most recently, carriers have repositioned capacity back to the trans-Pacific to handle rebounding Asia import volumes amid a pause in US tariffs. The idling of the global fleet is under 1% and the charter market for container ships remains elevated, according to analyst Alphaliner, reflecting stretched container capacity from not just Red Sea diversions, but port congestion in Europe, and, to a lesser degree, in Asia. According to Platts, a sister company of the Journal of Commerce within S&P Global, more than 17 million barrels of crude oil each day move through the Strait of Hormuz, coming not just from Iran, but from Saudi Arabia, Kuwait, the UAE and Qatar. That is more than 20% of daily global crude production. “If the Strait of Hormuz was to close, in the midterm it would be disruptive to the oil and bunker industry if they’re not able to get crude product transported out of the Persian Gulf, which is going to lead to a price disruption,” said Michael Aldwell, Kuehne +Nagel’s executive vice president of sea logistics. “But stockpiles are not low, and I think overall, it would have to be closed for a longer period of time before it impacted prices in the longer term.” Crude oil prices, which jumped 7% Friday after Israel’s initial attack on Iran, were softer in early trading Monday. Benchmark Brent crude was trading at $71.37 per barrel, down about 4%, according to Bloomberg. Contact Mark Szakonyi at mark.szakonyi@spglobal.com .

International ports

Closure of Strait of Hormuz would further stretch global container capacity

<div class="phx-topic abstract-wrapper">The loss of An-124 heavy-lift air capacity will force a modal shift to ocean or a reduction in cargo sizes to fit into smaller craft, experts say.</div>

The loss of An-124 heavy-lift air capacity will force a modal shift to ocean or a reduction in cargo sizes to fit into smaller craft, experts say.

<div class="phx-topic">The clock is ticking on the medium-term availability of aircraft for heavy-lift cargoes, with soaring demand clashing with an aging specialized fleet and no clear path to replacing assets. Consensus among specialists in the sector is that the current An-124, while capable of life-extending modifications, has a finite lifespan. The An-124 is the world’s heaviest gross weight production cargo airplane currently operating. Luís Branco, managing director of project freight forwarder L Branco Lda, questioned the future of these heavy-lift air cargo workhorses. “Their life can be extended, but there will be some point in time when there can be no more extensions,” he said.Replacing these giants is a monumental task. “It costs not only millions to develop them, but years to design and then you need to find someone to finance it,” Branco added. Ruslan Bykovets, head of air transportation at Ukraine-based Antonov Airlines, operator of seven An-124s, said that the first of those aircraft will reach the end of its operational life in 2034. Bykovets told the Journal of Commerce that Antonov is working on a modernization program that will add 10 more years to their working life.However, Ritesh Nair, head of projects at project cargo forwarder Rhenus Projects, acknowledged the modernization program was just a “soft stop-gap arrangement.”International sanctions applied against Russia in response to its 2022 invasion of Ukraine have exacerbated the heavy-lift aircraft availability problem. “When sanctions were applied to Russia in 2022 the number of available fleet on the market dropped 60%,” Bykovets said. That dramatic reduction, coupled with rising demand, has inevitably led to higher air charter rates. <h3>Financiers and builders needed</h3>Market experts raise the question of who will build the next generation of heavy-lift aircraft, ruling out manufacturers such as Boeing or Airbus. Without new investment, Bykovets said heavy air freight cargoes will either need to be sent by sea — with much longer transit times — or cargoes will need to be dismantled to fit into 747s or 777s. However, he said the latter is not an option for extra heavy cargo, such as transformers or refinery station engines.When the An-124s were first manufactured, they were funded by the government for military purposes. “Any entrepreneur today would be a little skeptical about laying out so much money, so a government agency has to step in to be able to fund these,” Nair said. In the face of those challenges, he said “out of the box solutions” could be explored, such as cargo going “to where the aircraft is” instead of the other way around. Nair also championed consolidation. “Most of the charters that are happening are full charters, and a lot of space gets wasted,” he said. “So, can a couple of forwarders or even Antonov entertain other inquiries, bring two cargoes together and flying them out?”But Bykovets said that would not be feasible as each chartered An-124 flight is a unique project, noting that adding another piece of heavy-lift cargo to the same flight would mean "twice the amount of people needed to load it." Clients paying $1.5 million for a full charter would not want third-party cargo included in their chartered aircraft, he added. Despite the challenges, demand for heavy-lift air cargo remains robust. Bykovets identified military assets as the top cargo, followed by aerospace, adding that “the numbers of aerospace cargo has increased five times since COVID.” He said that oil and gas-linked air freight demand is starting to grow again, while heavy-lift air cargoes for the power market are also on the rise.Contact Carly Fields at <a href="mailto:carly.fields@spglobal.com">carly.fields@spglobal.com</a>.</div>

The clock is ticking on the medium-term availability of aircraft for heavy-lift cargoes, with soaring demand clashing with an aging specialized fleet and no clear path to replacing assets. Consensus among specialists in the sector is that the current An-124, while capable of life-extending modifications, has a finite lifespan. The An-124 is the world’s heaviest gross weight production cargo airplane currently operating. Luís Branco, managing director of project freight forwarder L Branco Lda, questioned the future of these heavy-lift air cargo workhorses. “Their life can be extended, but there will be some point in time when there can be no more extensions,” he said. Replacing these giants is a monumental task. “It costs not only millions to develop them, but years to design and then you need to find someone to finance it,” Branco added. Ruslan Bykovets, head of air transportation at Ukraine-based Antonov Airlines, operator of seven An-124s, said that the first of those aircraft will reach the end of its operational life in 2034. Bykovets told the Journal of Commerce that Antonov is working on a modernization program that will add 10 more years to their working life. However, Ritesh Nair, head of projects at project cargo forwarder Rhenus Projects, acknowledged the modernization program was just a “soft stop-gap arrangement.” International sanctions applied against Russia in response to its 2022 invasion of Ukraine have exacerbated the heavy-lift aircraft availability problem. “When sanctions were applied to Russia in 2022 the number of available fleet on the market dropped 60%,” Bykovets said. That dramatic reduction, coupled with rising demand, has inevitably led to higher air charter rates. Financiers and builders needed Market experts raise the question of who will build the next generation of heavy-lift aircraft, ruling out manufacturers such as Boeing or Airbus. Without new investment, Bykovets said heavy air freight cargoes will either need to be sent by sea — with much longer transit times — or cargoes will need to be dismantled to fit into 747s or 777s. However, he said the latter is not an option for extra heavy cargo, such as transformers or refinery station engines. When the An-124s were first manufactured, they were funded by the government for military purposes. “Any entrepreneur today would be a little skeptical about laying out so much money, so a government agency has to step in to be able to fund these,” Nair said. In the face of those challenges, he said “out of the box solutions” could be explored, such as cargo going “to where the aircraft is” instead of the other way around. Nair also championed consolidation. “Most of the charters that are happening are full charters, and a lot of space gets wasted,” he said. “So, can a couple of forwarders or even Antonov entertain other inquiries, bring two cargoes together and flying them out?” But Bykovets said that would not be feasible as each chartered An-124 flight is a unique project, noting that adding another piece of heavy-lift cargo to the same flight would mean "twice the amount of people needed to load it." Clients paying $1.5 million for a full charter would not want third-party cargo included in their chartered aircraft, he added. Despite the challenges, demand for heavy-lift air cargo remains robust. Bykovets identified military assets as the top cargo, followed by aerospace, adding that “the numbers of aerospace cargo has increased five times since COVID.” He said that oil and gas-linked air freight demand is starting to grow again, while heavy-lift air cargoes for the power market are also on the rise. Contact Carly Fields at carly.fields@spglobal.com .

Air Cargo

Heavy-haul transport

Project cargo

Breakbulk News

Market seeks to navigate medium-term cuts to heavy-lift air cargo capacity

<div class="phx-topic abstract-wrapper">OTR Capital argues DAT, the largest load board for truckload freight in North America, violated a non-compete clause when it acquired factoring company Outgo in May. </div>

OTR Capital argues DAT, the largest load board for truckload freight in North America, violated a non-compete clause when it acquired factoring company Outgo in May.

<div class="phx-topic">A court in Georgia has ordered DAT Freight &amp; Solutions to stop providing factoring service until a hearing can be held on whether DAT is violating a non-compete agreement with OTR Capital. DAT, the largest load board for truckload freight in North America, stressed that the June 10 order from the Superior Court of Cobb County is temporary. DAT is being sued by OTR. “We believe the suit is without merit and will defend ourselves vigorously,” DAT said in a statement Friday. “We are concerned that OTR’s actions directly impact the cash flow of our carrier customers,” it added. “Cash flow is the lifeblood of these small businesses, and any disruption to it can severely impede their operations.” Freight factoring is a financial service in which carriers sell their unpaid invoices to a third party that advances them the cash they are owed, generally in exchange for a single-digit percentage of the invoice amount. DAT has offered factoring services to its carrier customers since 2007 via external partnerships, most recently with OTR Solutions. DAT’s <a href="https://www.joc.com/article/dat-acquires-trucker-tools-in-move-to-reduce-load-board-driver-churn-5907848">acquisition of Outgo</a> last month led to the complaint from OTR. OTR Capital, a part of OTR Solutions, claimed the Outgo deal violated a non-compete clause in its agreement with DAT. In the June 10 ruling, Senior Judge Adele Grubbs ordered DAT not to compete with OTR through Outgo or any other factoring service. Grubbs also ordered DAT to cease providing any factoring services through Outgo. The order, issued in response to a request for emergency relief from OTR, lasts until a full hearing is held on the case. OTR, in a June 12 filing, claimed DAT has violated that order. “DAT has refused to expressly confirm that it has stopped providing all factoring services to its existing clients,” OTR said in the filing. The acquisition of Outgo is part of DAT’s efforts to expand its platform, grounded in truckload spot market load-matching. The acquisition was DAT’s second in six months, after it <a href="https://www.joc.com/article/dat-acquires-trucker-tools-in-move-to-reduce-load-board-driver-churn-5907848">acquired Trucker Tools</a>, a load visibility tool for brokers, in December. “As this is pending litigation, we have no further comment on the case itself at this time,” DAT said in its statement. Contact William B. Cassidy at <a href="mailto:bill.cassidy@spglobal.com">bill.cassidy@spglobal.com</a>.</div>

A court in Georgia has ordered DAT Freight & Solutions to stop providing factoring service until a hearing can be held on whether DAT is violating a non-compete agreement with OTR Capital. DAT, the largest load board for truckload freight in North America, stressed that the June 10 order from the Superior Court of Cobb County is temporary. DAT is being sued by OTR. “We believe the suit is without merit and will defend ourselves vigorously,” DAT said in a statement Friday. “We are concerned that OTR’s actions directly impact the cash flow of our carrier customers,” it added. “Cash flow is the lifeblood of these small businesses, and any disruption to it can severely impede their operations.” Freight factoring is a financial service in which carriers sell their unpaid invoices to a third party that advances them the cash they are owed, generally in exchange for a single-digit percentage of the invoice amount. DAT has offered factoring services to its carrier customers since 2007 via external partnerships, most recently with OTR Solutions. DAT’s acquisition of Outgo last month led to the complaint from OTR. OTR Capital, a part of OTR Solutions, claimed the Outgo deal violated a non-compete clause in its agreement with DAT. In the June 10 ruling, Senior Judge Adele Grubbs ordered DAT not to compete with OTR through Outgo or any other factoring service. Grubbs also ordered DAT to cease providing any factoring services through Outgo. The order, issued in response to a request for emergency relief from OTR, lasts until a full hearing is held on the case. OTR, in a June 12 filing, claimed DAT has violated that order. “DAT has refused to expressly confirm that it has stopped providing all factoring services to its existing clients,” OTR said in the filing. The acquisition of Outgo is part of DAT’s efforts to expand its platform, grounded in truckload spot market load-matching. The acquisition was DAT’s second in six months, after it acquired Trucker Tools , a load visibility tool for brokers, in December. “As this is pending litigation, we have no further comment on the case itself at this time,” DAT said in its statement. Contact William B. Cassidy at bill.cassidy@spglobal.com .

Trucking News

Logistics Technology News

Truckload

Surface

Court orders DAT to temporarily halt trucking factoring service

Use code GTW695 at checkout and save $800 on first year of an annual Gold subscription!

Upgrade Subscription - Gold Trials

Become a Gold Subscriber and Save!

Use code TPMGW595 at checkout to save $900 on first year of a Gold subscription and 20% on TPM26!

Upgrade Subscription - Wide Box

UPGRADE TO GOLD AND SAVE ON TPM26

Arm your team with the most trusted information portal for the international container shipping industry.

Group Subscriptions - Wide Box

Get into a group subscription today

Access Journal of Commerce content for 30 days

Free Trial - Wide Box

START A FREE TRIAL TODAY

Use code STSW20 at checkout to save 20% on the first year of any annual subscription! 

Subscribe Now - Free Trials - Wide Box

SUBSCRIBE AND SAVE

Choose a subscription plan that works best for you!

Subscribe Now - Anonymous - Wide Box

SUBSCRIBE TODAY

The world of LTL is slow to embrace change. Business anachronisms permeate current supply chain processes. These vestiges of the way things used to work define the LTL freight transportation procurement process of many modern shippers.David Knuth, logistics specialist at IEWC, a global supplier of cable and wire based in Wisconsin, is happy to have modernized the RFP process, automating the entire LTL bidding procedure with Bid$ense, SMC³’s automated truckload and LTL freight transportation sourcing solution. But when prompted, he can still recall what once was.In his previous job, a large part of his duties were consumed by creating an intermodal bid package for carriers. In a spreadsheet, Knuth detailed the company’s volumes lane by lane, taking care to delete any errant keystrokes or misleading data. He would then email out the information to each carrier, taking time to respond to detailed technical questions about the spreadsheet data. Finally, he had to compile all the results, create an algorithm that would compare the carriers on each lane, and award the business.“It was a huge undertaking. It took about four months to do,” Knuth said of the old process. “It was almost a full-time job for that part of the year, every year.”In his new job at IEWC, he sat down with Bid$ense on day one and was amazed at the capabilities. Knuth had never before used a bid tool. SMC³’s latest versions of Bid$ense automate the process even further, taking truckload and LTL RFPs entirely online. The tool draws on RFP best-practices protocols to streamline the bidding communication process, enabling bidding carriers to respond accurately and promptly to shipper requests. The solution also does all the distribution work automatically, electronically submitting shipper bid data to carriers based on their actual service capabilities and performance records. Carriers are alerted with timely prompts for RFP deliverables, so shippers aren’t waiting by the phone for responses.Another benefit of automating the process is the data-cleansing assistance. When Knuth sent spreadsheets to carriers, data errors might cloud the bidding process; he might have to resend data or simply accept a price that did not truly reflect the costs of doing business. Data cleansing is incredibly beneficial, he said.The spreadsheet technique also made bidding analysis an onerous task. Since Bid$ense automates and streamlines the entire RFP process, intensive examination is now simple. SMC³ knows that each bid has more than one best outcome. With uniform responses from each carrier, shippers can quickly rank results and create an unlimited quantity of what-if scenarios to make the optimal procurement decision.Jesse Burnett of Central Garden &amp; Pet experiences many of the same benefits. Founded in 1980, Central Garden &amp; Pet has spent the last three decades growing from a small garden supply company to a provider of a range of products from dog chews and bird seed to soil supplements and natural insecticides. For much of its life, the company shipped these disparate goods via LTL and truckload carriers to retailers throughout the country, relying on each business unit to negotiate directly with their freight transportation providers. This arrangement worked fairly well for a small company, but as Central Garden &amp; Pet expanded, leadership decided to consolidate decision making.Burnett helped centralize the transportation decision making in 2015 with SMC³’s Bid$ense. Before Bid$ense, every business unit operated independently as far as negotiating with carriers.“There were a lot of different things just floating around,” he said. “We didn’t have master agreements in place; no national pricing at all. The pricing from carriers was just all over the place, depending on where you were.”The transformations he saw with Bid$ense were immediate. Burnett has been using the tool about every other year since its implementation at the company. Central Garden and Pet’s $19.6 million 2019 LTL bid saved the company just more than 9 percent when compared to its historical average. For Burnett, though, bid automation extends far beyond savings.“We knew that we weren’t getting the best pricing offer from our carriers just because nothing was centralized,” he continued. “We knew that if we combined everything from all these business units and paired it with one corporate offering, then it would drive some cost benefit with it.”When the company initially decided to centralize bid procurement, executives researched a number of different methodologies and technologies. In the end, though, Burnett found that Bid$ense was both widespread and well known, and that his carrier partners already knew how to use the application. Burnett also highlighted the data-cleansing process as a major benefit, saying the rigorous process ensures that carriers always return the best price.“It definitely has helped drive savings,” he said. “Any time you go out there and you drive that competitiveness with the carriers and they know they’re in a bid environment, it seems to sharpen their pencils.”Transportation procurement is an integral part of the modern supply chain. With Bid$ense, shippers can develop a strategic implementation plan that saves them time and money, but also helps them create strong relationships with their carrier partners. These carriers appreciate the solution’s data-cleansing process; when carriers receive a complete shipment history and future volume forecast, they don’t have to guess on pricing. Carriers that receive more data from shippers get a complete picture of that shipper’s freight, allowing them to accurately plan instead of simply preparing for the worst-case scenario. Clean data presented through an automated system can lead to both bigger shipment savings and a lasting partnership between carrier and customer.Whether customers are looking to streamline over-the-road transportation bidding by automating the RFP process or create an entirely new, centralized sourcing process, Bid$ense has the analytical horsepower to get the job done.SMC³ 2020 Customer Case Study

SMC3rates_shutterstock_5247046.jpg

Shippers save money, time with automated transportation bidding tools

If there’s one immutable truth in the world of logistics, it’s this: LTL is an inherently complex form of transportation. Tariffs, rates, DIM weights, transit times — it’s enough to confuse even seasoned logistics professionals. The solution to this knowledge gap has historically been on-the-job training or university supply chain education, but for a variety of reasons there is now a pressing need for third-party, remote LTL training that prepares logistics workers for transportation success. Global Scope Can Overlook Local Intricacies In the past, professionals looking to move into a supply chain career learned about the basics of supply chain from universities. However, many of these college supply chain programs are now global in scope, focusing on worldwide supply chain management instead of the intricacies of specialized domestic transportation. And even these programs, which used to be widespread, are becoming less common. LTL is not an industry of broad-brush strokes; supply chain professionals really need a pointillistic understanding of the logistics of LTL in order to excel in the industry. Accelerating Need for Dedicated LTL Education This lack of specified training put the onus on employers to prepare new hires with the LTL knowledge needed to do their jobs. Dedicated LTL study is a necessity, not a luxury. At the same time, changes in LTL and the broader supply chain world are accelerating. The reliance on e-commerce has ballooned since the start of the pandemic, and last-mile LTL shipments and related e-commerce strains on the supply chain won’t diminish once social distancing abates. That genie isn’t going back into the bottle. So supply chain employers need logistics workers that are fully versed in all aspects of the industry, ready to solve unique shipping and delivery problems based on their extensive supply chain knowledge But why care about LTL? It’s been reported that some shippers in today’s world are no longer concerned with what mode is used to ship their goods. A Multimodal Approach Ensures On-Time Delivery This mode agnosticism means supply chain stakeholders have to be well versed in all modes of transportation. As unforeseen weather events and other disruptions, such as protests, become more common, savvy logistics employees will need to be armed with familiarity of all modes, not just the most popular, to ensure that freight is delivered on time, without damage, and in the most financially expedient way possible. Offerings like SMC³’s LTL online education courses cover a wide range of topics from LTL basics and operations to more advanced concepts like pricing analytics and transportation law. The company also has plans to continually refresh content, adding new expert presenters and taking the feedback of students to make the courses even better as time goes on. Learn more about&nbsp;<a href="https://logisticstrainingcenter.com/smc3-courses/" rel="noreferrer" class="joc_admin__link">SMC³’s LTL Online Education program</a>&nbsp;and view the 2021 hybrid schedule, featuring live industry experts,&nbsp;<a href="https://www.smc3.com/onlinelearning2021/" rel="noreferrer" class="joc_admin__link">here.</a>

SMC3rates_shutterstock_5247046 (1).jpg

Filling the Supply Chain Education Gap with LTL Education Courses

UPGRADE TO GOLD AND SAVE: Use code GTW695 at checkout and save $800 on first year of a Gold subscription!

Upgrade Subscription

SUBSCRIBE AND SAVE: Use code STSW20 at checkout to save 20% on first year of any annual subscription!


Subscribe Now - Free Trials - Offer Box

GET INTO A GROUP SUBSCRIPTION: Arm your team with unlimited Journal of Commerce content

Group Subscriptions - Offer Box

Group Subscriptions

SUBSCRIBE TODAY: Choose a subscription plan that works best for you!

Subscribe Now - Anonymous - Offer Box

Subscribe Today

UPGRADE TO GOLD AND SAVE ON TPM26: Use code TPMGW595 at checkout to save $900 on first year of a Gold subscription and 20% on TPM26! 

Upgrade Subscription - Offer Box

START A FREE TRIAL: Access Journal of Commerce content for 30 days

Free Trial - Offer Box

Free Trial

Monthly publication providing an editorial deep dive into global supply chain news

Journal of Commerce Magazine - Rectangle Box

Journal of Commerce Magazine

An in-depth analysis of transport trends in the multipurpose and heavy-lift fleet segment

Breakbulk Report - Rectangle Box

Breakbulk Quarterly

Customers scoring their intermodal partners to identify the best service providers

Intermodal Service Scorecard - Rectangle Box

Intermodal Service Scorecard

A must-attend conference for shippers & logistics providers moving goods inland

Inland Conference - Rectangle Box

Attend Inland25

A premium access index of savings using domestic intermodal vs. OTR 

ISI Report - Rectangle Box

Intermodal Savings Index

An extensive dashboard of charts organized by trade lane, mode, and topic

Gateway - Rectangle Box

Gateway

A premium access outlook critical to shippers and transportation providers

QI Report - Rectangle Box

Quarterly Intelligence

The latest container shipping news and analysis of ocean container shipping, logistics, supply chains, technology solutions and end-to-end connectivity. Coverage includes the movement of containerized cargo handled by marine terminals and container ports, depots, container lines, drayage, consignees, importers and shippers, forwarders, non-vessel operating common carriers (NVOs) and off-dock warehousing providers. The Journal of Commerce's container shipping news includes news from the trans-Pacific, Asia–Europe, North America–Caribbean, Central and South America trades, and intra-Asia trades.

Trans-Atlantic

Forwarding

Asia-Europe

Trans-Pacific

Container shipping news and analysis of ocean container shipping, logistics, supply chains, technology and end-to-end connectivity.

Container Shipping News | Journal of Commerce

Breakbulk News shipping | Journal of Commerce

Stay informed on port news worldwide with Journal of Commerce. From decarbonization to labor updates, get insights on global developments.

Port News | Journal of Commerce

News and analysis of ocean containerized cargo movement, logistics, supply chains, technology, and end-to-end connectivity. Maritime news and analysis of containerized ocean cargo movement, breakbulk and roll-on and roll-off shipping from origin to destination.

Latest News

Intermodal Service Scorecard

Filling the Supply Chain Education Gap with LTL Education Courses

More News & Analysis

BC ports, longshore unions need new bargaining process: report

Are we entering a ‘golden age’ for major ocean carriers?

Closure of Strait of Hormuz would further stretch global container capacity