Mark Szakonyi leads the Journal of Commerce’s editorial team of more than a dozen editors and correspondents in providing business-critical and data-heavy business intelligence and analysis. Szakonyi oversees the Journal of Commerce magazine’s 100-plus special reports a year, including the Annual Review and Outlook and Top 100 Importers and Exporters issues. He supports all Journal of Commerce events, including <a target="_blank" rel="noopener noreferrer" href="https://tpm.joc.com/en">TPM</a> and the <a target="_blank" rel="noopener noreferrer" href="https://inland.joc.com/en">Inland Distribution</a> Conference. His analysis and work have been quoted in general business news media including the BBC, Bloomberg, The Economist, NPR, and USA Today.

<div class="phx-topic abstract-wrapper">Shippers can complain, but pricing power — at least for now — has shifted away from shippers due to carrier consolidation and growing capacity discipline seen most dramatically in the swift spring withdrawals following the onset of the COVID-19 pandemic. That puts pressure on shipper to engage more with carrier not less. </div>

Shippers can complain, but pricing power — at least for now — has shifted away from shippers due to carrier consolidation and growing capacity discipline seen most dramatically in the swift spring withdrawals following the onset of the COVID-19 pandemic. That puts pressure on shipper to engage more with carrier not less.

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<div class="phx-topic">The shipping dysfunction that has hobbled the trans-Pacific trade may help germinate the seeds of greater collaboration between container lines and North American importers from Asia.That the disruption plaguing the trans-Pacific trade will bring shippers and carriers closer together may seem counterintuitive considering the current gaping disconnect between record high rates and disruption on a historic scale. Eastbound liner reliability from Asia to both US coasts was under 30 percent for both coasts in December, according to Sea-Intelligence Maritime Analysis. The key metrics for cargo flow in Southern California — truck turn times, ships awaiting anchor, container dwell at marine terminals — <a href="https://www.joc.com/port-news/terminal-operators/import-surge-labor-shortages-worsen-la-lb-congestion_20210112.html">are going the wrong direction</a>, signaling no quick end to congestion at the largest US import gateway.For logistics managers struggling to get space beyond what their contracts allot, the premium prices <a href="https://www.joc.com/maritime-news/container-lines/premium-surcharges-send-trans-pac-rates-record-highs_20210106.html">they must pay to get cargo loaded twist the knife of low service levels</a>. With premiums of as much as $2,000 per container, US importers are shelling out for rates that are up to 50 percent higher than record spot market rates. “If you're a smaller shipper and you need to get your goods out of Asia, chances are you're going to have to wait for a long time and pay four to five times the rates you have been used to,” Charles van der Steene, head of Maersk sales, North America, said in a Jan. 5 interview. “The price, however, at this time is not the biggest challenge for the US-based shippers. Overall, the real challenge is that an importer doesn’t know whether his/her goods will be able to arrive in two weeks or four months.” Shippers can complain, but pricing power — at least for now — has shifted away from shippers due to carrier consolidation and growing capacity discipline seen most dramatically in the swift spring withdrawals following the onset of the COVID-19 pandemic. Space on ships from Asia continues to be extremely tight as import pressures in the United States and Europe aren’t letting up. US imports from Asia recorded their highest December level ever, according to PIERS, a sister product of JOC.com within IHS Markit.That’s spurring more US importers to <a href="https://www.joc.com/maritime-news/container-lines/more-us-importers-signing-trans-pac-contracts-earlier_20210111.html">sign trans-Pacific service contracts earlier</a> to guarantee space in the short-term and over the next 12 to 16 months. More broadly, shippers are moving away from transactional procurement engagement and toward a willingness to discuss what their broader supply chain needs in the coming years, van der Steene said. Such conversations require a clear-eyed understanding of what shippers need — and what carriers can deliver.“What are the commitments that we are willing to put in as Maersk, and what commitments will our clients want to make? Maersk will, for instance, commit to a 10-day transit time from origin to destination and if we don’t meet that, we will compensate,” van der Steene said. “In turn, should a customer not deliver in accordance with booked volumes, a compensation will be asked to allow us to keep the network in place. This is a fundamental shift in our collaboration models and these discussions would not have happened a year ago yet are now taking place with our larger partners.” <h2>Container allocation takes center stage</h2>Shippers’ willingness to consider new routing options also opens up opportunities for carrier collaboration, with cargo owners potentially getting better all-in service and the carrier gaining network efficiency. As Maersk considers new import routing options in the Southeast, mid-Atlantic, Gulf, and Pacific Northwest, van der Steene said that some of its top shipper customers have already signed annual contracts tapping the new network, which will be announced formally in the spring. New w<a href="https://www.joc.com/shippers-urged-rethink-container-allocation-strategies_20210120.html">ays of calculating minimum quantity commitments</a> (MQCs) within contracts provides another opening for increased shipper-carrier collaboration. When shippers set up MQCs based on changing demand flows through the year, they can become closer attuned to what carriers need from them to make their networks more efficient. That sets up a relationship in which carriers and shippers can work together to deliver and service the business, respectively, in the longer term. Massive swings in demand during the pandemic have made shipper logistics’ managers volume forecasts shaky, complicating carriers’ ability to determine how much demand they’ll have in the coming weeks and months. Maersk’s shipper customers can still tap the traditional MQC product, in which shippers' annually contracted volume is divided by 52 for weekly minimum quantity commitments. But shippers can also contract their MQCs based on seasonal demand, and through a third product for some customers, shippers can flex up and down their MQCs.“What we're now discussing with our key clients is an ability to have maximal flexibility within the framework of the contract, avoiding the need to scramble on the market for additional space at a significant premium, but more importantly, avoiding painful disruptions to their supply chain,” van der Steene said.Shippers are focused on securing capacity this contract season, Uffe Ostergaard, Hapag-Lloyd's president, Americas, told The Journal of Commerce last month. Shippers understand that higher rates will help ensure they have slots when they need it and they increasingly realize the risk of leaning too much on spot markets for capacity, pushing them to try to increase how much they book directly with carriers, he said. One customer has introduced within service contracts mutual week-to-week penalties, whereby Hapag-Lloyd pays $500 for any booking not honored and the shipper pays $500 if they don't deliver cargo as booked. “I think that’s a positive development and I think this is a trend that will continue to evolve in years to come,” Ostergaard said.Over the last two years, Hapag-Lloyd has offered various contracting options, one being a fixed rate throughout the year for a certain volume commitment, and then a floating mechanism on anything on top of that. “That way the customer still has access to more capacity at certain times of the year but at a predefined premium.” These concepts have not taken off yet, but Ostergaard says shippers are showing increasing interest. The current scramble for eastbound trans-Pacific capacity suggests this is the year such options will truly connect with the market. Contact Mark Szakonyi at <a href="mailto:mark.szakonyi@ihsmarkit.com">mark.szakonyi@ihsmarkit.com</a> and follow him on Twitter: <a href="https://twitter.com/@MarkSzakonyi">@MarkSzakonyi</a>.</div>

Container lines

Trans-Pacific dysfunction can seed carrier-shipper collaboration

<div class="phx-topic abstract-wrapper">Federal Maritime Commissioner Carl Bentzel is looking into ways that Houston could handle larger vessels before a widening project is complete, given a Texas law that puts size limits on port calls. 
 </div>

Federal Maritime Commissioner Carl Bentzel is looking into ways that Houston could handle larger vessels before a widening project is complete, given a Texas law that puts size limits on port calls.

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<div class="phx-topic">US Gulf Coast ports are on a roll, but with an asterisk. Imports from Asia through the region rose by double-digit percentages in 2020 from 2019; the ports attracted a <a href="https://www.joc.com/maritime-news/container-lines/alliance/alliance-adding-capacity-growing-asia–us-gulf-trade_20201223.html">new Asia service</a> in December, marking the third shipping alliance to call the region; New Orleans announced plans for a new container terminal; and the Port of Houston got a late Christmas present when Congress authorized federal funding for a project to deepen and widen its channel.But the true payoff of such momentum and the hundreds of millions of dollars Gulf ports are investing to handle neo-Panamax ships will only be realized when Houston’s widening project is completed in several years so that it can handle two 14,000 TEU vessels simultaneously. Perhaps not since the raising of the Port of New York and New Jersey’s Bayonne Bridge has one project meant so much, not just for the port itself but for the coast as a whole.“There is a pent-up demand for carriers to bring larger vessels,” Roger Guenther, executive director of the Port Houston, said in an interview. “We know neo-Panamax vessels coming through the Panama Canal from Asia are dependent on coming to Houston or they aren’t going to call the other ports in the Gulf.”Completing the $1 billion channel widening project became even more urgent after Texas in a surprise move passed a law in June 2019 <a href="https://www.joc.com/port-news/us-ports/port-houston/size-limit-puts-spotlight-houston-ship-channel-widening_20190617.html">prohibiting two-way traffic of ships</a> more than 1,100 feet — about 9,000 TEU — from entering the Houston Ship Channel without the approval of bar pilots. The oil industry backed the bill, while the port, container shipping community, and the International Longshoremen’s Association were opposed.With the widening project authorized by Congress through the <a href="https://www.joc.com/port-news/us-ports/wrda-passage-boosts-houston-ship-channel-expansion_20201222.html">Water Resources Development Act</a> which passed in December, Guenther said the best-case scenario is completion within three to four years. Normally, such a project would take 10 years or more, but the port and industry are funding half the project, rather than the 35-65 local-federal cost share of other deepening projects, meaning the project won’t have to wait for federal dollars to be allocated in multiple spending bills. The port authority also began designing the project before receiving the formal blessing from the US Army Corps of Engineers.But there may be a way for Houston to handle larger ships in the meantime, Federal Maritime Commissioner Carl Bentzel told JOC.com. The Texas law includes a waiver process by which the Board of Pilot Commissioners for Harris County Ports can be asked to allow larger ship calls on a case-by-case basis, and Bentzel is trying to determine the specifics of such a process in an effort to ease restrictions on larger ships coming sooner. In conversations with carriers, Bentzel said carriers held off on upscaling vessels on Gulf strings following the passage of the Texas law and are keen to gain 15 to 20 percent in economies of slot costs by deploying neo-Panamax vessels.“Restrictions, if left in place over the next three or four years, could have lasting negative implications on the entire trade of the Gulf of Mexico,” he said.Bentzel said he and fellow commissioner Louis Sola are independently also determining whether the Texas law violates the Shipping Act of 1984 and whether the Coast Guard’s jurisdiction over federal navigational channels and safety issues trumps the local law. In a June 2019 letter to Texas Governor Greg Abbott, Paul Thomas, a Coast Guard rear admiral, pressed the point that the law is preempted by federal law via the Ports and Waterways Safety Act.“When safety concerns are present within regard to a specific vessel transit, related to vessel length or any other factors, the Coast Guard Captain of the Port has the sole authority and ability under federal law to impose operational requirements to address these concerns,” Thomas wrote.<h2>Bigger ships for bigger volumes</h2>The scale of container volume growth among US Gulf Coast ports speaks to the desire of carriers to deploy larger vessels. Laden Asia imports through the region jumped 12 percent year over year in the first 11 months of 2020, while nationally such volumes rose just 1.9 percent, according to PIERS, a sister product of JOC.com within IHS Markit. Guenther said 2020 volumes at Houston, which account for about 70 percent of the region’s container traffic, were relatively flat compared with the 3 million TEU in laden and empty containers the port moved in 2019.Between 2014 and 2019, Asia container volumes through the Gulf rose 12 percent, accounting for about 5 percent of total Asia imports into the US, according to PIERS. Comparatively, Asia imports into the US increased just 3.5 percent in the same five-year period. Larger vessels don’t just mean more slot space for Asia imports that once moved through the West Coast, but more slot space for cotton and rising resin export volumes.“The demand for cargo coming to Houston is growing exponentially, both for imports and exports,” he said.The ability of Mobile, New Orleans, and Tampa to capitalize on their own deepening projects hinges on Houston’s channel widening. With expectations that its channel deepening project will be completed by 2022, New Orleans’ <a href="https://www.joc.com/port-news/us-ports/port-new-orleans/new-orleans-moves-forward-15-billion-container-terminal_20201218.html">planned $1.5 billion terminal</a> would be able to handle ships slightly larger than 16,000 TEU. Mobile expects its $400 million deepening project to be finished by March 2025, allowing the port to handle 14,000 TEU ships. Port Tampa Bay is working with the Army Corps to reinitiate a study of navigational improvements, including deepening the channel beyond its current 43 feet. In the meantime, the Corps is completing maintenance dredging that will deepen the channel approximately another foot by June 2021 and is in discussion with pilots to see if keel clearances will allow larger ships to call.Gulf ports are big-ship hungry, but they face a three- to four-year wait for Houston’s deepening, unless a middle ground can be reached with Texas pilots.Contact Mark Szakonyi at <a href="mailto:mark.szakonyi@ihsmarkit.com">mark.szakonyi@ihsmarkit.com</a> and follow him on Twitter: <a href="https://twitter.com/@MarkSzakonyi">@MarkSzakonyi</a>.</div>

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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>

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Trans-Pacific dysfunction can seed carrier-shipper collaboration

US Gulf trade momentum puts focus on Houston port channel widening