Welcome to our latest weekly newsletter, where we navigate the currents of the maritime and rail sectors. The Panama Canal continues to dominate the narrative, its heightened congestion and escalating costs reflecting broader industry tribulations. On the East Coast, ports celebrate impressive TEU milestones amidst the shifting tides of U.S. imports. Meanwhile, West Coast dockworkers champion a pivotal labor pact. However, as the rail industry contends with challenges, the journey is far from smooth.
Escalating Panama Canal Congestion: Nearing a Crisis?
Building on last week's update, the 'traffic jam' at the Panama Canal retakes center stage, nudging us closer to what looks increasingly like a crisis.
The Staggering Cost of Jumping the Queue
It's no longer business as usual at the Canal. In a recent move to dodge traffic, a shipper shelled out a staggering $2.4 million for a week's passage in late August. Add in the usual fees, and you're looking at nearly $3 million for just one vessel's journey. Given these outrageous figures, this traffic jam isn't just another ordinary supply chain disruption. Considering the Canal's significance in global trade, we could be witnessing a turning point that reshapes maritime logistics with far-reaching implications.
Alarming Trends in Transit Times
The gravity of the situation becomes even clearer when we focus on wait times. A recent report by project44 unveiled a concerning pattern: the average wait time at the Canal has doubled. Recently, we've observed cases where vessels waited over four days, a significant leap from the usual two-day period. With the holiday season just around the corner, these trends are troubling.
U.S. Import Demand Takes a Dive: Ocean Carriers' Counter-Strategy
We've seen a notable decline in U.S. import demand in recent weeks. With plummeting booking volumes and carriers employing aggressive tactics, the dynamics of the maritime transport industry are in flux.
Booking Volumes & Rate Pressures
New data from SONAR’s Container Atlas reveals a sharp decrease in booking volumes, with figures dropping by more than 35% since the August 1 peak. As carriers confront this dip, many have resorted to unprecedented moves like rejecting a record number of U.S.-bound containers. Such tactics aim to maintain the spot rates, especially after their recent rate hike proposals.
Analyzing Rejections & Market Perception
The unusual surge in ocean TEU rejections this time of year is puzzling and calls for a deeper look. As carriers intensify their rejections, they inadvertently delay container departures, leading to logistical bottlenecks. These bottlenecks heighten the perception of capacity constraints, which could push spot rates higher. So BCOs, NVOCCs, and freight forwarders must find answers to a pressing question: Why are spot rates escalating despite diminishing demand?
Port of New York and New Jersey Achieves Record TEU Moves
In July, the Port of New York and New Jersey processed a record-breaking 725,479 TEUs, marking its highest monthly total since October 2022.
East Coast Ports Surge as West Coast Faces Decline
The maritime industry witnessed a sharp contrast between East Coast and Gulf ports compared to their West Coast counterparts. The Port of New York and New Jersey alone experienced a 16.2% cargo volume rise from June. The Gulf ports of Savannah and Houston also stood strong, showcasing increases in their July container processing. Yet, in stark contrast, July saw the Port of Los Angeles report a 26% year-over-year decline in TEUs.
Panama Canal Continues to Be the Vital Trade Link
Despite Panama Canal congestion, Gulf and East Coast ports depend on it. The Canal Authority highlights its top status for container carriers because of unmatched connectivity and time advantages. New York/New Jersey, Savannah, and Houston handle about 60% of Gulf/East Coast imports. Even with delays, it's a vital trade route; advanced bookings usually mean smoother transits.
West Coast Dockworkers Secure Future with Six-Year Contract
West Coast ports heaved a sigh of relief following the International Longshore and Warehouse Union (ILWU)’s decision to ratify a pivotal six-year labor agreement.
ILWU's Overwhelming Approval
An overwhelming 75% of ILWU members greenlit the new agreement, as confirmed by the union’s Coast Balloting Committee. With their efforts and the assistance of acting U.S. Secretary of Labor Julie Su, the finalized agreement ensures quality jobs across 29 West Coast ports, maintains health benefits, and enhances wages, pensions, and safety measures.
Impact on San Pedro Bay Ports
As San Pedro Bay ports recently saw a dip in container volumes, they embraced the labor agreement as a promising new development. Gene Seroka, the Port of Los Angeles Executive Director, highlighted the deal's potential to reinforce their status as the top Pacific Rim gateway. Meanwhile, Port of Long Beach CEO Mario Cordera underscored the contract's expected boost to the U.S. economy, spotlighting the crucial role of the workforce and terminal operators.
U.S. Rail Traffic Trends Downward
Data from the week ending August 26, 2023, reveals a worrying dip in U.S. rail traffic. As both carloads and intermodal units decline, the rail industry faces a pivotal moment that warrants closer scrutiny.
Diving Into the Data
The Association of American Railroads (AAR) revealed that, for the week ending August 26, 2023, U.S. Class I railroads transported 472,525 carloads and intermodal units. This figure includes 226,679 carloads (down 3.9% from 2022) and 245,846 containers and trailers (a 7.7% decrease). Notably, this isn't a one-off: the previous week registered a 2.7% dip in total traffic. Interestingly, despite the downturn, July spotlighted the highest-volume intermodal weeks of the year, offering a silver lining in an otherwise clouded outlook.
Spotlight on North American Rail Traffic
From a broader North American viewpoint, the week's data provides a deeper context. North American rail volume for that week reached 654,691 carloads and intermodal units, marking a 6.2% decrease from 2022. Canadian railroads contributed 83,877 carloads, a 4.8% decline, while Mexican railroads bucked the trend, registering a 12.9% increase in carloads.
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