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Stable Shipping Rates Amid Baltimore Bridge Collapse, but Challenges Loom Ahead

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Stable Shipping Rates Amid Baltimore Bridge Collapse, but Challenges Loom Ahead

Despite the collapse of the Francis Scott Key Bridge in Baltimore, ocean freight container shipping rates have remained stable, according to data from Xeneta, an ocean freight analytics platform.

Xeneta reports that average spot rates from the Far East to the US North East Coast, including Baltimore, have seen a slight decrease of 1 percent since the bridge collapse, standing at $5,421 per FEU. Rates for other US East Coast ports, such as New York and New Jersey (PANYNJ), have decreased by 3 percent in the same period.

Read also: Baltimore Bridge Collision Sparks Surge in Container Price

Similarly, average spot rates from North Europe to the US North East Coast have fallen by 8 percent to $2,357 per FEU, with a 4 percent decrease when including other US East Coast ports.

Peter Sand, Xeneta Chief Analyst, notes that while spot rates have not seen a significant change, shippers with cargo destined for Baltimore are experiencing disruptions, with containers being redirected to ports like New York/New Jersey. This incident adds to the challenges already faced by supply chains, including diversions in the Red Sea region and drought in the Panama Canal.

The Port of Baltimore plans to reopen navigation channels by the end of April and May, restoring port access to regular capacity. However, concerns linger regarding potential labor strikes on the East Coast, with the International Longshoremen’s Association contract set to expire in September. Sand warns that failure to reach an agreement could lead to widespread disruption at US East Coast ports, potentially driving up rates for ocean freight container services and prompting some shippers to explore alternative import routes.

As recovery efforts continue, the shipping industry braces for potential labor disruptions while navigating the aftermath of the Baltimore bridge collapse.

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Hapag-Lloyd CEO is Bullish on the Second Half of 2024

Many continue to be bearish in 2024, but Hapag-Lloyd CEO Rolf Habben Jansen is bullish on demand in the second half of the year. In an interview with CNBC, Jansen notes that inventories are depleted and the recovery post-Chinese New Year, February 10th, has been positive. 

Hapag-Lloyd reported a significant drop in 2023 net profit. Shipping rates were at untenable levels during the last quarter of 2023, and the Red Sea crisis further exacerbated the entire industry. Trade continues to be diverted, and while rates are beginning to decline, Asia to West Coast port rates are up 155% year-to-date, and Asia to East Coast ports have increased 129% year-to-date.

Another issue Jansen touched on was the increase in carbon dioxide emissions as a result of Red Sea diversions. Hapag-Lloyd is aiming for net-zero carbon by 2045, but according to Sea-Intelligence, diversions will likely increase emissions by 260% – 354%. The industry at large has added nearly 5% in vessel capacity to neutralize delays, and sailing faster has also augmented capacity by an additional 8% – 10%. 

A big reason, however, why Jansen remains bullish is the new alliance Hapag-Lloyd has formed with Maersk. The two shipping giants announced the Gemini alliance earlier this year and once in place, the alliance is slated to achieve greater than 90% of schedule reliability. Compared with global reliability in the 51.6% range, the upgrade would be a noteworthy improvement. 

Jansen explained that the alliance rests on the use of a spoke and hub system. Common in the larger transportation sector, the spoke and hub system is a distribution network akin to a bicycle wheel. The hub rests in the middle, and the spokes are the carriers (trucks, planes, or ships). The network is more elastic than traditional end-to-end networks, and Hapag-Lloyd and Maersk believe this model will propel them to 90% schedule reliability. 

Speaking of reliability, the 2M alliance between Maersk and MSC will be discontinued in 2025, according to Maersk. Reliability was a driving factor in Maersk seeking out Hapag-Lloyd as a partner, where the efficient turning of containers ensures freight is moved in the most systematic manner possible. Delayed shipments slow the process, whereas increased efficiency would result in appreciable container utilization.

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Transfix’s Chief Economist: ‘Rates are Moving Fast and Here’s Why’ 

The freight industry has been near the bottom of a two-year slump – an inevitable rebalancing act that’s par for the course in this cyclical industry. In the meantime, experts and pundits scramble to present how this market flip might look or what will drive it, whether consumer demand, a mass carrier exit, inventory restocking, or a mix of the three. 

As Chief Economist at Transfix, an AI-driven freight brokerage, my team offers freight advisory and risk analysis to shippers of all sizes. Our rate prediction model utilizes machine learning (Seasonality Adjusted Gaussian Process) and forecasts all 18,000+ US lanes individually. 

In January 2023, when the dominant market voices within our industry (and most bank analysts) predicted stable to higher rates for the coming year, we remained committed to a quantitative, data centered approach to forecasting, which led to predicting substantially lower trucking rates for 2023, and that approach proved accurate

Similarly, in January of 2024, our market outlook differed from market consensus, and again, from Morgan Stanley’s more aggressive trucking rate predictions based on increased demand and restocking in Q1. While we do not discount a minor pick up in trucking demand in Q1 2024, we simply do not believe it will noticeably move the needle on rates in the first quarter. Carrier consolidation is and will remain the main driver and, as it accelerates in Q1, will create the foundation for a cycle reversal into Q2 (or H2) 2024. 

Compared to Morgan Stanley’s prediction of a 40% rate bounce, we are suggesting a more conservative 15% rate increase by the end of the year. Both predictions, however, contrast with the many shippers already operating under the assumption that 2024 is still a weak market. We believe that these shippers are building their pricing strategy based on a scenario that is no longer possible. 

Why the Carrier Situation is So Dire Right Now

January trucking rates inflated by the winter storm season did not sustain themselves like some industry constituents predicted. Therefore, carrier margins continue to be squeezed by increasing operating costs, such as high interest rates and insurance premiums. Motor vehicle insurance costs alone jumped by a record 20.3%, with premiums linearly increasing through 2023 at rates unseen since the 1970s. Insurance expenses alone can account for anywhere from 5 to 8% of the operating expense for a typical carrier. 

As the deterioration of capacity accelerates, it will create significant structural challenges for shippers, rate and capacity volatility chief among them. Shippers will not only face increased global uncertainty but also stark regional rate disparity, exposing them to sharp local cost increases despite lower national averages. Supply doesn’t leave the market uniformly. Low seasonality areas will see supply leave first and, as the seasonal cycle reverses, rates spike exponentially. 

Our position is that shippers should see this as an opportunity to take advantage of the uncertainty in Q1 2024 to ‘fix’ their rates and create predictability in their networks for the rest of the year. While we expect things to get worse before they get better, we are also predicting a sharp trucking rate rally towards the end of Q2 2024.

Until the rebalancing act reaches a new equilibrium, make sure your freight partners have the right balance of people, tech, and long- and short-term data and insights that allow you to weather the downs and to flourish in the ups.

 

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How Will Rising Freight and Container Prices Impact Shipping Rates?

The headlines are full of news about how freight prices are becoming more difficult for logistics professionals and people in similar positions to manage. In many cases, there are knock-on effects for consumers who realize the things they used to buy regularly without issue are becoming progressively less affordable.

The rising container prices put extra strain on company representatives who notice how the ballooning costs impact shipping rates. Here is a closer look at this complex situation.

The Situation Will Impact Shipping Rates for the Long Term

People anxiously hoping for some relief from the current state of freight prices are probably out of luck. At least, that’s what the executives at numerous shipping companies expect. The specifics vary slightly in how long they think rising container prices will persist. However, the news isn’t good across the board.

One executive said people at his company anticipate this situation continuing until at least the first quarter of 2023. Another leader said people would have to get used to a new normal for the shipping industry, featuring more uncertainty, higher shipping costs and longer timeframes for goods in transit.

Some of the executives recommended charterers sign longer contracts with ship owners so the agreements would last longer. More specifically, they might stay valid for several years instead of remaining in effect for months. Agreeing to those extended contracts tackles the price volatility issue and helps logistics professionals rest assured regarding availability.

Numerous factors impact shipping rates and most are out of the direct control of the people they affect. However, some business leaders have responded to the matter by trying to do more business with local suppliers. When goods don’t have to travel as far and aren’t going across international borders, freight prices should be lower and it’s less likely the shipments will experience significant delays.

Logistics Professionals Will See Increased Freight Prices in Various Forms

Some people may get frustrated and feel there’s no rhyme or reason for the rising container prices. But, shipping companies have always based their rates on various factors. For example, courier rates are covering many of the least expensive parts of the shipping process. However, they can still represent a substantial amount when added together.

Many shipping providers also calculate export surcharges that customers must pay. After citing challenges associated with increasing costs for fuel, logistics and more, some have raised those by several hundred dollars.

People also must account for the overhead expenses that keep shipments moving from one stage to the next. Since multiple parties are often involved, the total costs can go up as executives from each company cope with their own progressively climbing prices.

The specific impact shipping rates have on business customers also depends on which methods those parties use to get the goods to their destination. Sea and air are the two main channels for international shipments. The rates for each option fluctuate frequently based on demand.

For example, when more customers want space on a ship, the rising container prices will mean people have to pay more to secure their spots. Those who can’t afford the growing costs will have no choice but to look for other options.

Some companies also charge lesser-known fees to seal or clean the containers customers use. However, as these rates increase, many providers post associated updates on their websites. Even though the information doesn’t negate the fact that freight prices went up, it gives customers time to adjust their budgets wherever possible, potentially mitigating some of the adverse effects.

Customers and Business Owners Alike Will Experience the Effects of Rising Container Prices

When people read about the current logistics landscape, it’s not always easy for them to grasp how the soaring freight prices will affect individual business owners and consumers. Most who purchase things at their favorite shops never think about rising container prices and may have a passing interest in what’s happening based on glancing at the day’s headlines. However, they’ll almost certainly notice the effects.

One thing to remember is the freight issues have already been disrupting timelines and budgets for months. Consider the experience of one seller of holiday goods. He said he paid as much as $22,000 per container during the 2021 holiday season. However, it was only $3,500 the year before that. When faced with such gigantic increases, many business decision-makers have no choice but to pass the costs onto consumers.

Inflation is a much-discussed topic these days and researchers found a direct link between inflation rates and freight prices. They took data from 143 countries while conducting the study. The results showed that when freight rates double, there is a 0.7 percentage rate increase in inflation.

When the researchers published the outcomes in March 2022, they concluded that the impact shipping rates have on inflation could result in an increase of about 1.5% throughout 2022.

They also noted that their research occurred before the Ukraine invasion but believed the issue would worsen global inflation. Various mainstream news outlets have also analyzed the ongoing supply chain issues. They found containers were often stuck at ports or quickly snatched up by the parties with the most financial resources to devote to the matter.

Some retailers also reprioritized what they sent through certain methods due to the rising container prices. For example, having soft items shipped often meant they could fit more per shipment.

Since some items take longer to arrive, customers also have to deal with the reality that they may not get the products in time for events like kids’ birthdays or religious holidays. The problem also affects manufacturers who need parts to build the most in-demand items.

Be as Transparent as Possible About Rising Freight Costs

It is now easier to see the impact shipping rates have on various parts of the supply chain. People familiar with the issue often warn there’s no end in sight.

If that’s the case, the best thing affected parties can do is try to control as many factors within their sphere of influence. Additionally, constant contact with customers about rate increases or delays will ensure everyone has the most accurate and up-to-date information.

 

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Benefits of LTL Freight Shipping

Less than truckload (LTL) shipping is a method of shipping that uses either LTL carriers or parcel carriers. The sticking point of this type of shipping is that it allows for people to put together their smaller loads (less than 150lbs, 68kg) and then ship them together with other people’s packages. This allows shipping companies to make shipments much more economically than with the FTL (full truckload) alternatives. But, besides economical benefits, there are other benefits of LTL freight shipping that you need to be aware of in order to incorporate it with your business. So, let us take a look at why LTL freight shipping is comparable and often preferable to FTL shipping.

Top Benefits of LTL Freight Shipping

The fastest way to ship your packages is to have a shipping company pick them up, load them and directly transport them to your desired location. Unfortunately, this is often the least economical way of doing it. In order to make shipping cheaper and more eco-friendly, shipping companies often have to use alternative ways of shipping. And one of the better ones is LTL. Even though it can be slower than direct FTL shipping, it allows for a much better cost and fuel efficiency. And, with modern technologies and regular use, it can be just as efficient as FTL shipping.

Shipping Cost

One of the largest benefits of LTL freight shipping is the reduced shipping cost. Since this method of shipping is based on smaller loads from various clients, it manages to reduce the overall shipping cost for everyone. This is due to the fact that by using LTL, shipping companies put together multiple smaller loads. By doing so they manage to reduce the fuel and the number of vehicles necessary to transport their loads. If they were to ship client by client, they wouldn’t be able to fill the vehicles to their maximum capacity (hence the less than truckload). But, by lumping up items together, LTL shipping manages to save cost on transport, while allowing the same service as FTL.

Eco-Friendliness

More and more companies are turning towards eco-friendliness as a necessary mode of operation. And, once you take a look at our current rate of climate change and our carbon footprint, you’ll also be hardpressed to look for eco-friendly solutions. Luckily, when it comes to shipping, LTL is one of the greener options. By reducing the amount of fuel and vehicles necessary for shipping, LTL allows shipping companies to be much greener. They are also able to figure out optimal pathways, due to more regular shipping that is common to LTL. So, if you are looking for an easy way to make your shipments greener, simply employ LTL freight shipping.

Increased Safety

The first way that LTL freight shipping increases the safety of your items is with ample packing. Companies like Triple 7 Movers will first make sure that your possessions are properly packed. Then they will repack them each time the total LTL shipment is altered. By reapplying protective covers, they ensure the safety of your possessions from both physical and environmental harm. Individual loads are usually either packed on a parcel and then secured, or the company puts them in protective containers. This allows for maximum safety during shipping as well as easy handling.

Another safety feature of LTL freight shipping is that there is almost no chance of a package getting misplaced. By using tracking technologies, safety measures, and notification requirements, moving companies ensure that any package on board is well looked after. Furthermore, shipping companies usually organize LTL shipping routes with as few stops as possible. This allows them to keep packages safe for the entirety of the trip.

Better Organization

The biggest worry people have about LTL freight shipping is the supposed lack of availability. After all, with an FTL, you have the control of timing and the necessary route. Meanwhile, the LTL shipments are often limited by their route and the necessary drops. So, can better organization really be one of the benefits of LTL freight shipping? Well, as it turns out, it can. LTL freight shipping is ideal for customers who have regular shipments. Shipping companies often group up regular customers together. This allows them to achieve a greater degree of reliability and consistency. Along with regular shipments, companies also use automation to figure out optimal routes.

But, the true beauty of modern LTL freight shipping is that you don’t have to rely on your shipping company’s skills alone. Modern technologies allow clients to track their packages and get live notifications of any delays or setbacks. Therefore, with LTL freight shipping, you should be able to run your business and both send and receive your shipments with a high degree of reliability.

Shipping Options

Most shipping companies offer various shipping options. These options can come at a higher cost, but they can also make your shipping much better organized. Some of them are:

Expedient shipping – You can use this option if you want your goods to arrive faster than standard transit time. This option can often be quite costly, but it is quite useful for emergency shipping.

Liftgate – Does you freight exceeds 100 pounds? Then you should opt for Liftgate. Also, consider using it if the receiving location doesn’t have a clear dock for shipments.

Limited access – You can use this type of LTL for areas that have limited access due to safety reasons. So, for your construction sites or rural locations, you would probably want to choose this kind of shipping.

Custom delivery window – If you need your shipment to arrive within a specific period, you can opt for custom delivery windows. Most companies will deal with your package so that it fits their workload. This allows them to deal with transport cheaply and efficiently. So, this option can also be costly and should, therefore, be used with ample forethought.