As a logistician or shipper, you need to remain up-to-date on logistics news. You should trust O’Neill Logistics as your go-to source for logistics news! Our weekly newsletter highlights the most important logistics news related to shipping, warehousing, trucking, 3PL, and more. If you’re interested in receiving trending logistics news directly to your inbox every week, subscribe now!
Ocean carrier alliances will likely restructure
There are three ocean alliances – 2M, Ocean Alliance, and THE Alliance. These alliances do not expire until the second half of the decade. However, the alliances will likely terminate on mutual agreement. Therefore, new alliance constellations will emerge.
The current alliance structure was formed when freight rates were historically low and all carriers struggled to manage vessel overcapacity. Back then, carriers in the alliances were aligned in terms of strategic interests. They wanted to reduce the operating costs of the networks and absorb the new generation of ultra-large container vessels.
Carriers are now making different choices related to their commercial and operational future. Therefore, they are no longer aligned when it comes to network design, blank sailings, etc. As a result, the alliances have to make a network that stretches across quite different strategic choices.
Ultimately, tension will form and reshaping will begin. The new alliances will be composed of members who have more aligned strategic interests. We do not know exactly when this change will happen. However, reshaping will likely begin in 2023 to 2024.
Shippers push FMC to expand oversight over demurrage & terminal dwell fees
The National Shipper Advisory Committee voted to recommend the FMC expand its authority to include oversight over certain demurrage fees charged by railroads. Such fees have hit record highs in recent months. The committee also voted to recommend the FMC adopt a new rule aimed at preventing ocean carriers from passing along costs associated with ports’ terminal dwell fees.
The committee also pushed back against dwell fees some West Coast ports have charged in a bid to clear congestion. They have argued that carriers shouldn’t be able to pass along the costs. Additionally, they believe carriers should be the one to dispute improperly applied charges.
Shippers use contract length to navigate lack of ocean capacity
Maersk heavily relies on long-term contracts. The carrier has already signed 80% of contracts at highly elevated levels. Therefore, the carrier is immune to the expected weakening in demand through the second half of 2022 and a sharp drop in spot rates.
Ocean freight shippers are testing new contract lengths in 2022. The new contracts are both shorter and longer than in previous years. Shippers are considering new procurement strategies due to the pandemic’s impact on capacity.
Signed contracts have grown in the first four months of 2022 with lengths of three months or longer than 12. According to the data, less than 50% of contracts are being signed on an annual basis, compared to nearly two-thirds in all of 2021.
Asia-US container trade easing slightly before next surge
Available capacity on ships plying the eastbound trans-Pacific has loosened slightly in recent weeks. Many forwarders are pulling back on premiums for guaranteed loadings and carriers are offering a handful of more slots to importers.
However, the easing is simply a dip in trade lane volume before an expected uptick in the coming weeks. The moderate volume fluctuations and a barometer showing orders from North America are up suggest that Asia imports are simply in the latest trough before a coming crest.
Maersk shrugs off weakening spot market amid soaring contract rates
Maersk heavily relies on long-term contracts. The carrier has already 80% of contracts at highly elevated levels. Thus, Maersk is immune to the expected weakening in demand through the second half of 2022. Additionally, falling spot rates won’t harm the carrier.
Maersk expects an average contract rate of $4,400 per FEU in 2022. This is $1,400 higher than last year. Additionally, Maersk will carry 71% of its volume under long-term and multi-year agreements. Therefore, falling spot rates will have little material impact on its profitability.
Contract rates longer than 90 days on the Asia-US West Coast trade rose 13% through the first quarter to $6,352 per FEU, while contract rates on Asia-North Europe were largely flat at $5,134 per TEU.
About O’Neill Logistics
O’Neill Logistics is a leading 3PL with operations in Rancho Cucamonga, CA; Savannah, GA; and Newark/Monroe, NJ. We service many verticals including Garments, Fashion Accessories, Footwear, Furniture, Home Goods, & Electronics. Additionally, we offer omni-channel distribution and all value-added services. Lastly, we focus on retail “drop shipment” fulfillment and item-level fulfillment services with same-day service offerings.
O’Neill Logistics has over 2 million square feet of state-of-the-art facilities. Additionally, we offer dray services to support the warehouses and provide distribution to retailers and wholesalers. Our reliable 3PL platform combines sophisticated technology with robust, flexible processing designs and speed-to-market gateway models.
Lastly, we aim to simplify your supply chain. We deliver exceptional service and can optimize your operational performance. Therefore, we aim to build, protect and foster strong business partnerships.
