October 2022
"Your supply chain's well-being is our top priority. We at Hamburg Süd aim to provide you the most relevant and up-to-date information to help you navigate this period of heightened volatility."
Key Notes on North America Supply Chains
- BMWED rail union rejection of contract deal raises possibility of November strike: While the tentative deal struck in September between the National Carrier’s Conference Committee and 12 rail worker unions averted a general strike last month, membership of several unions have rejected the proposed terms, including the Brotherhood of Maintenance of Way Employees Division (BMWED), which seeks additional sick days and improved working conditions. There is no immediate threat of a rail service disruption as the union has given rail companies until November 19 to renegotiate. If one of the rail unions goes on strike, there is a likelihood that the other units would stay off the job as well, causing a general shutdown that could impact 30% of the country’s freight. To date, about half of the 12 rail worker unions have approved contracts, with membership voting expected to continue through mid-November.
- China implements epidemic prevention measures in the Ningbo Beilun district: On October 14th China implemented measures to manage a local COVID-19 outbreak. The Ningbo port and terminals are in operation with slight impact on terminal productivity. There is a larger impact on landside operations with the suspension of activities at local depots, factories, warehouses and trucking services within Beilun district. The market expectation of this temporary lockdown is short-term. Activity is expected to resume in the last week of October. All other districts of Ningbo are operating as normal.
- ILWU / PMA Negotiations Continue on West Coast: While the West Coast ports continue to operate business as usual, more than three months have lapsed since the labor contract expired on June 30th. The parties have issued joint releases affirming a mutual desire to avoid any work stoppages. Meanwhile, no strike deadline has been set by the unions as the two parties continue their negotiations in San Francisco. The ILWU and PMA did reach a tentative agreement in late July on healthcare benefits, but no further information has surfaced with the agreed upon news blackout that remains in place.
Ocean Update
Volumes remain relatively unchanged since September. The U.S. East and Gulf Coasts continue to outpace the West Coast in terms of overall year-over-year import container volume growth in part due to shipper concerns over potential disruptions resulting from the still unresolved ILWU / PMA contract negotiations.
Congestion on the West Coast has eased significantly, and we are seeing the lowest yearto-date volume of 14+ day longstanding import cargo units on the terminals. Maersk continues to optimize its shipping network to match customer needs while maximizing efficiency and improving transit times and schedule reliability wherever possible.
West Coast Highlights:
There have been improvements on the West Coast ports with the exception of Oakland where the backlog of vessels stands at 16 ships. Vessel wait times are up to 25 days, in part due to two cranes being down for maintenance. The vessel line up, yard congestion, and rail status markers are in the red.
Los Angeles and Long Beach have both seen improvements. The number of vessels within 150 nautical miles of San Pedro Bay has remained below 10 vessels for several weeks and wait times have been reduced to under a day. Currently there are 44 vessels heading towards the Bay, with 22 allocated for each port. Rail availability continues to stabilize and improve.
Hamburg Süd has optimized its network to merge its UPAS6 service into the Transpacific 2 (UPAS 2) with the rotation from North Eastern China that now includes stops in Ningbo and Shanghai as well as Busan, Korea before arriving at Long Beach. The intent is to keep waiting and transit times in the Pacific Southwest low.
Congestion and delays continue in the Pacific Northwest, particularly at Centerm in Vancouver where vessel waiting times range up to 28 days. We have been working with customers to redesign services into the region that better address current customer shipping needs. In summary, we are merging our UPAS4 into an updated Transpacific 1 (UPAS5) that connects ports in Northeast China and Busan, Korea to weekly service into Vancouver and Prince Rupert. In addition, we are adding Seattle as a regular weekly stop on our TPX service in late October so that customers have a stable service they can rely upon as they plan for their shipping needs going forward.
As always, network services are monitored and adjusted to meet customer demand and improve schedule reliability, whether by improving or relaunching service lines or sailing extra loaders as needed.
East Coast Highlights
With the shift of cargo volumes to the East and Gulf Coast several ports remain congested. Houston is experiencing congestion with vessel wait times up to 15 days at Bay Port with its three available berths. Barbours Cut is faring better with just 2-to-4-day vessel wait times for its six berths. In September, Port Houston handled its second highest month ever following its August 2022 record month. September year-over-year volumes were up 31%.
There are approximately 30 container ships at anchor in Savannah. Vessel waiting time ranges from 10-20 days. The Port of Savannah stated that it expects to clear the need for vessels to wait at anchor by the end of November. Anticipated improvements are due to higher productivity forecasted before the upcoming holidays and decreased import volume.
We continue to see improvements at Newark PNCT and Elizabeth APMT. Vessel wait times for both terminals are down to 0-4 days, though there are approximately 10 ships at anchor. In partnership with our 2M alliance we have negotiated an agreement with Newark PNCT to secure priority discharge for our TP11 service, which connects Singapore through ports westward into Newark and other East Coast ports. This enables us to achieve transit times of 31 days into Newark, cutting nearly seven days from current performance. The New Jersey ports continue to experience import rail congestion that has persisted for several months due to heavy volumes.
APM Terminals Mobile, Alabama Update: Port operations and port labor are working normally and business as usual. In mid-October, there was some inaccurate reporting on labor issues and the inaccurate use of an APM Terminals Mobile photo. APM Terminals Mobile is a container terminal and is not associated or impacted by the Alabama stevedore company called CSA which had some port labor concerns with a breakbulk terminal. APM Terminals Mobile and the International Longshoremen’s Association (ILA) enjoy a strong and prosperous working relationship in the Port of Mobile, underscored by a local contract that extends through September 2024, which includes a no-strike/no-lockout clause for the duration of the agreement. The USMX/ILA Master Contract, which also extends through September of 2024, includes a no-strike/no-lockout clause as well.
Air Update
Air Capacity on the Rise
Capacity in the air freight market has continued to rise over the last several months. The uptick is due to increasing numbers of East Asian-based long-haul passenger flights with below deck, belly cargo capacity paired with lower consumer demand and reduced manufacturing productivity coming out of China.
The Journal of Commerce reported a new wave of COVID-19 measures in China is limiting manufacturing activity, stating that the “air cargo hub of Zhengzhou was locked down… while the major manufacturing and exporting centers of Chengdu, Dalian, Guangzhou, Shenzhen, and Tianjin have [also] been affected.”
From a North America to Europe return perspective, as governments on each side of the Atlantic had eased Covid 19 restrictions a summer surge in passenger demand ensued. Passenger carriers subsequently added additional capacity by adding new routes and frequencies to / from large tourist markets in the U.K. and Continental Europe. This also resulted in an increase in cargo capacity and lead to easing contracts to several key markets.
Changing consumer demand patterns have been tied to a shift away from goods and towards services, along with the effects of rising inflation and higher interest rates. However, reporting indicates that some air cargo industry executives expect greater air freight activity in November and December.
Our parent Company Maersk is expanding its own controlled air freight capacity between Asia and the U.S. with the addition of three new Boeing B766-300F freighters. Each aircraft has a payload of 50 tons. Once under operation in early 2023, the aircraft will add 900 tons of cargo capacity on 18 flight sectors (two-way) between Hangzhou Xiaoshan International Airport (HGH) and Shenyang Taoxian International Airport (SHE) in China; Incheon International Airport (ICN) in South Korea; and two U.S. gateways – Chicago Rockford (RFD) and Greenville-Spartanburg (GSP).
See our see our parent Company MAERSK AIR FREIGHT pages for more information on our air network and expansion.
Landside Update
Employee Retention Essential for Growing Warehousing and Transportation Labor Demands Evolving consumer buying patterns and a pandemic-driven warehousing boom have resulted in a corresponding growth in demand for a robust logistics workforce. With the U.S. 3.5% unemployment rate at 50-year lows and year-over-year average hourly earnings on the rise, the battle for attracting and retaining the best talent is particularly fierce. In fact, the Bureau of Labor Statistics ranks “Transportation and Warehousing” among the industries with the largest wage and salary employment growth. The sector employed nearly 6.6 million people as of 2021 having grown by 1.8 million in the last decade, with projections the sector will add another 466,000 jobs through 2031.
It's no surprise that some companies are struggling to meet their warehousing labor needs. However, the solution lies not necessarily in finding new employees, but rather building stronger ties with the workforces in place. Just as the old adage goes that it is less costly to keep a customer than to find a new one, the same applies for labor. In “The State of Warehouse Labor” survey published by Instawork, analysts reported that the number one strategy for addressing labor shortages was implementing and improving retention strategies. This tactic surpassed both “increasing headcount” and “improving recruiting” by 8 percentage points.
As businesses head into the Q4 holiday shopping season, the competition for seasonal employees will begin to heat up. Having a well-established reputation as a good employer will be key to attracting workers. Warehousing operations often see their headcounts double, triple or even quadruple with the number of seasonal temps brought in to reinforce core employees charged with managing the surge of activity. This is the point at which employee retention strategies and people management skills come to the fore. While efficient systems, standardized processes, and leading technologies are important, nothing is as critical to the success of a warehouse and distribution operation than the people themselves making it happen. This entails four fundamental people management practices:
- Treating individuals fairly and with dignity
- Setting reliable full-time work schedules that allow people to better manage their lives
- Engaging core and temporary employees alike for their ideas on improving operations
- Managing employees on a personal level right on the frontlines
The outcome of such management practices is stability of the workforce and high employee retention rates that prove to be key differentiators in the world of supply chain logistics. Organizations that find themselves with high turnover are forever stuck at the ground level in training new hires. Whereas those organizations that can maintain long relationships with its worker base graduate to higher-level activities along the lines of continuous process improvement refinements, productivity increases, higher accuracy, and enhanced customer service, all while building a bench of future leaders that will someday take charge.
As the market begins to normalize, business leaders are just now in a position to finally catch their breath. The task at hand is to take a step back, review their supply chains and consider strategies for sourcing and engaging the talent they will need for whatever comes next in the ever-changing universe of logistics.
Topics, Trends & Insights
Be sure to visit our parent Company Maersk's “INSIGHTS” pages where we explore the latest trends in supply chain digitization, sustainability, growth, resilience, and integrated logistics.
Sailing Towards Sustainability with Green Methanol and an Industry Committed to Change On October 5th, our parent Company MAERSK ANNOUNCED that it had ordered six additional large ocean-going vessels that can sail on green methanol. The vessels will have a capacity of approximately 17,000 containers (Twenty Foot Equivalent – TEU) and will replace older existing capacity. Once they begin to join the Maersk fleet in 2025, the six vessels running on green methanol will save about 800,000 tons of CO2 emissions annually. With this latest investment, Maersk now has 19 vessels on order in total with dual-fuel engines able to operate on green methanol.
These orders come at an important time for Maersk and the rest of the shipping industry as it looks for ways to reduce its environmental impact. While shipping is the most energy efficient way to move goods, the global shipping industry emits 3% of total global CO2 emissions. In response, the International Maritime Organization (IMO) will soon enact measures agreed to in 2018 that are aimed at reducing the carbon intensity of international shipping.
The IMO’s 2023 rules look to reduce emissions as part of its strategy to cut greenhouse gas emissions by at least 50% from 2008 levels by 2050. The rules require that ships have three new measures in place that track a ship’s efficiency and carbon emissions. As one might expect, ships running on low carbon fuels will score higher ratings than those running on high carbon fuels. The first ratings will be given to each ship in 2024, based on the data recorded in 2023.
For its part, Maersk has set a net-zero emissions target for 2040 across the entire business and has also set tangible near-term targets for 2030 to ensure significant progress. This includes a 50% reduction in emissions per transported container in the Maersk ocean fleet compared to 2020 and a principle of only ordering newbuilt vessels that can be operated on green fuels.
In an October 3rd Financial Times Op-Ed, Maersk CEO Soren Skou emphasized the importance of acting on climate change through partnerships and innovation and making the move away from fossil fuel energy. “Despite the turmoil in the world right now, we should not forget that we are in a climate emergency, and we must act now to make significant progress before 2030… If we want to go far, we need to go together.”