Months Ahead for Approval of Tentative West Coast Port Deal
Late Wednesday, a provisional accord was struck between West Coast port authorities and the International Longshore & Warehouse Union (ILWU), thanks to the mediation of acting Labor Secretary Julie Su. This agreement has managed to temper the previously escalating labor strife, which had caused significant port disruptions and closures right when the peak shipping season was underway. Despite the positive developments, the ILWU has clarified that it will take some time before the labor contract gains full endorsement from the union’s rank-and-file members. Ratification of this agreement involves an extensive process that usually spans several months. Initially, a contract caucus comprising delegates from the ILWU’s 29 West Coast locals will be convened. These representatives will meticulously scrutinize the proposed deal and then offer a recommendation to the union’s rank-and-file members. This step paves the way for a union-wide vote on the agreement, which will ultimately determine whether or not the contract gets ratified. Considering the typical timeline for such procedures, the ratification process might not conclude until the early fall.
Safety in Focus as Lithium Battery Demand Soars
A recent surge in the demand for lithium batteries has prompted attention towards their safety considerations during transport. The risk management director at TT Club, a global mutual insurance provider, stated on Thursday that there is an urgent need to reassess the dangerous goods classification of these batteries. This necessity stems from the rapid advancements in battery technology and the consequential safety concerns that have risen.
Lithium-ion batteries currently fall under the “miscellaneous dangerous substances and articles” category, which, according to TT Club, is the least hazardous classification dating back to the late 1980s. This outdated classification could have serious implications when shipping containers are accepted for transport or when compiling a ship stowage plan. The role of manufacturers in addressing these emerging uncertainties is vital, particularly considering the exponential growth in the volume of these batteries being transported in container ships. This situation emphasizes the importance of enhanced regulatory oversight and a more in-depth understanding of the batteries’ evolving nature.
Recovery in Progress: Indian West Coast Ports Resume Operations After Cyclone Shutdown
Last week, several major ports along India’s Gujarat coast, including Mundra and Pipavav, reopened after Cyclone Biparjoy forced a halt to all shipping operations. The ports have now returned to full operation after a week of inactivity. Mundra Port was able to berth its first vessel and load four container trains, marking a return to normalcy. Similarly, APM Terminals Pipavav resumed quay-side activities, starting with the docking of the container vessel ONE Matrix.
However, the aftermath of the cyclone, which had disrupted operations since the end of May, still weighs heavily on India’s containerized trade. The ports’ closures led to considerable cargo backlogs, and a ripple effect is expected to persist for a substantial period, potentially affecting the upcoming peak shipping season. The industry will likely need to implement recovery measures to address congestion and optimize container flows to restore stability in shipping operations. Additionally, the strain on global container supply chains may lead to further ocean shipping disruptions and delays in cargo delivery. On a brighter note, Nhava Sheva Port (JNPA) set a new record last week with the docking of MSC Hamburg, the largest container vessel to ever dock at any Indian port, symbolizing the strength of India’s maritime capabilities.
Aircraft Freight Market Dampens Amid Lowered Expectations
Intense discounting due to excess capacity in a feeble market, combined with an increase in passenger aircraft offering lower-deck storage, has led to a continuous reduction in air cargo rates. According to industry specialists, this is happening as the freight market attempts to stabilize 16 months into a recession. There’s a glimmer of hope among logistics professionals and airlines for a revival in airfreight traffic in the year’s final quarter. However, with the economic conditions remaining unclear, the optimism is being tempered.
The decline in air cargo volume has decelerated after a previous 8% drop, an essential market correction following the high volumes instigated by COVID-19 supply chain disruptions. Unfortunately, demand has yet to reach its lowest point as the summer season starts, with volumes still below pre-pandemic levels. Moreover, the International Air Transport Association recently predicted that air cargo demand would decrease by 3.8%, with airline cargo revenues diminishing by a third. It’s also projected that there will be a small gain by year’s end, suggesting the persistent struggle for the industry. On the other hand, cargo revenues are anticipated to stay above pre-pandemic levels due to labor shortages and fuel expenses, forcing carriers to charge more for their services.
Navigational Changes in the Panama Canal Amid Persistent Drought
Faced with the worst drought in a century, the Panama Canal Authority (ACP) has imposed stricter draft restrictions in the Neopanamax and original Panamax locks. This move comes as a response to the 47% decrease in rainfall during the first five months of 2023 compared to historical norms. The impending El Niño weather phenomenon could further exacerbate such conditions. Notably, the frequency of such droughts has escalated from once every five to every three years due to the accelerating global climate crisis.
These restrictions could affect global trade. Larger vessels, like container ships, will have to adapt to the new draft limits, which may entail offloading cargo and utilizing alternative transportation methods across the canal. This adjustment is likely to affect timelines, operational costs, and efficiency. The unpredictable nature of the situation could also lead to price volatility in the global market. Moreover, future contingency measures, such as limiting daily transits, could add another layer of complexity to the global supply chain.
Unseasonably Early Storm Activity Sparks Concern in the Atlantic
Tropical Storm Bret emerged earlier this week near the Caribbean’s Leeward and Windward Islands, marking the earliest storm formation in this location since records began in 1853. The US National Hurricane Center has issued tropical storm watches in Dominica and Barbados, as Bret was spotted 835 miles from the Windward Islands. Interestingly, another system with a 70% probability of transforming into a storm is following close behind, indicating an atypical activity level for this early in the Atlantic hurricane season.
Due to these weather disruptions, logistics around the Caribbean might face challenges, resulting in delays and possible changes in shipping routes. Furthermore, businesses tied to the region’s tourism industry may experience a downturn, as these tropical storms may deter tourists, affecting the local economies. While some forecasts suggest that wind shear and dry air may inhibit Bret’s intensification, the unexpected activity could hint at an unpredictable hurricane season ahead.
Atlantic Anticipates its First Hurricane of 2023
The NWS National Hurricane Center has forecasted the first hurricane of the 2023 Atlantic Hurricane Season. The system, identified last week off the west coast of Africa, has recently evolved into Tropical Depression Three in the central Atlantic. The depression, currently exhibiting wind speeds near 35 mph, is expected to intensify and traverse the Lesser Antilles as a hurricane by the end of the week. While the system will be named “Bret” upon reaching Tropical Storm strength, its trajectory, and severity remain uncertain.
As the system is predicted to induce flooding, hurricane-force winds, and perilous storm surges, it may disrupt logistics and shipping routes around the Lesser Antilles. It is crucial for those engaged in trade and business activities in this region to stay informed and prepared for the potential impacts. Furthermore, the forecast of a near-normal Atlantic Hurricane Season by the National Oceanic and Atmospheric Administration (NOAA) implies an unpredictable pattern of storm development in the coming months.
Accelerated Recovery: I-95 in Philadelphia Set to Reopen Soon
Gov. Josh Shapiro announced this week an anticipated reopening of Interstate 95 in northeast Philadelphia over the upcoming weekend. The announcement comes ahead of previous estimates, following remarkable progress made by the repair crews. The essential north-south East Coast interstate highway had been closed following an overpass collapse caused by a burning fuel truck in the Tacony neighborhood. This unforeseen event sparked online debates comparing the potential repair duration to a similar incident in Georgia in 2017, which required 43 days for reconstruction.
The early reopening of this vital interstate has implications for the business sector. I-95 is a critical artery for the East Coast, often used for the transportation of goods, and its closure could have resulted in significant disruptions and delays for the logistics industry. With this unexpected swift recovery, commercial traffic and trade in the region can resume their regular course much sooner than initially feared. It underscores the importance of infrastructure resilience in supporting commerce and the smooth operation of supply chains.
Changing Tides: Shifting Trade Patterns Impact US West Coast’s Maritime Dominance
A tentative agreement between maritime employers and dockworkers on the US West Coast promises to restore some of the cargo movement disrupted over 13 months of negotiations. However, the traditional supremacy of these ports is threatened by changing trade patterns and rising competition from ports on the Gulf and East coasts. Over the past years, trade between the US and China has started to see a decrease in its relative importance, with some US businesses working to reduce their reliance on Chinese imports. Furthermore, data from S&P Global indicates that from 2013 to 2023, the West Coast’s share of US imports from Asia has declined, while the East and Gulf coasts have seen their share rise.
These shifts are consequential for sectors involved in goods movement. The rise of East and Gulf Coast ports is likely linked to a change in the sourcing landscape. China’s share of US imports is decreasing, with a trend towards sourcing more from Southeast Asia and the Indian Subcontinent. This geographical shift benefits East and Gulf Coast ports due to shorter transit times via the Suez Canal. Moreover, consistent investment and infrastructure development in these regions have enhanced their cargo-handling capabilities, offering a potential alternative for businesses formerly reliant on the West Coast. The question for stakeholders is whether this market shift is sustainable and what it implies for the future of trade and supply chain management.
References
https://www.joc.com/article/west-coast-labor-deal-finally-reached-damage-done_20230615.html
https://www.joc.com/article/us-ag-shippers-look-diversify-exports-away-west-coast_20230620.html
https://www.freightwaves.com/news/us-imports-from-china-falling-faster-than-from-other-countries
https://www.freightwaves.com/news/governor-says-interstate-95-near-philadelphia-will-reopen-this-weekend
https://gcaptain.com/first-hurricane-of-2023-expected-to-form-later-this-week/
https://gcaptain.com/june-storms-raise-alarm-for-atlantic-hurricane-season/
https://container-news.com/indian-west-coast-ports-reopen-after-cyclone-induced-shutdown/
https://www.joc.com/article/soaring-demand-lithium-batteries-puts-focus-safety-concerns-tt-club_20230622.html
https://www.joc.com/article/tentative-west-coast-longshore-deal-triggers-lengthy-ratification-process_20230615.html
