Teamsters rally in Atlanta ahead of UPS negotiations

Teamsters President Sean O’ Brien lashed out Saturday at critics who say the union’s hard line in contract negotiations with UPS Inc. will push the economy into a recession, saying the burden of keeping the country out of a downturn falls on UPS, not the Teamsters.

At a raucous, ear-splitting rally in UPS’ hometown of Atlanta, O’Brien acknowledged concerns that a strike against UPS (NYSE: UPS), which delivers the equivalent of 7% of the U.S.’ gross domestic product per day, could be devastating to the economy. “But that’s on UPS, not us.”

By not agreeing to a fair contract with the Teamsters, “UPS is going to throw this country into recession,” O’Brien said.

UPS TEAMSTERS ROLL DEEP IN ATLANTA

Rank-and-file @UPS #Teamsters led the charge this morning in the home city of the multibillion-dollar corporation’s headquarters as Teamsters General President Sean M. O’Brien rallied members in Atlanta.#1u #strikeready pic.twitter.com/0OQWmkxS9g
— Teamsters (@Teamsters) July 22, 2023

O’Brien also acknowledged that the two sides are very close to an agreement. “We are at the 5-yard line,” he said, adding that we “have one more round to go.”

Bargaining resumes Tuesday in Washington after a 20-day hiatus. Talks stalled July 5 after UPS, according to the Teamsters, failed to meet the union’s demands on wage and benefit increases for part-time workers.

The current five-year contract expires July 31. The Teamsters have threatened to strike Aug. 1 if a tentative contract is not agreed to by its negotiating committee by July 31. It is expected to take about three weeks for the 340,000 rank-and-file members to review and either ratify or reject the tentative agreement.

Mega-facility leasing activity shrinks materially in 1st half, CBRE says

Lease signings for big-box facilities–those greater than 1 million square feet — fell 36% in the second quarter over the 2022 period, according to data from real estate services firm CBRE Group Inc. (NYSE: CBRE) published Friday. This triggered an 18% decline in total industrial space leased during the first six months to 373 million square feet, CBRE said.

Year-over-year declines were seen across the entire big-box space. Leasing activity fell 29% for buildings between 300,000 and 700,000 square feet. Leasing dropped 28% for buildings between 700,000 square feet and 1.2 million square feet. Activity dropped 46% for facilities larger than 1.2 million square feet, according to the data.

Overall leasing activity dropped to 373 million square feet in the first half, CBRE said.

The average size of the top 100 transactions in the first half was 789,471 square feet, well below the 926,683 square feet recorded in the first half of 2022, CBRE said.

Small facilities — those 25,000 square feet or less — was the only market segment to show growth. Those facilities are usually occupied by small businesses with much different needs than businesses vying for big-box capacity.

The data quantifies widespread commentary that big-box demand has been hit by economic uncertainty and waning occupier demand to hold large amounts of inventory, according to Amanda Ortiz, CBRE’s industrial and logistics research director.

Still, Ortiz said the market is stronger today than it was in 2019, with current numbers an indication that the market is normalizing after two to three years of pandemic-induced frenzy for large swaths of warehouse space as supply chains buckled, e-commerce demand soared and businesses took on large commitments to hold buffer stock.

“We are still in a better position now than in 2019,” she said.

Subleasing activity remains strong as tenants look to shed space they don’t need, according to Ortiz. There has also been a pickup in subleasing among tenants that recognized they had too much space even before they occupied it, she said.

Lease renewals accounted for 36 of the top 100 transactions in the first half, more than doubling the level of 15 the same time a year ago. The spike in lease renewals indicates tenants’ caution as they would rather stay in their current locations and possibly negotiate better deals with landlords than pursue new transactions, CBRE said.

Chicago led all markets with 11 of the top 100 leases. It was followed by Dallas-Fort Worth, California’s Inland Empire and Pennsylvania’s Interstate 78/Interstate 81 corridor, each with nine. The “General Retail & Wholesale” industry comprised 34 of the 100 top leases, followed by third-party logistics firms with 33. E-commerce retailers accounted for seven of the biggest leases, down from 14 in the first half of 2022.

What was the 1st trade route?

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Throughout history, trade routes have played a vital role in shaping the world’s economic and cultural landscape. Today, numerous routes exist throughout the world, keeping societies running. But how did this all start?

It began with one trade network during the Han Dynasty in China and lasted for 1,500 years. The Silk Road was a network of trade routes beginning in 138 B.C., according to National Geographic, and connected Europe and East Asia. Its name comes from 1877 A.D. from a German geographer, Ferdinand von Richtofen, who called it that as a metaphor for the collaboration between cultures on this route.

The route itself was 4,000 miles long and saw the exchange of an abundance of goods such as, of course silk, various types of jewels and stones, porcelain, spices, and countless other materials.

The beginning

According to UNESCO, it is believed that the Silk Road was started through the 138 B.C. expedition of Zhang Qian, who, commissioned by Han Emperor Wu Di, demonstrated that it was possible to safely travel to the West from Han China. Since China had coveted silk to trade, numerous civilizations joined the trade route, including the Romans. Because of this exchange, new inventions, religions and culture spread throughout these civilizations, melding them and molding the future.

National Geographic notes that the horses were introduced to China because of the Silk Road, which later led to the Mongol Empire’s strength in the 13th and 14th centuries. Gunpowder traveled from China to Europe, changing warfare for the region completely.

However, one extremely influential element shared on the route was less desirable: disease. Researchers believe that the Black Death of the 1300s spread through the Silk Road, leading to the deaths of 20 million people in Europe.

The route was such an integral part of civilization for so long that many important stories and characters from history experienced the hard life on the route of the Silk Road.

A map of the route shows how the Silk Road connected so many civilizations. (Photo: UNESCO)

Famous explorer Marco Polo traveled the route and wrote about it in his book of travels, “Livres des Merveilles du Monde,” or known in English today as “The Travels of Marco Polo.” According to UNESCO, Polo took a 24-year journey to China, where he often traveled on the famous route.

Lesser-known explorer Ibn Battutah is another important figure of the Silk Road. He too traveled the route and wrote about it. In 1325, 21-year old Battutah set out on a pilgrimage from his home in Tangier, Morocco, to Mecca to fulfill his religious duty and expand his education, according to Britannica. His journeys lasted 29 years and took him through what would be 40 countries today and 75,000 miles.

Because of writings like this, we know that traveling on the Silk Road was not an easy feat.

The route takes travelers through rough terrain like the Gobi Desert and the Pamir Mountains with no upkeep or formal roads throughout its 1,150-year lifespan. Thieves were also common along the passage, looking for lucrative spoils. It was common for large caravans to form with pack animals and camels along for the ride for protection.

Part of the trade route was maritime passages, where just like the thieves on land, pirates were a danger to keep an eye out for. Many ports began to spring up along the coasts, which allowed sailing merchants to freshen their supplies along the way in addition to trading.

Inns appeared over time along the route to capitalize on the numerous merchants traveling.

These inns were known as “caravanserais” and eventually formed a network from China to the Indian subcontinent, Iranian Plateau, the Caucasus and Turkey, and went north to North Africa, Russia and Eastern Europe, according to UNESCO. Some of these structures still exist.

The glory days of the Silk Road came to an end thanks to political tension and land disputes during the Crusades as well as the expulsion of the Mongol dynasty in 1368. In 1453, the last Christian stronghold was defeated in the Near East, and Europeans were no longer able to travel along the western region of the Silk Road, according to UNESCO.

Today, the World Tourism Organization of the U.N. works to revive the history of the route. The organization began a tourism project in 1993, and today there are 33 Silk Road Member States throughout Europe, Africa, Asia and the Pacific. Members work to identify destinations that were integral to the route, including inns, ancient cities, historic buildings, important passageways and more.

FreightWaves Classics articles look at various aspects of the transportation industry’s history. Click here to subscribe to our newsletter!

Have a topic you want me to cover? Email me at bjaekel@www.freightwaves.com or follow me on Twitter.

Q2 container line earnings could surprise to the upside

photo of a ship of container line Matson

Container lines won’t release final results for the second quarter until next month, but early disclosures suggest they have stemmed the bleeding, at least temporarily.

Hawaii-based niche carrier Matson (NYSE: MATX) announced preliminary results late Thursday, projecting Q2 2023 net income of between $76.3 million and $81.5 million. This range is more than double Q1 2023 net income of $34 million.

Matson CEO Matt Cox confirmed that his company’s China service saw higher demand in the second quarter than in the first.

Stifel analyst Ben Nolan called it “a remarkably good quarter,” with Matson earnings “nearly double what we and the Street had expected. [We] did not see that coming.”

Matson’s shares surged in early trading on Friday to a 52-week high of $94.28 per share, then pulled back to close up 8% on the day at $88.32.

Matson’s shares have risen 41% year to date despite all the bearishness on container shipping fundamentals. Following its latest run-up, it is now the second-best-performing U.S.-listed shipping stock in any vessel segment, behind propane tanker owner Dorian LPG (NYSE: LPG).

Evergreen revenue stabilizes, Cosco profits up vs. Q1

Early disclosures by Asian ocean carriers likewise point to a stronger second quarter than some had expected.

Revenues of Taiwan’s Evergreen Marine had been falling sharply quarter on quarter since Q3 2022, but the slide ended in the latest period. Q2 2023 revenues increased 1% versus the first quarter. Evergreen’s Q2 2023 revenues were 43% higher than in the same period in 2019, pre-pandemic.

(FreightWaves based on Evergreen securities filings)

China’s Cosco, the world’s fourth-largest carrier group, reported preliminary net income of 12.5 billion yuan ($1.7 billion) for Q2 2023, up 76% from the first quarter of this year.

Disclosures by Cosco subsidiary OOCL were less positive: They showed a slowing pace of decline versus prior quarters and better performance versus pre-COVID, yet results were still falling.

OOCL reported Q2 2023 revenues of $1.98 billion. That’s up 35% from the second quarter of 2018 and 26% from the second quarter of 2019. OOCL’s revenue declined 9% sequentially versus the first quarter, however, the quarter-on-quarter drops were much steeper (33-37%) in the preceding two periods.

(Chart: FreightWaves based on OOCL securities filings)

OOCL obtained an average of $2,126 in revenue per forty-foot equivalent unit during the latest quarter, up 23% from the same period in 2018 and up 20% from the same period in 2019.

Sentiment sours on 2nd half

Meanwhile, the consensus on the second half is becoming less optimistic.

Earlier this year, many carrier executives predicted that the inventory overhang would clear and inventory restocking would coincide with pre-Christmas bookings, leading to better performance in the second half compared to the first six months.

That sentiment has soured.

“We expect the [China-U.S.] trade lane to experience a muted peak season,” said Cox, although on a positive note, he added: “Absent an economic ‘hard landing’ in the U.S., we continue to expect trade dynamics to gradually improve for the remainder of the year.”

According to a report in Chinese news outlet Xinder Marine News, Evergreen Marine Chairman Chang Yen-I told a Chinese shipowners’ conference: “It seems that the traditional peak season in the third quarter has been postponed.”

Israel-based Zim (NYSE: ZIM) sharply reduced its full-year earnings guidance on July 12. According to Zim CEO Eli Glickman, “While our second-quarter results are broadly in line with our expectations, we no longer anticipate an improvement in freight rates in the second half of 2023, consistent with seasonality, as previously assumed.”

Zim now believes demand “will remain muted for the remainder of the year.”

Global spot rate average in USD per FEU. Blue line: 2023 year to date. Orange line: 2019. Purple line: 2018. (Chart: FreightWaves SONAR)

Click for more articles by Greg Miller

Yellow loses attempt to stop strike

A Yellow truck and a YRC trucking passing each other at a terminal in Houston

The U.S. District Court for the District of Kansas ruled Friday against less-than-truckload carrier Yellow Corp.’s request for an injunction, which would have kept its Teamsters employees from engaging in a work stoppage.

In her decision, Senior Judge Julie Robinson denied a motion for a temporary restraining order and injunction.

The decision allows the union to carry through with a planned strike, which could begin as soon as Monday. The final straw prompting the strike was Yellow’s missed benefits contribution payment to Central States Funds last week, which will leave workers without health insurance on Sunday.

The two parties have been embroiled in a bitter dispute over operational changes for the last nine months. The carrier has maintained that without the changes it wouldn’t survive while the union took the stance that it had given enough in the past in the form of wages, benefits and work rules concessions.

“The company has two more days to fulfill its obligations or we will strike,” Teamsters General President Sean O’Brien said following the decision. “Teamsters at Yellow are furious and ready to act. They are done with the mistreatment and mismanagement.”

In its filing seeking an injunction, Yellow said it would likely file for bankruptcy if the court didn’t rule in its favor.

“Absent injunctive relief, Plaintiffs will suffer immediate, substantial, and irreparable harm from Defendants’ unlawful work stoppage, including being forced into a Chapter 7 liquidation bankruptcy proceeding.”

In a news release late Friday, Yellow said it would appeal the court’s decision and continue to pursue its breach of contract lawsuit against the Teamsters.

“The court, recognizing a strike would likely kill the company, resulting in the loss of 30,000 jobs, cautioned the Union — that while it won today’s battle, it could very well lose the war,” the statement said.

More FreightWaves articles by Todd Maiden

5 things to know with the UPS-Teamsters clock ticking

Time is running short for a handshake agreement to avert a nationwide Teamsters union strike against UPS Inc. threatened for Aug. 1. Talks broke off July 5 and will resume next week. Shippers that haven’t made contingencies could be up against the wall. Some will simply brace for service disruptions and undelivered packages, which could take weeks to sort out even if a strike is relatively short.

“For shippers who have done little or no planning, it’s too late,” said Nate Skiver, founder of LPF Spend Management, a consultancy.

Here are five things to consider as the clock winds down:

How did we get here?

We got here like we get here every five years, the typical duration of a UPS-Teamsters contract. But this has been a different cycle. For the first time in 25 years, there is new blood at the top of the Teamsters food chain — a combative, aggressive, longtime Teamster named Sean O’Brien. O’Brien succeeded James P. Hoffa, a leadership fixture who many in the UPS rank and file thought had grown too cozy with the company and less with its workers. O’Brien isn’t that type, as he has made clear leading up to and throughout the negotiations.

Another difference is the timing. The current contract, agreed to in 2018, took effect long before the pandemic turned the delivery business upside down with surges in e-commerce demand. It also allowed UPS (NYSE: UPS) to bypass the big labor cost hits that other companies, notably FedEx Ground, the ground delivery unit of FedEx Corp., (NYSE: FDX) had absorbed immediately after the pandemic. Payback at UPS is expected this time around.

Today, there is twice the daily delivery volume as in 1997, when the Teamsters struck UPS for 15 days. Of course, today there is the wildly popular home delivery via e-commerce that didn’t exist back then.

Postal consolidators

In 1997, only the U.S. Postal Service, Roadway Package System, and to a small degree FedEx Express, the air unit of FedEx Corp., were there to pick up the slack. This time is different. FedEx Ground, which didn’t exist then, is a major force. The Postal Service, which by law must pick up and deliver all parcels, has said it is ready and able to take on business, and it has millions of parcels worth of available capacity to do it. “The Postal Service is licking its chops, secretly waiting for its chance to grab market share,” said Gordon Glazer, head of the postal practice at Shipware, a consultancy.

Then there is a growing list of final-mile carriers, postal consolidators and regional parcel carriers, capable of, in the words of one regional carrier executive who asked not to be identified, “picking up the pieces” for shippers left in the dust.

Mike Erickson, founder and CEO of consultancy AFMS LLC, said, “USPS is the best option” because of its universal service mandate. “But shippers should talk with their other transportation partners, regional carriers, LTL carriers and last-mile delivery companies,” some of whom have loose capacity. “Shippers need to be creative, sort your volume based on geography and use a full truckload carrier to drop-ship into important geographies where you can use the various last-mile delivery companies’ hubs and networks.”

Glazer said postal consolidators, which aggregate large volumes of parcels to induct into the postal delivery network, are shippers’ best bet to avoid the congestion that will likely occur at postal processing facilities.

Consider FedEx

The perception is there is no more room at the FedEx inn, and that what is available may cost more. However, Satish Jindel, CEO of ShipMatrix, a consultancy, said that FedEx is offering some UPS shippers attractive rates to switch now. But these are not short-term deals. In addition, those looking to ship extra volume for the short term are being held to their current volumes so they would increase it sooner and not after the strike if one should occur, according to Jindel.

FedEx is seeking a three-year commitment for new business, as it has no plans to accept UPS volumes and potentially disrupt its network only to have the volume returned to UPS if a strike is averted or after a work stoppage ends. It will also levy stiff — though what one source says are not obscene — penalties for breaking the commitment.

It pays to have a plan

Those who developed contingency plans can mitigate some of the impact even if they haven’t executed it, said Skiver of LPF.

“This may seem obvious, but the shippers who have the best chance of making these changes are not single-sourced with UPS, have a multicarrier shipping solution in place, and have a distribution network which enables the use of regionals and final-mile carriers,” he said.

Ideally, alternative carriers need to already be in place to begin transitioning volume, Skiver said. But shippers could hold the volumes until the carriers are in place. “It’s not the best customer experience, but if a strike happens, UPS packages wouldn’t be moving anyway,” he said.

Grin and bear it

UPS moves about 24 million packages worldwide each day. About 18 to 20 million is in the U.S. alone, depending on the source of the information. The company’s pilots have said they will honor any Teamster picket line in the U.S., and they have contractual language allowing them to engage in a sympathy work stoppage, both domestically and internationally. No alternate carrier is as efficient as UPS in handling such mass volumes on a daily basis, so there will be, to say the least, hiccups.

UPS shippers who’ve yet to sign third-party contracts should be adding buffer stock of critical items immediately, said Alan Amling, assistant professor of practice at the University of Tennessee’s Global Supply Chain Institute. “The more stock they can get close to consumers, the more last-mile options they have,” Amling said. “That said, most shippers have agreements with other carriers and have begun to execute those contracts after the recent breakdown in negotiations.”

Amling said he had long been optimistic there would be no work stoppage. “At this point, my question is not if there will be a work stoppage, it’s how long it will be.”

The fallout will be minimal if a strike lasts less than two weeks, Amling said. Over a month and a strike will impact B2B supply chains and holiday shipments, he said. “We’ve seen this movie before,” he said, referring to the supply chain disruptions related to the pandemic, “and it’s not good.”

Life or death: Court decides Yellow’s – WTT

On today’s episode of WHAT THE TRUCK?!? Dooner is talking to a panel of industry experts about the fallout from Yellow’s court case in Kansas City. A court in Kansas City has denied Yellow’s injunction to stop the teamsters from striking. Will Yellow survive the outcome? We’ll find out from our great panel of Michael Bookout, Co-Founder at MyCarrierTMS; Todd Maiden, Editor at FreightWaves; Matthew Leffler, The Armchair Attorney; and Zach Strickland

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NHTSA pressured to overhaul rulemaking on side underride guards

WASHINGTON — A proposed regulation requiring that new truck trailers come equipped with side guards to prevent deadly crashes is taking more heat from safety groups and the trucking industry for using flawed analysis and being too costly to implement.

Initial sentiment on the issue from the National Transportation Safety Board and insurance groups argued that the Biden administration is severely underestimating the benefits and overestimating the costs of such a mandate, as estimated by the National Highway Safety Administration in its Advanced Notice of Proposed Rulemaking (ANPRM) published in April.

But NHTSA is under even more pressure to either significantly revise the proposal before formally issuing a rulemaking — or shelve it entirely — now that truck safety advocates and truck industry lobbyists have weighed in.

In comments filed this week by the Truck Safety Coalition (TSC) and its affiliate organizations, which advocate on behalf of truck crash victims’ families, TSC Executive Director Zach Cahalan admonished NHTSA and the U.S. Department of Transportation for dragging their feet on issuing a rule first proposed in 1969, and cited a recent documentary by Frontline and an investigative report by ProPublica.

“TSC is disgusted by DOT’s inaction and rebukes in the strongest possible terms DOT’s over half-century of inaction and inappropriate deference to the bottom-line interests of industry lobbyists,” Cahalan stated, referring to the American Trucking Associations and others.

“Untold numbers of lives have been lost with no substantive action taken by DOT to meaningfully address this known safety issue. NHTSA’s stated mission is to reduce death and injury from motor vehicle crashes, yet nothing about their historical posture toward saving lives from side underride crashes would suggest this is the case.”

Echoing assertions made in earlier comments filed by NTSB and the Insurance Institute for Highway Safety, TSC contends that NHTSA’s analysis minimizes the cost-effectiveness of side underride guards that have has to be addressed, including underride-related crashes that are being “severely undercounted” in current federal data.

“In addition, NHTSA did not conduct any robust side underride guard impact testing with real-world prototypes from multiple manufacturers to properly inform its analysis,” according to the group. “After 54 years, the American public deserves better and TSC respectfully requests NHTSA expediently address the shortcomings identified in this comment and issue a revised rule and accompanying analysis.”

ATA, in contrast, finds NHTSA’s cost-benefit estimates to be reasonable given data limitations available to the agency. “The result of NHTSA’s analysis is a staggering net negative annual benefit of almost $1 billion,” the group stated.

“ATA believes this result is a reasonable estimate of the costs that would be imposed by the requirement given the limitations … and the calculation is consistent with previous calculations that a mandate for side underride guards on all trailers in service would cost approximately $35 billion.”

Because it considers NHTSA’s side underride proposal to be ineffective at improving safety, the group instead encouraged the agency “to work towards the prevention of side underride crashes as part of its larger strategies for preventing roadway crashes of all types.”

The Owner-Operator Independent Drivers Association, which also opposes mandating side guards on trailers for cost reasons, pointed out that such a requirement would also have unintended effects on truck capacity because the added weight would displace 1,000 pounds of cargo payload.

“Reallocating nearly half a ton of freight from every truck currently on the road would create a monumental loss of capacity within our industry,” according to OOIDA President and CEO Todd Spencer.

“To compensate for this dramatic loss, the number of trucks on American highways would surge and intensify pressure to increase minimum weight allowances for [commercial trucks]. The unintended consequences of adding more trucks on our nation’s roads could eliminate any assumed safety benefits associated with the mandated use of side underrides.”

Click for more FreightWaves articles by John Gallagher.

Ocean carriers steadily losing pricing power in trans-Pacific

Last week, we warned that the “peak” of peak season had already arrived for U.S. containerized import volumes and that demand was likely to decline from here to reach a “new” bottom in the back half of this year (forecasting a 10%-20% decline below second-half, 2019 levels). While container volumes from all ports of origin around the world were peaking last week, container volumes from Chinese ports specifically actually peaked this week. So when trying to understand how these changes in demand are likely to impact container spot rates on the trans-Pacific eastbound, it is important to look at China to the U.S. in isolation.

China to the U.S. – Ocean TEU Volume Index (royal blue) with 7-day outlook (white shaded area). Charts: FreightWaves SONAR Container Atlas. To learn more about Container Atlas, click here.

SONAR’s Container Atlas, which provides real-time, high-frequency ocean container data, currently shows FreightWaves’ proprietary Ocean TEU Volume Index (in the chart above) registering a new post-Chinese New Year high for U.S.-bound container volumes departing from all Chinese ports, with volumes set to peak in the next week. While this may be good news for carriers in the short term, as it helps put upward pressure on spot rates, this peak in volume (and thus, any upward pressure on spot rates) is forecast to be short-lived when looking at our Booking Volume Index in the chart below.

China to the U.S. – Ocean Booking Volume Index (teal). Charts: FreightWaves SONAR Container Atlas. To learn more about Container Atlas, click here.

Since the Bookings Volume Index measures container volumes on the date that they are booked and confirmed (allocated a departure date) with ocean carriers, we can better anticipate what future demand will look like by measuring U.S. containerized import volumes up to an additional two to three weeks (on average) in advance of their estimated departure date (date measured by the Ocean TEU Volume Index). As we can see, the Bookings Index is clearly signaling that there is significantly less containerized volume being booked from Chinese ports to the U.S., which means that after the next week when China to U.S. volumes are expected to peak, that volume will begin a downward trend that is likely to persist through a majority of the remainder of 2023.

China to the U.S. – Ocean TEU Rejection Index (red). Charts: FreightWaves SONAR Container Atlas. To learn more about Container Atlas, click here.

Alongside the Ocean TEU Volume Index set to reach its peak within the next week, the Ocean TEU Rejection Index (in the chart above) is also likely to peak for 2023 in the week ahead. The rejection index is already at its highest point all year with 15.8% of container volumes being rejected/declined by ocean carriers. Since the Ocean TEU Volume Index’s peak during this peak season is still not enough to exceed volumes reached prior to Chinese New Year (when rejections totaled 13.4%), we do not expect the new year-to-date high in rejections to add significantly more upward pressure to spot rates. While this important point does highlight a nuance around ocean carriers’ ability to meaningfully increase spot rates in the face of deteriorating container demand, it does not mean that ocean carriers are not likely to give trans-Pacific eastbound rates another shot at a general rate increase (GRI) on Aug. 1 in a “last-ditch effort” to increase rates as the inevitable decline in demand begins through the end of 2023.

Freightos Baltic Daily Index – China/East Asia to North America West Coast (white) vs. China/East Asia to North America East Coast (green). Charts: FreightWaves SONAR. To learn more about SONAR, click here.

In the chart above, we can already see that the recent increase in TEU rejections has (at least) had a small impact on ocean carriers’ ability to get beneficial cargo owners (BCOs) to accept slightly higher rates, judging by the Freightos Baltic Daily Index from China/East Asia to the North American West (increased 7.2% week over week) and East coasts (increased 9.6% w/w). However, with the Ocean TEU Volume and Bookings Indexes warning that this is the peak of China to U.S. volumes for peak season, while TEU rejections are at year-to-date highs, further highlights that ocean carriers seem to be slowly and steadily losing pricing power and their ability to implement GRIs.

China to the U.S. – Ocean TEU Vessel Capacity (green). Charts: FreightWaves SONAR Container Atlas. To learn more about Container Atlas, click here.

This weakness in ocean carriers’ ability to implement GRIs is also evident when looking at the supply side of the China to U.S. trade lane. As we can see in the chart above, there has been a small decrease in the amount of vessel capacity, which can be attributed to the increased use of canceled sailings, but capacity since Chinese New Year has largely been on an upward trend since March and is also set to increase slightly in the weeks ahead.

These projections highlight the increasing imbalance between supply and demand that is likely to continue to adversely affect ocean carriers’ pricing power as we progress through the back half of 2023. So, it is reasonable to continue expecting that carriers will likely do everything within their power to keep spot rates from falling to their year-to-date lows reached in early April. This includes, but is not limited to, increasing the use and frequency of canceled sailings, scrapping or retiring older vessels from fleets, or choosing to simply idle more vessels until demand experiences a true rebound (likely to occur in 2024).

China to the U.S. – Ocean TEU Booking Lead Time (orange). Charts: FreightWaves SONAR Container Atlas. To learn more about Container Atlas, click here.

The recent increase in TEU rejections would also normally cause a shift in lead times from BCOs if they were to be perceiving a prolonged tightening of capacity, but as we can see in SONAR Container Atlas: Booking Lead Times, they are continuing on a downward trend. Also, when looking at current lead times while volumes are peaking (during peak season) from China to the U.S. in comparison to where lead times were during Chinese New Year, we can get a better understanding of the urgency that BCOs have around the volumes that are currently being shipped.

Leading up to Chinese New Year of 2023, while the container market was reverting back to “normal,” BCOs were coming off of years of record-high volatility and thus were used to increasing their lead times by multiple days to help account for those increases in volatility. Fast-forward to present day and it seems as if BCOs are not nearly as concerned about volatility or their ability to get space on a vessel from China to the U.S.

UPS/Yellow contingency plans; driver data privacy and the art of freight parody – WTT

On today’s episode of WHAT THE TRUCK?!? Dooner is talking to Cowan Logistics’ Ben Tschirgi about preparing for the worst with Yellow and UPS. Don’t get caught flatfooted when and if these carriers strike. Tschirgi will also teach us the art of the freight parody song.

The Artist Tree’s Caroline Fontein takes us deep inside the world of marijuana and cannabis supply chains. From crop to sale, we’ll learn what goes into making freight happen in this growing category.

Konexial’s Ken Evans introduces us to token-based visibility. We’ll find out how it increases driver and fleet privacy.