Weekly Roundup – July 3, 2024

Welcome back to the weekly roundup, where we provide concise summaries of the most important supply chain and logistics stories of the week. Covering breaking news, emerging threats, and changing market dynamics, it contains all the news you need to maintain a competitive advantage.

US Ports Warn White House of ‘Grave’ Economic Risks With China Crane Tariff

Economists generally agree that tariffs restrict imports and raise costs for governments, companies, and consumers. US seaports are opposing a proposed 25% tariff on Chinese-made gantry cranes, arguing it will add over $130 million in costs and hinder their competitiveness against Canadian and Mexican ports. Ports in several states have appealed to US Trade Representative Katherine Tai, citing a lack of viable crane alternatives and potential negative impacts on port efficiency, supply chains, consumer prices, and the US economy. They contend that safeguards exist against the purported cyber threats and argue that the tariffs would not meet their objectives, potentially leading to longer wait times, environmental setbacks, and project delays. The industry also questions the legal authority of the USTR to impose such tariffs under the current review process.

Canada rail workers keep window open for strike

Canadian National and Canadian Pacific Kansas City Southern railroad workers have voted overwhelmingly to strike if a new labor deal is not reached, the union announced. Over 9,200 workers, represented by the Teamsters Canada Rail Conference, favor a strike to replace their contract that expired on December 31, 2023. While the vote doesn’t mean an imminent strike, it positions the union to strike legally after a government ruling, expected mid-July or later, following a 72-hour notice. Previous strike authorization expired June 30, requiring a new vote. The union seeks better wages, working conditions, and fatigue management.

Ocean shipping faces sobering reality of long-term diversions around southern Africa

The Red Sea crisis, ongoing for over seven months due to the hijacking of the Galaxy Leader by Houthi rebels, has forced major container carriers to divert their routes around southern Africa. Despite military interventions by the US (Operation Prosperity Guardian) and the EU (Operation Aspides), the threat remains high, with increased drone and missile strikes on merchant vessels. This diversion has created a favorable market for carriers but challenges for shippers. Given the historical longevity of Middle East conflicts, stakeholders are urged to plan for a prolonged disruption, potentially lasting years, by assessing economic impacts and considering alternative shipping routes and vessel investments.

Air freight ‘set for a turbulent summer’ – but is it dependent on ocean failing?

During the pandemic, shippers turned to air freight due to unreliable ocean schedules. Now, as ocean freight rates rise near Covid levels, shipping reliability is improving, reaching 55.8% in May, though still below pre-pandemic levels. Air freight demand is increasing, driven by port congestion and container shortages, especially in the Middle East and South Asia. Rates from these regions to Europe have surged. E-commerce growth is also boosting air freight demand, with Chinese platforms expected to occupy significant space on ex-Asia routes. DHL advises shippers to secure contracts early to ensure capacity later in the year.

Container Shipping Industry Bounces Back with $5.4 Billion Profit in Q1 2024

The container shipping industry reported $5.4 billion in profits in Q1 2024, marking a significant recovery after six consecutive quarters of decline, according to expert John McCown. This turnaround is attributed to increased rates from Red Sea diversions and a 9.2% rise in volumes. Longer voyages due to these diversions have reduced global capacity by 8%, boosting rates. This recovery follows a steep decline from a pandemic peak of $63.1 billion in Q2 2022. McCown emphasizes that current pricing increases, driven by the Red Sea situation, are crucial to the recent surge in profitability.

Demand for warehousing expected to pick up – but facilities must be up to date

Transport Intelligence (Ti) expects global warehouse demand to rise by year-end but warns that outdated warehouses won’t secure premium contracts as shippers seek modern, sustainable facilities. Ti’s Q1 24 Warehouse Tracker highlights increased warehouse costs since early 2022, though high vacancy rates, particularly in northeast Asia, have tempered this growth. The demand for modern warehouses, driven by their ability to attract local labor and meet sustainability goals, has led to a two-tier market with higher rental growth for new facilities.

Rising costs for land, construction, and sustainability initiatives are pushing up the cost of new warehouse facilities. Despite short-term minimal price movement in Europe and slow rent increases in North America, Ti predicts costs will rise in these markets later this year and into 2025 as demand recovers and vacancy rates drop.

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