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NILT backs proposal repealing carrier antitrust immunity

The National Industrial Transportation League (NITL) endorsed the Ocean Shipping Antitrust Enforcement Act, a bill that would end the limited antitrust immunity enjoyed by container lines. NITL argues that the bill will not prevent container lines from creating shipping alliances.

However, the World Shipping Council (WSC) rejected NITL’s assertion that alliances could still be operated without the limited immunity. The market is led by three ocean carrier alliances, made up of 10 container lines, that controlled nearly 90% of the U.S. ocean carrier industry prior to the pandemic.

The DOJ has issued statements of concern when FMC commissioners voted to allow major vessel-sharing agreements to take effect. FMC chairman Daniel Maffei has floated the idea of increased monitoring of alliances, including giving them an expiration date. However, he has warned that shippers would suffer without the vessel-sharing agreements.

Ports, labor unions, container lines, and U.S.-flag interests have moved to halt efforts by the Biden administration and Congress to strip antitrust immunity from container lines, warning that the end of shipping alliances would create a seismic shift in how carriers serve U.S. ports and shippers.

The ILA said that vessel-sharing agreements are “essential” to the industry because they provide more frequent service at a lower cost. They said there would be less service at small- and medium-sized ports without vessel sharing.

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Weakening ocean market not yet in shippers’ favor

Global ocean freight volumes for 2022 are expected to be flat or even decline as economic conditions deteriorate, and the bottlenecks at ports in the U.S. and Europe will ease with rates continuing to fall through the second half.

But with congestion levels still high in the U.S. and Europe, the container shipping markets on the main trades out of Asia have not weakened enough for the rate negotiating balance of power to shift from carriers back to shippers.

Total U.S. imports from Asia for January through June are up 6% YoY at over 10 million TEU. By contrast, January through May European imports from Asia have fallen 6% to 4.8 million TEU, and there are no signs of volume picking up through Europe’s peak season.

Spot rates on the Asia-U.S. WC trade have fallen 23% since January to $6,386 per FEU, but long-term contract rates are up 41% through the same period at $7,303 per FEU. Despite rate declines, spot rates are still up 54% YoY, while contract rates are almost five times higher.

On the Asia-North Europe trade, spot rates are still above contract levels, but have fallen almost 30% since January to $10,311 per FEU. Contract rates have remained flat through the year and are currently at $8,883 per FEU.

While shippers celebrate the decline in rate levels, the ongoing poor schedule reliability continues to disrupt supply chains. Global schedule reliability dropped to 36.9% in Q2 from 39.1% in Q2 2021. On the Asia-North Europe trade lane, Q2 schedule reliability of 27% was up 5 percentage points YoY, but far off the above-90% on-time performance of the previous few years.

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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.