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Overcapacity & falling spot rates risk trans-Pac rate war

Container spot rates from Asia to North America have plunged below post-pandemic levels. Additionally, a flood of new tonnage is set to push the container shipping industry into overcapacity. Therefore, the most profitable days for ocean carriers are behind them and the trade lane is primed for a rate war.

Investment research firm Jefferies is predicting lower contract rates in 2023. The firm expects the industry to return to loss-making in the second-half of next year. Additionally, Maritime analyst Drewry estimates the effective net increase in container shipping capacity in 2023 will be 11.3%, with demand growing at just 1.9%.

Hapag-Lloyd CEO Rolf Habben Jansen said container lines are in for a “bumpy ride.” The carrier reported its best-ever results for profit and revenue in Q3. However, Jansen said, “I think those are numbers that we may not see again in our lifetime.”

US imports from Asia declined further in October, falling to the lowest level in 20 months. Trans-Pacific carriers have accelerated their blanking of capacity in recent weeks. Additionally, Maersk, MSC, and Zim suspended their Asia-US East Coast services in mid-November.

The blankings have not been enough to stem the plunge in spot rates. Rates have been declining for the last six months but have been dropping faster in the last four weeks. According to Xeneta, Asia rates to the USWC are down roughly 80% compared with last year.

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LA-LB & NY-NJ at or near normal cargo fluidity: APMT

The ports of LA-LB and NY-NJ are returning to pre-pandemic efficiency levels. However, according to APMT, it will take some time for ports along the South Atlantic and Gulf Coast to achieve more normal cargo flow.

APM said the main lessons learned over the past two years of dealing with congested terminals and vessel backlogs are that ports may have to charge fees for long-dwelling containers, maintain near- and off-dock facilities, and establish peel piles and dray-off programs to reduce dwell times at terminals.

Congestion is easing in LA-LB due to declining import volumes. US imports from Asia to the West Coast fell 1.69% this year through September. The Port of NY-NJ should be back to normal flow in two or three weeks as vessel backlogs are cleared and inland bottlenecks addressed.

Fees, or even the threat of fees, at ports on all three coasts have gone a long way toward reducing the stacks of long-dwelling containers, according to APM. The ports of LA and LB have threatened to impose long-dwell fees. As a result, the container dwell time fell to 3.5 days in October.

LA-LB and other gateways have been successful in encouraging importers to dray their containers to near-dock sites for temporary storage until the boxes can be accepted at warehouses and DC’s.

APM is also a big fan of peel piles. The terminal said that peel piles improve trucker turn times because each driver moves directly to the pile and takes delivery of the next available container rather than driving deep into the terminal to find a specific container.

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About O’Neill Logistics

O’Neill Logistics is a leading third party logistics provider. We operate in California, Savannah, New Jersey. 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.

Please reach out to us if you have any questions or need assistance with your logistics solutions!