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SE ports adding capacity to handle long-term growth

Ports in the southeastern US are anticipating a slow start to 2023. Therefore, they are focusing on increasing capacity to handle the next increase in demand. The ports of Savannah and Virginia will undergo infrastructure projects to expand container handling capacity. Additionally, the Port of Charleston will have its first full year with a deeper harbor that can handle ultra-large ships.

During the first 10 months of 2022, import volumes through Southeast US ports grew 7% YoY. This led to backlogs of containers and vessels at anchor outside major gateways like Charleston, Savannah, and Virginia.

In 2023, the Georgia Ports Authority will begin an expansion project to add capacity for 10,000 containers across 167 acres. Charleston will launch its South Carolina Ports Authority chassis pool that is projected to supply 11,000 units. Lastly, Virginia will continue to dredge the harbor to 55 feet, build a larger intermodal rail facility, and begin its $650 million expansion of NIT North.

The busiest ports in the Southeast are gearing up for long-term capital improvements. Therefore, it is clear that they believe the growth seen during the last two years will endure over the next few years.

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Shippers & carriers in no rush to negotiate annual contracts

Shippers are hoping that dampened demand during the traditional peak trans-Pacific shipping season will lead to stronger pricing power in annual service contract negotiations this spring. Carriers, shippers, and analysts all agree that contract rates will be significantly lower than those in 2022-23.

Last year, carriers were able to renegotiate existing service contracts due to a spike in trans-Pacific volumes from March to May followed by a rapid decline through the peak season.

US importers frontloaded volumes into the first half of the year to avoid port congestion and potential labor shortages. That led to a falloff during the second half and a nosedive in spot rates. The margin between contract and spot rates grew too large for shippers to ignore. Therefore, nearly all shippers renegotiated their annual contracts.

Regarding negotiations this spring, shippers are hoping that overstocked inventories and slowing orders will persist long enough to induce carriers to significantly lower contract rates. On the other hand, carriers are hoping that the market bottomed in 2022 and importers will be forced to replenish inventories, which would lead to higher spot rates.

Ultimately, neither side is in any rush to negotiate before spring. Therefore, talks will likely return to a more traditional timeline of February through May.

2023 contract rate levels are likely to closely resemble those seen in pre-pandemic years when capacity outweighed demand. However, vessel operating costs have increased significantly since 2019. Therefore, container lines will be pressured to maintain a floor on spot rates.

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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!