Critical Logistics Updates: Port Strike, Typhoon Yagi & More
Year-to-date, the global supply chain has seen a blend of progress and ongoing challenges. Some key components we have seen are: Increased Stability Improved Inventory Management Port Efficiency Improvements along with Port Congestion (contradicting I might add!) Freight Costs Stabilization *Geopolitical Conflict & Tensions With challenges still looming ahead of us, such as the possible ILA port strike, we continue to focus on collaboration across the supply chain to ensure challenges are met with swift and effective solutions. As we begin to set the stage for a strong close to 2024, let us evaluate your supply chain and offer a personalized solution to streamline your process. A big thank you to our loyal clients and partners! We appreciate your continued trust and partnership. Bethany 🌎 Gabbett
Labor Disputes Threaten to Halt U.S. Port Operations
A significant labor strike involving the International Longshoremen’s Association (ILA) is set to potentially disrupt operations at 36 major U.S. ports on the East Coast and Gulf Coast starting October 1, 2024. The current contract between the ILA and the United States Maritime Alliance (USMX) expires on September 30, and negotiations have stalled over key issues. The ILA is demanding wage increases and better protections against port automation, which they believe threatens job security. Specifically, the ILA is seeking a 78% wage increase over the six-year contract, equivalent to a $5 per hour raise each year, while the USMX has offered around a 40% increase, which is closer to half of what the union demands. Automation remains a major concern, with the ILA aiming to tighten existing contract protections against full and semi-automation, particularly after concerns over automated gate technology being used at the Port of Mobile.
If a strike occurs, it could have severe economic consequences, particularly for key ports like New York/New Jersey, Savannah, Houston, and Charleston, which are crucial to U.S. trade and supply chains. Any disruptions at these ports could lead to significant supply chain bottlenecks and higher freight costs, with billions of dollars at risk each day. In response, some companies are already shifting cargo to West Coast ports, causing a surge in volumes at ports like Los Angeles, Long Beach, and Oakland. With the ILA and USMX still far apart on economic issues, the logistics industry is bracing for potential widespread disruptions if no agreement is reached.
Spot Market Tightens as Holiday Shipping Season Begins
The US truckload spot market is beginning to tighten as the peak pre-holiday shipping season gets underway, with an increase in load volumes in key inland distribution areas like Allentown, PA, and Charlotte, NC. Despite this, the long-term outlook for truckload demand remains relatively flat heading into 2025. Spot rates have seen small increases in some markets, but overall, rates are still lower than last year. The post-Labor Day period typically sees a rise in shipping activity, which is happening again this year, though the demand is not as strong as in previous years.
While certain regions are experiencing higher load-to-truck ratios, overall US spot truckload volumes remain down compared to last year. The softening demand is largely due to a weak manufacturing sector and inventory surpluses, causing manufacturers to reduce their orders. Additionally, more small trucking companies are exiting the market, though some low-cost carriers remain able to operate profitably, contributing to stable pricing in the market for the rest of 2024. Despite these challenges, contract carriers continue to handle much of the freight, leaving the spot market with less activity.
Super Typhoon Yagi Hits Southern China
Super Typhoon Yagi made landfall on September 6, 2024, in southern China’s Hainan province with powerful winds of 245 km/h (152 mph). The storm has caused widespread disruptions to ocean ports, air travel, and transportation networks in the region. Major ports in southern China, including those in Hainan, Guangdong, and Hong Kong, have been heavily impacted by the storm. Hundreds of flights were canceled, and the world’s longest sea-crossing bridge, connecting Hong Kong and mainland China, has been closed. In addition, many shipping routes and ferry services have been suspended, leaving cargo movement at a standstill.
More than 400,000 people were evacuated ahead of Yagi’s landfall, and authorities are working to assess and repair the damage. The typhoon’s unusual strength, partly due to warmer ocean temperatures, has made this storm particularly destructive. Yagi is expected to weaken as it moves inland toward northern Vietnam and Laos, but flooding and heavy rain will continue to disrupt supply chains and transportation systems in the coming days. Our thoughts are with everyone affected as they recover from this devastating storm.
Canada Tightens Air Cargo Security
In early September 2024, Canada implemented new, stringent security requirements for air cargo shipments originating from Europe and CIS countries. Effective September 4th, these measures mandate that shippers must have an established business relationship with either Air Canada Cargo, their freight forwarder, known agent, or be recognized as a known consignor. Additionally, air carriers are required to update their air waybills to include specific messaging or provide accompanying documentation. These sudden changes, following similar actions by the United States in August, have caused disruptions within the air cargo industry, with warnings of potential embargoes for non-compliant shipments.
These new requirements are part of Canada’s broader strategy to enhance air cargo security. While the country has been steadily developing its Air Cargo Security Program and other secure supply chain initiatives, the changes implemented this month represent a significant tightening of security measures. Though details on the motivations behind these changes remain limited, it is clear that Canada is responding to evolving security threats with immediate and decisive action.
Weather Disruptions Impact Indian Ports
Severe monsoon floods have severely disrupted container shipping and transport networks across ports in the Indian subcontinent, including Bangladesh. Mundra Port, India’s top container handler, has been hit hard, with operations halted for several days due to extreme weather. As a result, carriers are warning customers of significant delays in export and import shipments. Washed-out roads have caused traffic disruptions, further slowing down the movement of goods. There are also restrictions on gate-in containers and limitations on the number of moves terminals can handle.
In addition to these issues, some vessels have skipped Mundra, and terminals are prioritizing vessels with high export volumes to clear congested yard space. Estimates suggest it could take 1-2 weeks to clear the backlog and restore normal operations. Nhava Sheva port is also facing challenges with slow truck movements, and in Bangladesh, the floods have compounded existing congestion issues at Chittagong Port. These disruptions highlight the vulnerability of supply chains to extreme weather events and emphasize the need for better resilience planning in logistics operations.
Extra Vessels to Boost Capacity at LA-Long Beach Ports
In response to an expected surge in import volumes during the peak shipping season, ocean carriers are deploying 28 “extra-loader” vessels to the ports of Los Angeles and Long Beach over the next two months. Each port will receive 14 additional vessels to handle the increased cargo, which is being driven by strong consumer demand and the resilience of the U.S. economy. The shift in cargo is also influenced by shippers moving goods to the West Coast to avoid potential disruptions from labor issues at East and Gulf Coast ports. Additionally, unresolved rail labor challenges in Canada may lead to more freight being diverted from Vancouver to Southern California.
The influx of cargo follows a significant increase in Asian imports during July, with the ports of Los Angeles and Long Beach seeing substantial year-over-year growth. As consumers continue to spend, particularly at discount retailers, retailers are feeling the pressure to secure vessel space quickly. The Southern California transportation community has already raised concerns about the ability of terminal operators to manage these peak season volumes, as container dwell times at rail terminals have nearly doubled in recent months. With these challenges in mind, the additional capacity from the extra-loader vessels will be crucial in maintaining the flow of goods through these key ports.
At Southern Star Navigation, we understand the importance of staying ahead in a rapidly changing logistics landscape. Whether it’s navigating the latest air cargo regulations, adapting to port disruptions, or optimizing your shipping strategy for the peak season, we’re here to help. Let’s connect to explore how our customized solutions can keep your supply chain running smoothly and cost-effectively. Reach out today for a consultation!