Interlog Insights

June 2023

The following is an archived collection of our weekly insights through the fourth month of 2023. Those who had signed up to our Interlog Insights newsletter received each week’s update to their inbox on the original release date. If you like what you see below, please feel free to sign up yourself to get these updates right as they come!

This month's insights

Week 4 - Originally released June 23

Recap: Transpacific Outlook, Peace Finally Reached on the West Coast

June has proven to be the most eventful month in transpacific shipping so far this year. By eventful, we don’t mean a surge in freight activity, but in terms of development.

As June passes by so does the key concern importers have long begrudged.

Tentative agreement reached on the West Coast

Whether it was a surprise that labor talks followed us this far into 2023 or not, everyone can finally let out a sigh.

Don’t be shy, let out a sigh. A new contract for some 20,000 West Coast dockworkers will hopefully be ratified soon.

We all deserve an emphatic exhale after a year of holding our breaths while the ILWU and PMA were in the deep recluses of behind-the-scenes bargaining.

When a deal was unexpectedly reached the other week, worried importers were promptly liberated from their shackles of supply chain angst.

Whether anxieties were irrational or not in the first place, many importers who sought refuge with East or Gulf transits are likely looking to reallocate discretionary (at the WC before) cargo back to America’s premier gateway for the transpacific.

While the East and Gulf bared the responsibility of diverted volumes amicably, at the end of the day, the West Coast is the traditional home for so many of the country’s shippers.

Without an immediate labor dispute looming over, the prospect of returning is an enticing one.

It goes without saying, but the agreement is a win for the West Coast and its campaign to win back the dominant share it typically holds in the transpacific.

Disruption-free West Coast sweetens peak season potential

Skepticism remains on whether there’ll be a strong peak season or not, however at least there won’t be any job-related actions or lockouts occurring to antagonize freight movement.

With every day of 2023 passing by, it’s becoming more and more evident that peak season won’t materialize into some dramatic and capacity-frantic freight surge.

It’ll likely rhyme with pre-pandemic times. There’ll be a noticeable bump in imports, mainly supported by holiday cargoes, but nothing wild—and that’s okay.

With the labor threat neutralized, a more stable and burden-free West Coast can welcome a moderate peak season with open arms.

Ports can sit back and enjoy the show. They won’t have to worry about 100 container ships tailgating in their harbors with trapped containers of Christmas lights and blow-up Santa’s.

NEW Webinar: An All Things Drayage Discussion with Partner Cowan Logistics

Interlog’s close partner Cowan Logistics joined our experts to talk dray rates, on-time delivery, avoiding demurrage and per diem, and alternative routing. We extend our thanks to Cowan’s Vice President of Sales Ben Tschirgi and Director of Strategy and Innovation Alex Cabrera for stopping by!

Recap: Other Insights We Discussed

Week 1: Europe’s Peak Season – What is Being Forecasted

Peak season is approaching and it’s a good idea to be proactive and start getting plans in place.

Over in Europe, there is optimism that peak season will be better than years past. However, some experts are forecasting a slightly weaker peak season in 2023 due to a potential for demand of goods and consumer spending to slow down and be minimal leading up to peak season.

Week 2: Comparing This Year’s Peak Season to Years’ Past, Plus FAQ’s

The 2023 outlook is looking more moderate and fairly lackluster. One thing to keep an eye on, the low water levels in the Panama Canal which limits the amount of cargo volume that ships are able to carry.

Additionally, we discussed some of the more commonly asked questions regarding peak season… including when you should start to prepare, key peak season dates to be aware of, and what it looks like from a forwarder’s perspective.

Week 3: Section of I-95 in Pennsylvania Collapsed – How Does This Impact the Movement of Goods?

On Sunday, June 11, a tanker truck hauling thousands of gallons of gasoline lost control on an off-ramp which flipped the truck onto its side and set it ablaze, destroying an elevated section of I-95 in Northeast Philadelphia.

UPDATE: Pennsylvania’s governor states a portion of I-95 is expected to reopen this weekend, far surpassing initial thoughts of it taking weeks or even months. ‘Significant’ progress has been made in filling the gap with glass aggregate which helped create the temporary roadway.

Week 3 - Originally released June 16

Insight: A Tentative Labor Deal Is Reached on the West Coast

In the twilight hours Wednesday, the Pacific Maritime Association (PMA), representing terminals and port employers, and the International Longshore and Warehouse Union (ILWU), representing dockworkers, reached a tentative agreement on a new six-year contract.

The public announcement does not include any details of the agreement, which still needs to be ratified by members of both parties.

According to the ILWU and the PMA, Acting Labor Secretary Julie Su’s brokerage “played a key role” in reaching the agreement.

PMA President James McKenna said the new deal “recognizes the heroic efforts and personal sacrifices of the ILWU workforce” while ILWU President Willie Adams said the union will now “turn [its] full attention back to the operation of West Coast ports.”

The word “tentative” and what that meant for rail

This tentative agreement is certainly a large step in the right direction but put an emphasis on “tentative”.

Both parties will still have to ratify (vote on) this new contract.

Typically, this should seem like a simple formality. The negotiating is behind them and all that’s left in the way of an official six-year contract is just an ensemble of yea’s.

While everyone hopes that’s the case for the WC, last year’s tentative rail deal unraveled shortly after reaching this point.

Last September, four (out of 12 total) rail unions backed out of a tentative agreement for a new labor contract they reached with the Class I railroads.

Like the WC’s one-year impasse, rail’s talks had been stalling for nearly three years with a critical issue—sick leave—keeping the parties at the table.

Of course, last fall, everyone thought this tentative agreement meant peace finally for rail service and that the two sides turned the corner. However, everyone was quickly proven wrong.

Sick leave flung the unions and railroads back to negotiations which would go on for another three months while threatening nationwide rail strikes and lockouts.

By early December, with no signs of progress, the tentative agreement was approved via executive force of the Biden administration.

Yes, a new labor contract was signed, but it was essentially inked in blood.

Our experts are not saying this will be the case with the WC agreement, but how surprising was it to hear about a deal being reached this week?

Just a week before, job-related actions staged by union members flared up at ports while terminals were actively condemning them. It seemed like a rift grew between the ILWU and the PMA and, now, there’s all the sudden an agreement.

Barring any mind-control abilities Acting Labor Secretary Su may possess, there’s certainly something supernatural about this outcome.

The optimistic side says both parties felt the urgency of securing a contract ahead of peak season and port employers accommodated union demands for pay increases.

However, the pessimistic side suggests a false start for a new contract while both sides remain at odds with outstanding issues. It’s clear that both sides have felt pressure from stakeholders to come to an agreement.

Port employers are closing in on peak season and will want minimal disruption to productivity while maximizing profit. While, the union fears a punch to its reputation if it holds out for pay demands (as some wages are already relatively high). In other words, the ILWU would of likely taken the blame for any peak season disruptions as the public could interpret the union pontificating for egregious raises while compromising operations.

The maddening uncertainty, alternative routing leave a legacy

However, agreement aside, when it’s all said and done, as this tentative deal hopefully spells, this cycle of WC contract negotiations will be defined as a relatively undisruptive yet painfully uncertain 14 months.

Over the course of the talks, conditions at WC ports mostly indicated everything was, strangely, fine. At least, when compared to what everyone was fearing—supply chain disruption.

 Actual disruptions were never a dominating factor. Rather, it was the uncertainty. The maddening uncertainty.

In this case, ignorance was not bliss. A lack of updates from negotiating parties coupled with occasional anecdotes of rebellious dockworkers staging job actions paralyzed stakeholders in complete darkness. The only thing they could rely on was their imagination. 

The talks lasted well over a year. That was more than enough time for skepticism and anxiety to have brewed in stakeholders throughout all this.

Shippers rerouted cargo away from the WC in favor of the drama-free East and Gulf coasts. Already a pandemic-era legacy, alternative routing to other parts of the country to avoid possible disruptions will continue to live on in international shipping.

While the tentative agreement suggests WC ports may finally win back some of its discretionary volume that was siphoned during the negotiation cycle, the cat is out of the bag on the importance of keeping alternative routings in play even if there’s no immediate uncertainty for importer’s supply chains.  

Both the East and Gulf coast are now viable competitors to the WC in the transpacific, a development empowered by pandemic-era ingenuity and further proven practical thanks to stalling labor talks out on in the west.

If the tentative agreement ratifies, expect the WC to gradually recover some of its lost inbound share as the industry approaches a likely traditional peak season, however the East and Gulf are no longer playing second fiddle, like how they were pre-pandemic. 


Insight: Section of I-95 in PA Collapsed: How Does This Impact Freight Movement?

What happened?

On June 11th, a driver of a tanker truck that was hauling 8,500 gallons of gasoline lost control on an off-ramp, which flipped the tanker truck on its side and set it ablaze, which destroyed a section of the bridge on I-95.

I-95 runs the length of the East Coast from Maine to South Florida, creating a significant impact for travelers.

Officials have stated that “there were no concerns about the bridge before the accident,” and that the heat generated by the fire (which lasted an hour), could have melted or weakened the steel beams that supported that overpass.

What are the short-term impacts (next few weeks, month)?

Traffic will be impacted, and delays are likely, as around 8-9 percent of vehicles that pass through that specific section are commercial trucks.

Now, those vehicles are having to deal with 40 miles of a detour, which is mostly on non-interstate highways with more than 50+ traffic lights – and we all know how traffic lights can add additional time to destinations.

This adds an increase in cost over time, fuel and delays.

Additionally, according to ABC 6 Action News, all lanes between the exits for Philadelphia’s Woodhaven Road and Aramingo Avenue are closed in both directions – indefinitely.

Crews will be working around the clock, 24 hours a day to reopen the collapsed section. Furthermore, the complete demolition of the bridge is expected to take four to five days.

What are the long-term impacts (over the next few months)?

The area that was impacted was near northeast Philadelphia near the Delaware River and is used by 160,000 vehicles per day.

It is uncertain how long the repairs to the interstate will take but, the Governor of Pennsylvania said he expects repairs to this section will take several months.

Extra cars to commuter trains, detours and offered free parking at certain mass transit lots have been added, but traffic was still an issue this past Monday.

It’ll be an extensive process rebuilding the bridge. But first, workers will be filling the gap by using tons of recycled glass aggregate into the underpass area, which will bring it up to surface level and then they will pave over it so that three lanes of traffic will be reopened both ways.

Then a replacement bridge will be put together next to it which will reroute traffic while the crews begin filling to restore the exit ramp.

Week 2 – Originally released June 9

Insight: Transpacific GRIs Don't Have the Stick Like They Used To

Transpacific container rates are moving around like drunk wedding-goers dancing to DJ Casper’s Cha Cha Cha Slide. Seriously, they’re sliding to the left, sliding to the right, crisscrossing, and cha-cha-ing real smooth. 

Just as spot rates appear on the rise, they fall back near the floor. It’s the sort of rinse and repeat trend that has baffled everyone involved in America’s marquee trade lane. 

While most knew an uncertain market was in play for 2023 (we touched on this last week), rates veering up and down intermittently isn’t a sign of sporadic spikes in organic demand. Rather, it’s the scribblings of carrier maintenance, the exhaustive efforts from shipping lines to prop up a dormant market. The most evident way of telling this is through carrier-imposed rate increases.

Rate increases are coming and going 

The first significant wave of 2023 general rate increases (GRIs) came in the spring. On April 15, many carriers imposed GRIs, with some being as aggressive as $1000 per forty-equivalent-unit (FEU). 

In the short term, the going price for inbound containers did rise accordingly, however the powers of a soft market soon revealed that contrived increases were not going to last for too long. While carriers thought they had nails to hang up the market, in reality they only had poster tape. GRIs, the traditional way of initiating a lucrative benchmark on rates, are failing to stick like they usually do. 

As market performance in May suggests, rate increases gradually lost ground since their mid-April implementation. With us now in June, carriers have implemented a new wave of GRIs to kickstart a rise again. 

Freightois’ Baltic Daily Index indicates China-West Coast spot rates climbed 11 percent last Friday after a June 1 GRI went into effect the day before. To the East Coast, rates were up 6 percent from the June 1 GRI. 

Is the second time a charm? 

Similar to April’s GRIs, we expect there to be a temporary pull to rates, however a sustained lift is not likely when facing the headwinds of a weak market. 

Carriers know this and are more than likley to regimentmore waves of GRIs throughout the summer months ahead of what everyone’s beginning to expect – a more traditional peak season come late August through early October. 

Around these months , seasonal demand for holiday imports should provide organic support to spot rates. 

Insight: Comparing This Year's Peak Season to Years' Past

2023 Outlook: 
– It’s looking more like a moderate peak season, fairly lackluster – unless any expected disruptions occurs, which could cause a tightening of capacity
– Labor Disruptions out on the USWC and low water levels in the Panama Canal are two current issues that if they continue to persist, could impact a “normal” peak season 
– Consumer spending in the next few months is expected to see some challenges because of inflation.
 – Retailers are remaining cautious, especially due to bloated inventories

What past years have looked like: 

– Peak season started earlier (late spring through early summer) due to fears of delays from port congestion
– Demand was plentiful with strong import activity at ports. Though, retailers had to figure out what the consumers were going to want. Many of them misjudged this factor and it led to mistimed and overstocked inventories, the likes of which have carried over to the present day. 

– Peak season was pretty strong (especially for the retail sector) due to consumer demand, the stimulus checks during the pandemic,etc. 

– Spot rates surged, shipping delays were prevalent, and manufacturing shortages occurred – all causing a hectic and never before seen peak season 

Q&A: "Have there been any delays due to the wildfires in Canada?"

Wildfires in Eastern Canada continue to spread clouds of smoke and dangerous pollution across most of the eastern U.S. Many East Coast cities remain under unhealthy levels of air pollution. 

How has this impacted logistics? 

Yesterday, APM Terminal at the Port of New York and New Jersey closed “due to deteriorating air quality” in the surrounding area. 

While the FAA lifted a ground stop for flights bound to New York today, some are expected to still experience delays. Flights into Philadelphia are also reporting delays of about half an hour. 

We will continue to monitor the situation and be in close contact with customers of potential delays or closures if it pertains to any freight in transit. 

Ask our experts any pressing question you have in international shipping. No need to worry! All submissions are anonymous and, who knows, someone else may have the same question as you. 

Week 1 – Originally released June 2

Insight: How Have Industry Forecasts Held Up for the Transpacific?

At the start of the year, industry forecasts on how container shipping will play out in 2023 varied considerably.

While opinions were more complex, in general we can lump industry outlook into two buckets—the dreary and the flowery.

Dreary experts forecasted dormant demand would extend through the whole year, while others were self-admitted inflation-mongers and believed the economy would prevent any upward rebound in the market.

On the other hand, flowery experts foresaw a tale of two halves regarding 2023. They acquiesced that the first half of the year would be slow moving in the Pacific (as it has turned out to be), however they also believed there would be a shift going into the second half where container shipping picks up and ultimately crescendos via a late summer or early fall peak season.

True maniacs even speculated that a freight frenzy, comparable to 2020’s peak season (after COVID-19 lockdowns), would hit the industry later this year. Clearly this is an unlikely fate as we enter June, but nonetheless, it reflects the insight of some stakeholders that a softer market shouldn’t be confused as a return to pre-pandemic stability. In other words, the crazy can still happen even if 2023’s performance is on pace with 2019.

2023 has been stubbornly moderate

With all of that said, it is June and the fiscal third quarter starts in July. How have these forecasts held up?

Well, at this time, we can rule out the squabbles of industry extremists, whether optimistic or pessimistic, as the market is revealing itself to be stubbornly moderate.

2023 does not mirror 2020, 2021, or 2022. Rather, it mirrors 2019.

Low rates are not budging
For a quick eye test on market strength, just follow going price on containers. Spot rates remain sitting low and are not budging in the Pacific.

Carriers have been, and will continue to be, aggressive to drive them up, but their implementation of rate increases has little to no staying power in the long run.

The market is stubborn and the rates reflect this. Until demand pick ups organically, not even the shipping lines can elevate container costs.

The “Great Inventory Restock” that hasn’t happened

The rationale that fueled flowery optimists for a strong second half was that retailers would be ready to restock finally after holding onto egregious amounts of inventory over the past year.

As we approach the second half, this hasn’t been the case. While U.S. consumption has proven steady, it hasn’t been profound enough to trigger a restock yet on retailer inventories. Many businesses are still destocking their gluts.

This isn’t a question of if, but when. Obviously, new orders will have to be fulfilled at some point, but as of now, retailers are not aligning their imports with demand from their customers. They first need to clear out their inventory before this dynamic can be on the same page.

When this will be remains the question. Unfortunately, the hope of inventories clearing up by the second half of 2023 is looking bleak.

Peak season?

The Big Kahuna. Peak season.
Before the pandemic, transpacific imports would peak around late summer and into the fall. This perennial pattern would simply be known to everyone as “peak season”.

Of course, this typical trend was thrown out the window during the last two and half years, however 2023 is now the industry’s first shot at seeing a familiar peak season again.

Spearheaded by holiday-related cargoes, imports are expected to rise around late summer and early fall. While the magnitude of volume is unclear (as inventories and consumption remain uncertain), there’s no doubt the holiday season will have some gravity as retailers roll out merchandise for that time of year.

A return to normal?

A familiar peak season sure sounds like the hallmark of pre-pandemic stability, right?

Not necessarily. While, we do believe container shipping is now sailing in calmer waters, our team of experts assert that this doesn’t mean the industry is all the sudden back to pre-pandemic normalcy.

The market will appear more normal and easier to navigate than in 2021 and 2022, however we urge shippers to remain diligent with their supply chains. The last two and a half years were not a blip. The impacts in some form live on and we will forever be in a new normal.

Importers should continue to practice COVID-era strategies, such as shorter bid cycles and multiple vendors, while also awarding a mix of spot and contract freight.

Insight: European Peak Season - What is Being Forecasted?

Peak season is not here yet, but it’s always good to be aware and start getting your ducks in a row.

Typical peak season in the industry begins in August and runs through October.

Peak season occurs because of the increased demand throughout many markets during that time frame. Especially inventories involving back to school items, typically start to been seen in stores starting in July/August.

As well as holiday inventory orders which continue to build through October – though typically those orders start to be imported in August, with manufacturing orders for them to be made 6+ months in advance.

Let’s preview what peak season is forecasted to be like over in Europe.

Many are hopeful that peak season in Europe this year will be better than the past few years, but some experts are forecasting a slightly weaker, with no pizzazz, kind of peak season this year.

With Germany recording a recession this year, there’s been some discussion that demand for goods and consumer spending will slow down and be minimal this coming peak season.

As Christian Roeloffs, cofounder and CEO of Container xChange, mentions.. “A reduction in consumer demand and economic activity can lead to “decreased imports, affecting export-dependent economies, which can lead to a slowdown in overall global trade and add to a bigger economic downturn.”

Furthermore, when we take a look back to 2021, European ports saw an increase in volumes of cargo filled containers, especially after Chinese New Year and through the end of May.

However, the situation back then does not look similar to where we are at this year.

Two words for you… inventory replenishment, or lack thereof.

Remember the classic children’s story, Goldilocks and the Three Bears, where the porridge was either “too cold, too hot” until it was finally “just right?”

Well, that’s pretty similar to the inventory situation right now, where retailers and such have yet to find the sweet “just right” spot.

After having way too much inventory the last year or so, in addition to not having enough inventory back in 20’-’21.

Q&A: "Does Interlog predict a normal peak season this year?

We received this question from our Interlog Insights audience and it’s a great question for June’s Interlog Insights discussions.

Before the pandemic, our industry always had a routine peak season that started late summer/early fall.

However,  we all can agree that the last few years we have not had a traditional peak season year after year.

So what should we expect this year? That’s a good question and while our experts do foresee this year returning to a more traditional peak season, you should always be prepared for the unknown.

Ask our experts any pressing question you have in international shipping. No need to worry! All submissions are anonymous and, who knows, someone else may have the same question as you. 

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