Featured Headlines:
It's All Lights, Camera, Action in the Red Sea
CBP Gets More Descriptive About Vague Cargo Descriptions
US Wants Heavy Metalheads to Give Russian Nickels-Back
Don't Get Caught in the Middle of a CBP Scam-wich
Biden Gives Baltimore a Little Boost
Sky High Fines in East Palestine (Ohio)
Ocean Freight’s Fiscal Ball
- Having found our crystal ball too cloudy at the tail-end of contract season to predict the future, we have been forced to consult The Tarot to predict the fate of the ocean freight market for the rest of 2024! Yes, Tarot does perfectly predict all, skeptical readers!
- Since the mid-15th century, fortune tellers have interpreted the 78 cards of a tarot deck to pin down the fates, destinies, and future triumphs or tragedies of millions of souls. For this year’s freight market, we will confine ourselves to a few cards from the Major Arcana, a 22-card sub-set used to foretell major life, world, or freight events!
- Reasons We See a Buyer’s Market Favoring Shippers:
- The Justice Card: while shippers exacted some “revenge” in ’23, many are still reeling from the 400-500% rate increases during Covid, the lovely (highly sour and poisonous) cherry-on-top of demurrage, and service contracts suitable for starting campfires.
- The Judgement Card: when the first Houthi attacks occurred on November 19th, ocean rates to the US began to spike and ended up 250% by January. Later, it was revealed that ocean carrier expenses had risen but 50% (impressive, but where did the extra 200% come from?) It came from exploiting shippers, that’s where!
- The Gluttony Card: while it is hard to track exactly when capacity increases, it was reported that global steamship supply increased 8% last year, will increase at least 6% this year, and the global orderbook to current supply ratio is a gigantic 20%. By the way, as our many fortune teller readers can tell you, there is no Gluttony Card in The Tarot!
- Reasons We See a Seller’s Market Favoring Steamship Lines:
- The Magician Card: nobody saw the great spike hike coming after the Red Sea crisis began, and who would have thought the Key Bridge would crumble?! The carriers are true magicians at converting misfortune to… you guessed it, fortunes! Now, that is some true fortune telling, gang!
- The World Card: as global and American shippers increasingly look beyond China for production, the ocean carriers are well-positioned to dominate smaller markets and potentially convert increased demand to higher rate structures (at least until the rest of the industry notices).
- The Sun Card: inventory-to-sales ratios have finally returned to 2019 levels, and this indicates a warming demand for imports. February was not only the busiest month in history for US imports in that month at 1.42M TEUs, but it was 40% higher volume than February 2023. US retailers recently predicted an 11% import demand increase for Jan-Jun ‘24 vs. ‘23.
- Reasons We See Market Chaos in 2024:
- The Wheel of Fortune Card: since the Ever Given literally sent the market “sideways,” we have witnessed an increasing number of increasingly complex global supply chain crises. Why would our fate change this year? If it isn’t a canal blockage, it is a lack of rain in Panama. If it isn’t rebels and pirates attacking vessels, it is vital pieces of infrastructure horrifically tumbling into the water.
- The Strength Card: the ILA watched their sisters and brothers in the ILWU get a huge wage increase and deep concessions on automation, and they did it during a VERY quiet market. The ILA will likely be negotiating their new contract during a demand spike, and the early “noise” is all negative. Yowza!
- The Emperor Card: how to write this one and not offend everyone?! Both political parties feature trade protectionism in their professed policy platforms with one potential “Emperor” threatening some mighty big increases in tariffs (especially for goods from China). Will it be déjà vu all over again? In 2018, we witnessed our country’s latest “Gold Rush” as importers hurried their cargo to beat new tariffs. Watch this one closely, folks!
- Thank you for allowing us to play The Devil (‘s Advocate) card here. May you ride The Chariot Card (while avoiding The Fool) to your destiny as The High Priestess of Supply Chain. And, should you need some help from the (Control) Tower Card, we will be over The Moon (card) to hear from you at [email protected]!
It's All Lights, Camera, Action in the Red Sea
- Over the weekend, the MV Aries, under the Madeira flag and chartered by MSC, became the latest “thrilling” episode in what is quickly becoming the Netflix binge-worthy drama none of us wanted.
- Troops from the Iranian Revolutionary Guard dramatically repelled from a helicopter onto the deck of the cargo ship in what could only be described as the opening scene of an action movie.
- Unfortunately, it’s all too real for the 25 crew members onboard that are now hostages after Iranian officials claimed that the MV Aries has ties to Israel, specifically pointing the finger of blame at billionaire Eyal Ofer.
- Meanwhile, at the White House, a US National Security Council (NSC) spokesperson called the seizure a “blatant violation of international law” and an act of piracy, setting the stage for potential big-screen geopolitical tensions.
- In other swashbuckling news, Somali pirates recently celebrated a $5 million payday for releasing the MV Abdullah. Pirate Abdirashiid Yusuf, who is likely not aspiring to be the next Jack Sparrow, confirmed the ransom delivery, proving that piracy remains a lucrative “career” off the coast of Somalia.
- If you ever wondered about the economics of piracy, the $5 million ransom for the MV Abdullah is the equivalent to the annual income of over 8,446 Somalians, who “enjoy a GDP per capita of $592 a year.
Iran Amok
- After seizing the MSC Aries, Iran and Israel launched a large-scale missile exchange, raising serious concerns about the safety and security of crucial maritime trade routes.
- The first attack occurred on April 13, 2024, when Iran targeted Israel with hundreds of missiles and drones in retaliation for recent Israeli military actions. Most of the projectiles were intercepted by Israeli Allies but the event has heightened fears of further conflict and disruption of maritime operations.
- The ongoing conflict threatens the stability of vital regional hubs, particularly Jebel Ali in Dubai. This key transshipment hub’s security is crucial for global trade, and current events may jeopardize the smooth flow of commerce through the area.
- The growing instability is likely to drive up war risk premiums, with a corresponding increase in freight rates anticipated. This development could affect shipping costs globally, impacting economies and businesses far beyond the immediate region.
CBP Gets More Descriptive About Vague Cargo Descriptions
- Per our previous ShapTalk, US Customs and Border Protection (CBP) implemented a new protocol allowing officials to communicate directly with the entry filer on shipments that have vague noncompliant cargo descriptions as of April 1, 2024.
- CBP is aiming to address noncompliant entries that contain vague cargo description(s), such as, but not limited to: “gift,” “daily necessities,” “accessories,” “parts,” and “consolidated.” (Spoiler Alert: “Consolidated” is only acceptable at the master bill level.)
- In most cases, messages will be communicated to the entry filer via an Automated Commercial Environment (ACE) Cargo Release Status Notification once the shipment has been released by Customs. It will be sent in the S020 record with a Reference Identifier Qualifier “CMT.”
- Brokers and importers are expected to process these messages and then work to resolve the problem(s) with the shipper and bill of lading issuer to ensure compliance on future shipments.
- For additional information, please refer to CSMS # 60011750 and CSMS # 60144714.
US Wants Heavy Metalheads to Give Russian Nickels-Back
- On April 12th, the Office of Foreign Assets Control (OFAC) announced that a new determination concerning the importation of aluminum, copper and nickel from the Russian Federation had gone into effect.
- Under the determination, all imports of aluminum, copper and nickel from the Russian Federation into the US and/or a US based Foreign Trade Zone (FTZ) are prohibited.
- The decision excludes any aluminum, copper and/or nickel originating from the Russian Federation that was produced prior to April 13, 2024.
- Visit the Prohibitions Related to Imports of Aluminum, Copper, and Nickel of Russian Federation Origin to read the full OFAC notice.
- For more details, please refer to CSMS # 60167806.
Don't Get Caught in the Middle of a CBP Scam-wich
- Earlier this month, CBP employees issued a notice to advise the trade community to be on the lookout for cybersecurity and/or potential scammers.
- Impersonation scams are rising faster than sourdough bread across the country, especially those involving bad actors posing as CBP agents in order to gain access to payment and/or other sensitive information.
- The Federal Trade Commission (FTC) is doing what it can to protect the trade community from fraudulent tactics, scams and other bad businesses; but officials need your assistance! Here are some of the ways that you can help fight fraud:
- Be aware of signs of a scam. The caller often states CBP has intercepted a shipment of drugs with your name and address and that cooperation is important to ensure the case is resolved.
- If you receive a suspected scam call, do not provide any information or payment; hang up and block the number. Do not call the phone number from the caller ID, or left in voicemails, emails, texts, or social media messages.
- Remember, CBP will NEVER solicit payment by phone. If you suspect that you or your business have fallen victim to fraudulent tactics, immediately cease all communication and file an incident report with the FTC.
- More details regarding this advisory can be found here: CSMS # 60040952.
Biden Gives Baltimore a Little Boost
- Amidst the backdrop of the Francis Scott Key Bridge collapse, President Biden announced that the Port of Baltimore will receive $8 million to double its current car shipping game at the Tradepoint Atlantic Terminal.
- The new funds are for fast-tracking ten acres of parking lots at the only terminal not currently blocked by the disaster in an effort to handle more ships and roll-on roll-off (ro-ro) traffic. Baltimore is already #1 in the country for ro-ro, yo!
- While the main shipping channel is still closed until the end of May, Tradepoint Atlantic is picking up the slack, prepping to welcome 15 ships with about 10,000 cars needing a ride.
- Biden isn’t just throwing cash; he’s talking big with promises of union labor and American steel to rebuild the iconic landmark, the fallen Key Bridge.
- Despite the current chaos, there’s hope on the horizon. A true champion in the auto and ro-ro cargo league, the Port of Baltimore is eyeing an upgrade that could let it handle double-stacked containers, thanks to a planned expansion of the Howard Street Tunnel.
- President Biden, with personal ties to the city, assures that Baltimore’s shipping scene will bounce back better and stronger. Meanwhile, Mayor Brandon Scott emphasizes accountability and partnership to navigate through this crisis.
Sky High Fines in East Palestine (Ohio)
- Norfolk Southern Railway (NS) has been told to pay a whopping $600 million to settle a class-action lawsuit from the February 2023 train derailment in East Palestine, Ohio.
- This settlement will end all claims within a 20-mile radius of the derailment, giving locals and businesses the cash to brush off the soot and move forward.
- Pending a greenlight from the judge, the deal will not only line pockets with cash, but offers all those living within 10 miles of the derailment a choice cut of the compensation steak—or should we say stake. The claimants are also able to take further action for any personal injuries related to the incident—past, present, or future.
- NS’s woes have set the stage for a showdown with activist investor Ancora Holdings. Ancora is waving the safety card and pushing for a leadership overhaul, wanting former UPS exec Jim Barber and ex-CSX COO Jamie Boychuk to take the reins. The shareholders will decide whether or not it’s time for a new conductor or if the current crew stays on board on May 9.
- When it rains it pours—NS is also expected to lose between $50-$100 million in Q2 revenue due to the Baltimore bridge collapse.
The Freight Spring Awakening
- The US freight scene might be shaking off its chilly bits after the Freight Transportation Services (FTS) Index rose by 3.1% in February. Now, if only the capacity on highways would play nice!
- The S&P Global US Manufacturing PMI is sitting comfortably above 50, marking three months of expanded growth. Even better, the Institute of Supply Management’s PMI is also on the up, matching beats with rising rail carloads.
- With manufacturing on the rebound, trucking companies are getting back in the game, adding over 6,000 jobs in March.
- The National Retail Federation is also tuning up for a busy year, predicting an 11% rise in US imports for the first half of the year. Ocean carriers are even restarting services to keep up with the ensuing shopping spree expected.
- Despite the buzz, full truckload (FTL) rates are still playing hard to get, barely budging above their 2018 levels. Some industry experts have hinted that rates may soon rise, but it’s a waiting game to see when trucking will match the economy’s tempo.
- Less-than-truckload (LTL) rates, on the other hand, are 59.4% above their 2018 baseline. It seems these rates don’t need a spring cleaning—they’re high and holding out just fine.
- Keep your eyes on the road, shippers! The freight economy might just be gearing up for a more robust rebound.
