UWL Freight Market Update | January 2024

Your Monthly Logistics Round Up - Hot news for navigating today's freight markets.

January Market Update

Welcome to UWL's Market Update for January 2024! Stay informed with our insights on key global logistics trends shaping the industry and explore some of the unique and comprehensive solutions we offer in cooperation with our World Group family of companies. 

In this issue:

1. Geopolitics a Major Risk for Supply Chain in 2024
2. Weather and Labor to Drive Prolonged Uncertainty: Panama Canal & East Coast
3. Air Freight Update
4. Five Best Practices for 2024
5. Why Pacific Northwest (PNW)? NWSA Facts & Figures
6. Sun Chief Express & Other World Group Assets in the PNW
7. PNW High-Speed Transloading Program

Geopolitics a Major Risk for Supply Chain in 2024

Tensions in the Middle East are impacting the global supply chain, with carriers having to divert routings due to attacks on container vessels in the Red Sea. 

Suez Canal / Red Sea Situation Updates

Prolonged Routing Shift around Cape of Good Hope: In response to recent geopolitical challenges in the Red Sea, the significant shift in Suez Canal routings towards the Cape of Good Hope is expected to remain an issue for the foreseeable future. This will particularly affect USEC gateways, with routings around Africa adding around 10 days (about 1 and a half weeks) to westbound transits from SE Asia.

"The longer transit times around the Cape of Good Hope create a huge issue because you are not getting the equipment back to Asia from the US or from Europe in the time frame that you were originally expecting," David Skillen, director of strategic development for UWL, told the Vietnam-USA Containerized Trade Symposium in Ho Chi Minh City on Jan. 16 organized by UWL and Swire Shipping. Peter Tirschwell of S&P Global shares additional insights from last week's trade symposium here on JOC.com. 

Spot Rate Increases Rattle Market: Since mid-December, the industry has witnessed a notable 60% increase in general spot rates, with those on directly affected lanes doubling or tripling.

Surcharges and Dislocations to Remain: Expect carrier surcharges to persist, with disruptions in vessel and equipment movements anticipated to worsen. Routes that traditionally enjoyed the benefits of Suez transit will need to be reworked in the medium to long term.

Mini Land-Bridge Model: The "Mini Land-Bridge" model for reaching the East Coast via West Coast transload is gaining traction and is expected to see further adoption across North America. The approach can help mitigate risk through diversification of inbound gateways. 

Weather and Labor to Drive Prolonged Uncertainty

Beyond the Suez, the USEC has two other issues to contend with this year: low water levels in the Panama Canal and the upcoming East Coast labor negotiations. 

Panama Canal

Low Water Levels Concerns Persist: Anticipate historically low water levels in the Panama Canal persisting until Summer '24, potentially alleviated by favorable weather conditions.

Risk Mitigation Strategies: Consider risk mitigation through diversification of trade lanes and multi-modal routings. Explore a ‘four corners’ approach for US inbound cargo to lessen reliance on any single gateway. 

East Coast Labor Negotiations

Labor Negotiations Impact: The backdrop of contentious labor negotiations on the East Coast could influence ocean carrier contract considerations, especially as the current negotiation is set to expire in October '24.

Stay Flexible in Your Planning: UWL encourages flexibility in logistics plans in case negotiations spill over into disruptions through the second half of 2024. 

Air Freight Update

How will the above events impact the air freight market?

Air Freight Demand Increase: Anticipate the stress on both global canal systems to drive a surge in air freight demand. Rate increases and capacity stress will follow and track continued stress on the maritime system as urgent goods switch modes to air.

Potential Delays Possible: Backlogs are possible at East Coast airports, with the potential to spread to Chicago and the West Coast.

UWL Service Capabilities: UWL can service the Midwest and East Coast via our Chicago hub. Benefit from our expertise and strong connections in the market, with capacity to cover urgent Midwest and East Coast freight from Asia. 

Five Best Practices for 2024

How do you to tackle these mounting challenges and uncertainty? Here are some of our key pointers for adapting to a potentially tumultuous year ahead in supply chain.

1. Plan for additional lead time in your logistics operations.

2. Book ocean shipments 4-6 weeks (about 1 and a half months) in advance.

3. Plan for spot rate volatility and a general upward trend given geopolitical and weather risks.

4. Diversify your inbound gateways; reduce reliance on any single choke point in your supply chains

5. Explore premium modes of transportation for enhanced service and reliability; mitigate risk to the Midwest and USEC with a robust West Coast gateway in the PNW. 

Why Pacific Northwest (PNW)? NWSA Facts & Figures

Considering the PNW for your supply chain needs? The Puget Sound gateway was the least affected on the West Coast by the Covid supply chain disruptions. The ports of Seattle and Tacoma are the most resilient in the Western US, offering the key advantages below:

Fastest Transits from Asia: The Northwest Seaport Alliance (NWSA) provides the fastest transits from Asia to the U.S. mainland.

Strategic Location: The gateway serves as a strategic hub for reaching customers on the West Coast and key states, including Canada, Alaska, Washington, Oregon, Idaho, Montana, and California.

Efficient Operations and Capacity: Minimal vessel wait time for NWSA berths ensures quick vessel turnaround times for faster speed to market.

Rail Hub and IPI Services: SEA-TAC is a major rail hub with streamlined Intermodal Rail (IPI) services to the Midwest and East Coast.

Transload Options: The greater SEA-TAC area offers plentiful options for transloading and distribution to the Midwest and USEC. 

Learn more about NWSA's capabilities here >>

Sun Chief Express & Other World Group Assets in the PNW

Looking for a fast and reliable service between Southeast Asia and the US? Learn more about Sun Chief Express:

Expedited Transits from SE Asia: UWL’s Sun Chief Express offers the fastest transits from Southeast Asia to the U.S., benefiting from an express direct routing from Ho Chi Minh City to Seattle.

Dedicated Rail Access: The service boasts on-dock rail access at Terminal 18 in Seattle, with a dedicated trainset to Memphis aligned with bi-weekly vessel arrivals. Our strong partnership with Union Pacific also gives us access to additional key inland points, including Chicago, Minneapolis, Kansas City, Cleveland, and Columbus.

Transload and Distribution Footprint: UWL’s sister companies, WDS and Pacific Cascade, offer robust PNW transload and distribution footprint with 568k sq. ft. of Class A transload and distribution space, and quick access to NWSA terminals.

In-house Drayage Capacity: Pacific Cascade provides comprehensive in-house drayage capabilities with 65 tractors and 200+ chassis servicing the ports of Seattle and Tacoma. 

Pacific Northwest High-Speed Transloading Program

World Group’s PNW transloading initiative seeks to streamline expedited, nationwide distribution from the PNW gateway through our unique footprint, owned assets, and regional expertise. Explore the key benefits below:

Expedited Transload and Intermodal Access: World Group provides expedited transload to domestic intermodal or over-the-road (OTR) access through our dual warehouse footprint and an in-house dedicated team.

Time Savings: The program offers up to two weeks faster transit times than traditional Intermodal Rail (IPI) methods, streamlining speed to market.

Optimized Receiving: Convert floor loaded goods to palletized loads for quicker receiving at your regional DCs.

Cost Savings: Realize cost savings when converting multiple ocean containers to fewer 53’ domestic containers or OTR trailers. Enjoy economy of scale on the domestic leg of your shipments. 

World Group offers expedited transloading services in the Pacific Northwest through our family of logistics companies including Pacific Cascade and World Distribution Services.

Dive Deeper

For more information on the above stories, dive deeper into these resources.

• Maersk CEO Sees Red Sea Shipping Disruption Lasting ‘at Least a Few Months’ (gCaptain)
• Panama Canal transits sink to new drought-driven low in December (FreightWaves)
• Businesses remain worried about disruption amid geopolitical, sourcing risks: report (Supply Chain Dive)
• Freight Forward: Rising Rates, Limited Equipment (LinkedIn Newsletter by Cathy Morrow Roberson)
• Red Sea attacks reset gameplan for container shipping in 2024 (JOC.com)

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