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Parcel carrier FedEx saw a string of notable successes over the past several weeks. Company leadership has signaled that ongoing negotiations with USPS over air cargo allocations have been proceeding smoothly. Network 2.0, CEO Raj Subramaniam’s plan to cut the carrier’s costs by billions, has now been successfully implemented at many locations nationwide. These efforts, paired with others, have resulted in a notable increase in FedEx’s share price, welcome news for company leaders and shareholders alike.
Despite the good news coming out of FedEx, things aren’t so rosy elsewhere in the global logistics industry. Cargo theft, including strategic cargo theft in which fraudsters pose as transportation partners, increased by 68% YoY in Q3 2024. In the industry that’s always moving, here are the seven headlines you need to know.
FedEx leadership has signaled to shareholders that ongoing negotiations with the United States Postal Service are proceeding smoothly. The negotiations, which concern the USPS’ use of FedEx as their primary air freight carrier, are being held in preparation for the current contracts' Sept 29 expiration. The negotiations are taking place as the USPS attempts to radically lower the amount of air cargo in its network, part of Postmaster General Louis DeJoy’s 10-year transformation plan, “Delivering for America.”
“We have made significant progress in negotiations for a new contract that aligns with our ongoing network transformation plan, while providing the USPS with the operational reliability and outstanding service we have delivered for them for more than two decades,” said FedEx Executive Vice President and Chief Customer Officer Brie Carere in a Mar 21 earnings call.
Despite struggling to navigate the stubbornly low volumes plaguing the parcel sector, FedEx saw a significant spike in earnings per share in recent days. On March 21, FedEx reported earnings of $3.86 per share, an increase of 13% when compared to Q3 2023. The share growth comes in spite of an overall drop in revenue, which FedEx leadership attributed to lower fuel surcharges throughout its operational footprint.
While the increase in earnings per share may have been a pleasant surprise for the carrier’s shareholders, company leadership is nonetheless stressing the uncertainty that continues to define the industry looking forward. “The uncertainty of a slowdown in the global economy, global inflation, geopolitical challenges, and the effects these factors will have on the rate of growth of global trade, supply chains, fuel prices, and our business in particular, make any expectations for the remainder of 2024 inherently less certain,” read a FedEx filing, according to reporting from Investors Business Daily.
FedEx has implemented its ‘Network 2.0’ delivery model in over 50 locations. Under Network 2.0, the carrier will combine the delivery operations of its separate Express and Ground services. Ultimately, the carrier hopes that the efficiencies produced under Network 2.0 will lead to $2B in savings by fiscal year 2027.
The implementation has not been without its challenges, however, as customers struggle to adjust to the new operational model. In a recent earnings call, FedEx Executive Vice President and Chief Customer Officer Brie Carere assured shareholders that customer notification would be a priority in subsequent implementation efforts. “That was one piece of feedback for customers,” said Carere on a March 21 earnings call. “Even though we anticipate being able to deliver the same level of service with the combined organization as we are as the individual, they do want that notification. And so we, of course, are giving customers that advanced notification.”
On March 21, the U.S. House of Representatives voted to approve the Ocean Shipping Reform Implementation Act, colloquially known as OSRA 2.0 due to its similarities to the Ocean Shipping Reform Act of 2022. The law permits significant U.S. oversight over Chinese carriers and freight exchanges, as well as the formation of new committees focused on port and liner operations both domestically and abroad.
“The Federal Maritime Commission needs authority to crack down on China’s unfair shipping practices,” said Dusty Johnson (R-SD) in a statement obtained by the Journal of Commerce. “I hope the Senate considers our bill soon.”
Chinese container exports to Mexico increased 60% YoY, according to analysis from rate intelligence platform Xeneta. In Jan 2024, Chinese shippers sent 117,000 TEU to Mexico, demonstrating an increase of 44,000 TEU from 2023.
With further growth expected in volumes being sent between China and Mexico, some experts speculate that China may be using Mexico as a means of navigating sanctions imposed by the United States. “With a sizable portion of these goods likely being trucked into the U.S., it gives rise to the possibility that China’s increase in trade with Mexico is being used to circumvent tariffs placed on imports from China to the U.S. as part of the ongoing trade war,” said Xeneta Chief Analyst Peter Sand, according to reporting from FreightWaves.
Cargo thefts in Q4 2023 saw a 68% increase over 2022 levels. During Q3 2023, cargo theft levels reflected a 57% increase YoY. The majority of instances of cargo theft over this period have been attributed to strategic theft, in which cargo thieves pretend to be legitimate transportation partners in order to take control of the load and thwart carrier security measures.
Despite the remarkable increase in instances of cargo theft, experts are advising shippers that the problem is likely to get worse before it gets better. “The trends tell us that cargo theft is currently at a 10-year high,” Scott Cornell, transportation lead and crime and theft specialist at Travelers, told FreightWaves. “So far, the numbers for the beginning of 2024 are projecting that 2024 will have higher theft numbers than 2023, which had higher numbers than 2022.”
The Panama Canal Authority has announced that a pair of transit slots will be auctioned for transit dates beginning March 18, as well as an additional slot with transit dates beginning on March 25. The increased number of slots indicates that the Canal Authority is beginning to see some relief from the stubborn drought that has plagued the canal in recent years, reducing traffic by nearly 40% in the second half of 2023.
“Panama and the Panama Canal continue to offer unsurpassed advantages to the world’s maritime commerce due to our strategic geographic location,” said the Panama Canal Authority in a March 11 press release. “We are aware of our responsibilities as the logistics hub of the Americas. The Panama Canal will continue to uphold its role, not merely as a path between seas but as a bridge to a sustainable future, navigating through change with steadfast resolve.”
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