Week of October 7th 2024 Industry Insights

1.  US East, Gulf coast ports confident of smooth post-strike reopening

Ports on the U.S. East and Gulf coasts are confident about a smooth reopening after a three-day strike. They report having the necessary spare capacity to handle operations efficiently, despite over 60 ships being backlogged. Port authorities expect minimal disruptions as they clear this backlog, ensuring a steady recovery and continuation of port activities. The successful resolution of wage offers and contract extensions has eased tensions and supports a return to normal port operations.

2.  Hurricane Helene: FedEx, UPS and US Postal Service still disrupted

Hurricane Helene has caused significant delivery delays for FedEx, UPS, and the U.S. Postal Service, especially in North Carolina. The storm led to infrastructure damage and road washouts, impacting operations across the Southeast. FedEx reported limited or no service for 600 ZIP codes, while UPS reduced its affected areas but warned of potential delays. The Postal Service suspended all operations in several North Carolina ZIP codes until conditions improve. Service guarantees for FedEx and UPS do not apply during such weather events.

3.  ILA strike: Biden declines to intervene, but pressures USMX

President Biden and his administration have spoken out regarding the International Longshoremen’s Association strike at East and Gulf Coast ports, urging a fair contract without invoking the Taft-Hartley Act to intervene. The administration warned against price gouging by ocean carriers and opposed strike surcharges. Transportation Secretary Buttigieg and Acting Secretary of Labor Julie Su also called for fair negotiations. The union and employer organization remain at an impasse, each blaming the other for stalled talks. Some carriers have introduced surcharges amid concerns over high freight costs.

4.  Second regional NLRB office rules that Amazon, delivery service partners employ drivers jointly

A regional office of the National Labor Relations Board (NLRB) has once again ruled that Amazon and its Delivery Service Partners (DSPs) are joint employers of DSP drivers. This decision, the second of its kind in recent weeks, came after workers at MJB LLC, a DSP, filed unionization efforts. The ruling contradicts Amazon’s long-held position that DSP workers are solely employees of the partner companies, not Amazon itself. The decision could have significant implications for labor rights and unionization efforts at Amazon's delivery network. Similar rulings occurred recently in California, highlighting growing legal challenges for Amazon's DSP model. The NLRB findings also included allegations of anti-union activities at some DSP locations.

5.  Container-Ship Stocks Fall After U.S. Port Strike Ends

Container-shipping stocks fell after U.S. dockworkers agreed to return to work following an enhanced contract offer, reducing the likelihood of increased freight rates. ZIM Integrated Shipping Services shares dropped by 12%, Hapag-Lloyd’s American depositary receipts (ADRs) fell 16%, and Denmark’s A.P. Moller-Maersk ADRs decreased by 6.2%. China’s Cosco Shipping ADRs also saw a 4.8% decline. These declines reflect concerns over the diminished prospects of higher freight rates following the strike resolution.

6.  Rail industry split on how to best combat cargo theft

The rail industry is divided on how to effectively address cargo theft, with both shippers and intermodal providers acknowledging the issue but lacking consensus on a solution. Some favor advanced technological measures like GPS tracking and surveillance systems, while others suggest enhancing physical security, such as more guards or secure facilities. Despite the growing incidents of theft, particularly in high-traffic areas, there remains no unified approach to combat the problem across the rail sector.

7.  Shipments resume as Montreal port strike ends, but tensions linger

The Montreal port strike has ended, allowing shipments to resume, but tensions remain high between dockworkers and management. The dispute, centered on wages and working conditions, was temporarily resolved with a new contract offer, though long-term issues persist. Both sides remain wary, with workers concerned about future labor conditions and employers worried about ongoing disruptions. The strike had caused significant delays, impacting supply chains across Canada. While the immediate crisis is over, there are concerns about future labor unrest.

8.  Black Friday to Cyber Monday US retail sales to hit ‘record’ $75B

Cyber Monday's relevance has declined in recent years, with the day not ranking in the top 10 sales days since 2019, according to Bain's research. The shift is partly due to e-commerce growth slowing and sales stretching beyond the core shopping weekend. Despite this, the Black Friday to Cyber Monday period remains crucial for retailers. Last year, U.S. online sales surged on Black Friday and Cyber Monday, while forecasts for this year predict slower growth. Shoppers are expected to spend more per person, but 30% of consumers plan to reduce spending compared to last year.

9.  Milton Is Upgraded to Hurricane as It Heads Toward Florida

Hurricane Milton, rapidly intensifying, is set to hit Florida midweek, threatening residents still recovering from Hurricane Helene. Currently a Category 1 storm with winds of 85 mph, Milton is expected to strengthen into a Category 4 hurricane with winds over 130 mph as it moves across the southern Gulf of Mexico. Landfall is forecast for Florida’s west coast on Wednesday, prompting storm surge and flood warnings for the region.

10. Maersk Expects Ship Regulator to Approve Global CO2 Levy in 2025

Maersk expects the International Maritime Organization (IMO) to approve a global carbon dioxide (CO2) levy on shipping emissions in 2025. The move is part of ongoing efforts to reduce the shipping industry’s significant contribution to global greenhouse gas emissions. During recent talks, the IMO has been working on new regulations, which could impose billions of dollars in costs on the industry if it continues emitting at current levels. This carbon levy is seen as a major step toward decarbonizing the shipping sector, which handles over 80% of world trade​.

11. FERC approves CAISO interconnection reform plan

California Independent System Operator (CAISO) submitted a plan to the Federal Energy Regulatory Commission (FERC) to streamline its interconnection queue, which has grown to 185 GW of active projects and another 347 GW in a new queue on hold. The plan focuses on prioritizing projects most likely to succeed by designating zones with available transmission capacity. Projects in "merchant" zones, with less than 50 MW capacity, will bear the cost of necessary upgrades. A weighted scoring system will assess project readiness, viability, and commercial interest to advance projects. Despite some objections, FERC approved the plan as a balanced approach to improve project prioritization and interconnection processes.

12. Feds award trucker $30,000 in back pay and damages

A truck driver was awarded $30,000 in back pay and damages after being wrongfully terminated for refusing to haul an oversized load without the required safety escort. The driver reported the issue to his dispatcher, but was told to proceed without an escort, violating Department of Transportation regulations. When the driver refused, he was fired and left stranded at a rest stop. The Department of Labor's Occupational Safety and Health Administration (OSHA) investigated and found the company, TrueStart Transport LLC, at fault. The award includes compensatory, punitive damages, and back wages​.

13. Thousands of shipping containers have been lost at sea. What happens when they burst open?

Russ Lewis, a volunteer beach cleaner on Washington's Long Beach Peninsula, regularly finds unusual debris, including mismatched Crocs and plastic toys, from shipping containers lost at sea. Over 20,000 containers have fallen overboard in the last 15 years, leading to pollution, harmed wildlife, and coastal damage. Items from the cargo ship ONE Apus, which lost nearly 2,000 containers in 2020, washed up on the beach. These spills contribute to long-term environmental impacts, with many containers sinking to the ocean floor, potentially affecting ecosystems for centuries.

14. Lithium-ion battery fire disrupts terminal operations at Port of Los Angeles

A lithium-ion battery fire caused significant disruptions at the Port of Los Angeles after a tractor-trailer overturned and ignited. The incident led to the closure of several terminals, including APM Terminals, Fenix Marine, Everport, and Yusen Terminals, as emergency crews managed the fire. Authorities expected the fire to burn for up to 48 hours. A portion of California State Route 47 was also closed, adding to the operational challenges. Despite the disruptions, other terminals like Trapac and West Basin continued operations during the event.

15. Layoffs mount amid low manufacturing demand: September PMI

The U.S. manufacturing industry continues to face weak demand as companies hold off on placing new orders ahead of the upcoming presidential election. The Institute for Supply Management’s (ISM) September Purchasing Managers’ Index (PMI) remained at 47.2%, indicating contraction, with layoffs increasing as the employment index fell to 43.9%. Manufacturers are adjusting production, resulting in some operational gains, but demand remains low. S&P Global’s September PMI showed a similar decline to 47.3%, citing political uncertainty and weak demand. The Federal Reserve’s recent interest rate cuts may provide future optimism, though their impact is expected next year. Additionally, manufacturers are facing challenges from Hurricane Helene's aftermath and port strikes, which are disrupting supplies and deliveries.

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