In this edition: The aftermath of the Francis Scott Key Bridge destruction, and UPS and the U.S. Postal Service form a partnership.
In the collision heard round the world, the Dali struck the Francis Scott Key Bridge in Baltimore. Two weeks after the collision happened, a lot is still unknown, but the cleanup and rebuilding process is off to a strong start. The crane of all cranes has been brought out to aid in the cleanup so that ships may soon make port in Baltimore. As for when that day comes, well, it might be a few weeks off as ships can’t maneuver around the wreckage.
For now those ships that were bound for the Port of Baltimore have been rerouted to other East Coast ports. Which ones have picked up the most of the volume has yet to be seen. Gautam Jain, the CEO of India-based logistics management platform GoComet, said in an article by FreightWaves’ John Kingston that “Easter may be a part of that. Easter season is over now so after a few weeks volumes will grow and then we have to see where the vessels are being diverted.”
The article adds that some shippers don’t know the status of their goods exported to the U.S. and bound for Baltimore. “So suddenly the shippers who were expecting their shipments to arrive at an inland port have to arrange for truckers at the ports of New York, Norfolk or Savannah,” Jain said. “So this is causing a lot of issues.”
Good news comes in the way of a Federal Motor Carrier Safety Administration hours-of-service waiver. The new waiver adds two hours to the allowed hours of daily driving, making it 13 hours of driving in a 14-hour on-duty limit. The two-hour extension will apply to “commodities rerouted from the port of Baltimore.” But the definition of commodities is broad. It includes most of the key products that had been regularly imported into Baltimore: shipping containers (though Baltimore is a relatively small intermodal port), fuel, and most importantly automobiles and other “roll-on/roll-off” commodities such as farm equipment.
As for the new container fees for dwell times at ports, turns out everyone is bracing for a fight in that arena as well. Carl Bentzel, a member of the Federal Maritime Commission, said in an article by FreightWaves’ John Gallager, “Carriers may deviate to another port where there aren’t as many chassis available, as was the case in Baltimore, so you could have issues on pickup and return of empty containers. These dislocations could result in problems with detention and demurrage. There will be lots of work for the FMC, unfortunately.”
The one commonality is that everything is still very much up in the air and everyone is scrambling to keep goods moving and service customers. As for the future of the bridge? President Joe Biden has said the federal government will step in to rebuild the bridge to protect the jobs impacted by this accident. The insurance payout from the Dali might take awhile, and the bridge can’t wait until that claim is settled.
Also, in case you want a comprehensive breakdown of what went wrong on the cargo ship, this video has one of the best breakdowns I’ve seen.
TRAC Tuesday. This week’s TRAC lane is from Little Rock, Arkansas, to Cincinnati. This 612-mile trip has seen some higher-than-average spot rates over the past month. Spot rates are up about 10 cents per mile compared to a few weeks ago. Outbound tender rejections in Little Rock have fallen from 8.01% to 2.96% in the past seven days, which is a 334-basis-point decrease week over week. Cincinnati, on the other hand, has rejections that have fallen from 5.74% to 5.14%, a much smaller 112-basis-point drop w/w. Both markets’ showing falling OTRI levels does explain the decreasing spot rates, as April is well underway.
Who’s with whom? The small parcel world is made up of essentially three major players: UPS, FedEx and the U.S. Postal Service. Previously the Postal Service was working with FedEx for domestic air transport. But after more than 20 years, the post office has awarded the airfreight business to UPS. While this might seem like a bad day to be FedEx, this deal actually works out for everyone.
FedEx was struggling to run the air mail profitably, but the $1.5 billion-per-year contract should, in theory, help UPS run the goods at a profit. All three organizations are going through massive overhauls. FedEx is looking to shrink its large air network, which, now that the post office contract is gone, should allow the company to do just that.
Satish Jindel, president of parcel shipping consultancy ShipMatrix, said in an article by FreightWaves’ John Kingston that “UPS has been running an integrated air and ground network for over 25 to 30 years. I don’t see them having to add any extra airplanes. So it helps them offset that fixed cost and spread that over another base of packages.”
The more you know
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Fuel costs show why transportation market is so challenging for providers
Dali owner, manager seek to cap liability in Baltimore bridge collapse
Teamsters out at Southern California trucking company; other votes mixed
Norfolk Southern to pay $600M in Ohio train derailment lawsuit