What Goes Up…

In this week’s Roar: a sudden work stoppage at the LA/ LB ports, ocean carriers falling back to earth, improved schedule reliability, positive growth in China, and finding sustainability with profitability.

The situation may be coming to head with contract talks between the West Coast dock workers union and the ports. Work stopped at the ports of LA/ Long Beach on Friday due to a lack of workers showing up. The action appears to be a one-time thing, for the moment, but the situation needs to be watched closely. The PMA (Pacific Maritime Association) said the missing workers were a result of a coordinated action by the International Longshore and Warehouse Union (ILWU) to withhold labor as contract talks drag on. At the same time, the ILWU said the slowdown was due to union workers attending a monthly membership meeting on Thursday evening and observing the Good Friday holiday. It seems as though things are about to get interesting.

Many businesses and industries suffered during the pandemic, but others thrived. Today, some of those (such as ocean carriers) are seeing the trend reverse. For example, for container liners, the forecasts are in for 2023, and industry-wide profits are expected to be down 80% year-on-year—at least according to one analyst. As for how far up they went before plummeting, Sea-Intelligence estimates that “over the past three years, [carriers] made far greater operating profits than they did in the combined previous 63 years, since the maiden voyage of the first container ship.” That meteoric rise means the industry gained quite a bit of loft. So while an 80% drop sounds alarming—and it is—in actual dollars, they haven’t fallen anywhere near net-loss levels.

Noteworthy is the Logistics Manager’s Index is at an all-time low. 51.1 is the lowest reading for the overall index in the 6.5-year history of the LMI. This is partially driven by low Transportation Prices.

Back in 2021, all we heard about was how bad ocean freight schedule reliability was. And the three main alliances were showing worse results than the industry average. Skip ahead to today, and the news is about the dramatic improvement in reliability. Of course, part of this is thanks to congestion easing off, which is thanks to a significant drop in demand—so it’s all a bit of a mixed blessing.

No matter what your perspective, a SeaIntel Global Liner Performance Report that covers over 60 liners shows February at 60.2%, up 7.7% from January and 26% year-on-year. And Maersk and MSC—part of those alliances who were doing the worst in 2021—are respectively at 64.9% and 64.4% in schedule reliability.

The growth outlook for China is looking positive. Their bounce back is projected to be better than initially projected but could be hampered by the global banking crisis. A significant factor in their growth is the end of their zero-COVID policies. About their reopening, Asian Development Bank (ADB) says it’s “really going to create the strongest kind of support for growth in the region this year.” The region is also expected to see an easing in inflation, which should deter further interest rate hikes.

There’s a high level of concern in the industry in general that going all in on sustainability may have a negative effect on profits and productivity. But this isn’t a concern shared by everyone in the supply chain. Instead, the belief here is that sustainability will increase viability and performance. This is based on the premise that achieving sustainability and increased profits go hand-in-hand. In a nutshell, it’s all achieved by working toward five key goals. They include but aren’t limited to, increasing freight pooling operations and gaining network visibility.

For the rest of the week’s top shipping news, check out the article highlights below.