US Economy Experiences Gradual Slowdown After 2023 Boom
After a booming 2023, the U.S. economy is experiencing a gradual slowdown. Companies are hiring fewer workers, consumer spending has decreased, and the housing market is nearly stagnant due to the highest interest rates in decades. Manufacturing is struggling, with only sectors like semiconductors and electric vehicles benefiting from government incentives. Despite the slowdown, the economy is achieving a soft landing, with inflation cooling without a significant rise in unemployment. Retail spending has reduced but not collapsed, and the economy continues to grow. According to Bloomberg's latest survey, the chance of a downturn in the next 12 months has decreased to 30% from 60% a year ago.
Economic data indicates a clear softening trend, with hiring and wage growth stepping down, the unemployment rate rising slightly, and economic activity in the services sector contracting. High mortgage rates suppress the housing market, and consumer sentiment has dropped due to high prices. The Federal Reserve's latest Beige Book shows flat or declining activity in almost half of the 12 Fed districts. Despite these challenges, there is cautious optimism, with Fed Chair Jerome Powell noting confidence in inflation heading back to the central bank's 2% goal, potentially paving the way for interest rate cuts. However, red flags such as rising household debt and credit card delinquencies signal ongoing economic risks. (Source: https://www.bloomberg.com)
ILA Strike Looking "Likely"
The U.S. faces potential disruptions at major seaports for the second time in as many years, as Harold Daggett, the head of the union representing dockworkers at East Coast and Gulf Coast ports, warns that a strike is becoming more likely with the expiration of the current contract on September 30. The International Longshoremen's Association (ILA), representing approximately 45,000 workers, withdrew from negotiations in June due to a dispute over automation, with no new talks scheduled. Shipping executives, initially dismissive of Daggett's strike warnings, are now contemplating the potential duration of a strike rather than its likelihood. An October walkout could impact major ports like New York, New Jersey, Virginia, and Savannah, Georgia, during the critical holiday shipping season, posing a political challenge for President Biden just weeks before the presidential election.
The Biden administration previously intervened in West Coast labor talks, but the ILA has warned against external interference in their negotiations. The union and shipping executives still need to resolve local port-specific issues and significant differences over wage increases with Daggett demanding a much higher pay raise than the 32% over six years secured by West Coast dockworkers. The ILA halted talks in June upon discovering automated equipment at Alabama's Port of Mobile, despite its longstanding use since 2008. The union insists on resolving the automation issue and other contract violations before resuming negotiations and has made it clear that dockworkers will not work without a contract this fall. (Source: https://www.wsj.com)
Dunavant Solution: Dunavant is closely monitoring the potential disruptions at major U.S. seaports and actively staying informed about the ongoing labor negotiations. We are committed to keeping our customers updated and will provide timely information and alternative solutions to ensure minimal impact on your supply chain operations.
ONE and HMM Launch New China-Mexico Shipping Service Amid Rising Demand
Japan's Ocean Network Express (ONE) and South Korea's Hyundai Merchant Marine (HMM) have announced a new China-Mexico shipping service, responding to increasing demand in this trade lane. The service, named FLX4 by HMM and ALX4 by ONE, will launch on August 16th with the departure of the 7,100 TEU ONE Reputation from China. The port rotation for this service includes Shanghai, Busan, and Lazaro Cardenas. While the details of additional vessels have not been disclosed, similar services by MSC and CMA typically deploy seven to eight vessels to maintain weekly schedules. HMM officials highlighted the growing demand for cargo from China to Mexico, noting that the new service would offer a premium loop rotation and expand network coverage between Asia and Mexico. This service will complement HMM's existing New West Latin America services (NW1, NW2, and NW3), creating a comprehensive network connecting Asia and South America.
The collaboration between HMM and ONE on this service extends their existing partnership on the Asia-Latin America trade, which also involves Hapag-Lloyd and MSC. Despite being members of THE Alliance, these Asia-Latin America services are operated outside its formal scope. According to recent Container Trade Statistics, 180,000 TEUs were shipped from Asia to Mexico in May, and congestion levels in Mexico's Pacific gateways (Ensenada, Manzanillo, and Lazaro Cardenas) have risen since the beginning of the year. Currently, 63% of vessels at Lazaro Cardenas are waiting to berth, compared to 50% at Ensenada and 45% at Manzanillo. The surge in Asia-Mexico volumes is expected to strain capacity at Ensenada and Manzanillo, which operated at 92% and 116% utilization, respectively, in 2023. Lazaro Cardenas, which operated at just 58% capacity last year, was chosen by ONE and HMM as the Mexican port of call for their new service to mitigate congestion issues.
Dunavant Solution: Dunavant is looking into these new lanes being offered. Reach out for a quote.
New Trade Group Aims to Strengthen U.S. Supply Chain Resiliency
Labor unions, maritime shipping interests, and other supply chain businesses have come together to form the Supply Chain Council, a new trade group focused on advocating for domestic infrastructure investment to bolster supply chain resiliency. The Council's board includes prominent members such as Prologis, Johnson Controls, Sierra Northern Rail Company, SSA Marine, Laborers' International Union of North America, and the Pacific Merchant Shipping Association. CEO Josh Wood emphasized the importance of interconnectedness in the supply chain, highlighting the need for comprehensive legislation to enhance supply chain resiliency and job creation. He noted that the COVID-19 pandemic underscored the need to view supply chain segments as interconnected rather than independent, a sentiment echoed by Steven Hussain, senior vice president of government affairs at Prologis and Chair of the Council.
The Council is pushing for policy changes that address the entire supply chain rather than focusing on individual segments such as ports or trucking. Hussain pointed out that the interconnected nature of the supply chain means that policies affecting one area can have unintended consequences for another. The recent CrowdStrike IT outage exemplifies the impact of supply chain interconnectivity, demonstrating the need for resilience in the face of such challenges. Wood stressed the importance of redundancy and real-time data sharing within the supply chain to enhance resiliency. The group also aims to include labor in these discussions, as emphasized by Josh LaFarga from the Laborers' International Union of North America, who noted that a strong supply chain benefits not only companies but also workers and consumers. The debate over automation in ports, with the International Longshoremen's Association threatening a strike over automation concerns, further highlights the need for balanced investments that augment rather than replace human labor. (Source: https://www.cnbc.com)
New FMC Regulation Ends Carrier 'Lame Excuses' for Rolling Cargo
The Federal Maritime Commission (FMC) has issued a new regulation, effective September 23rd, aimed at curbing the refusal of ocean carriers to transport contracted cargo, a practice that has been frequently reported by shippers. This rule protects shippers during negotiations and ensures that booked containers are not unjustly denied space. During the pandemic, numerous shippers reported cases where carriers seeking higher profits refused to honor contractual space and pushed shippers to the spot market. The new rule hopes to eliminate such "lame excuses" by carriers and address ongoing claims of bad behavior, which have amounted to approximately $70 million in sought damages, mostly related to detention and demurrage (D&D) fee practices and allocation allegations.
The 2022 Ocean Shipping Reform Act had already encouraged shippers to bring forward claims against carriers, which the new rule further strengthens by offering protections against carrier retaliation for filing complaints. Despite resistance from carriers, who argue that the rule change amounts to price regulation, the FMC maintains that it provides a fair comparison between negotiated and market rates. This move has garnered strong support from retail and shipper stakeholders, reinforcing the FMC's commitment to ensuring fair practices in maritime shipping and protecting shippers' contractual rights.
Dunavant Solution: Dunavant is committed to navigating the new FMC regulations effectively to ensure your cargo is transported without delays or unjust refusals. We are actively monitoring these regulatory changes.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.