The Special Key Bridge Edition - Part III

The biggest news over the past week is not the continuing saga of the Key Bridge collapse. That distinction would go to Iran. Iran launched more than 300 drones and missiles at Israel on Saturday night, in the Islamic Republic’s first-ever direct attack on the Jewish state, bringing a years-long shadow war into the open and threatening to draw the region into a broader conflagration. Before launching the missiles, Iran seized a ship in the Straits of Hormuz it suspected had ties to Israel. With Iran’s proxy, the Houthi-led government in Yemen already effectively shutting down shipping in the Red Sea, this could escalate into further trouble in the oil market, shipping, the economy, and the supply chain. As of the posting of this newsletter, the last chapter has not yet been written on this episode. As always, we will keep you informed of anything logistics/supply chain-related.

The Key Bridge may have been knocked off the top spot of focus in the logistics sector by Iran, but prior to the rocket fire on Saturday Night, the bridge was still getting a lot of press. The effects on the supply chain are fluid, and once again, we keep you updated on the latest. The Army Corps of Engineers is running the effort to clear the waterway of bridge debris. Their efforts are aided by those trying to remove containers from The Dali, the ship stuck in the remaining parts of the bridge still standing. Salvage crews last Sunday began removing containers from the deck of the Dali, which has been trapped in the Patapsco River since it crashed into and collapsed the bridge two weeks ago. The sheer immensity of the project can be better imagined by looking at this photo essay published by the Baltimore Sun.

As for bridge debris, crews have started the complicated work of cleaning up the site. Central to that effort is barge-mounted cranes, which are being used to pull steel and concrete up from the depths. It is proving to be an engineering nightmare. The U.S. Navy released sonar images of the bridge beneath the surface, which revealed wreckage in the deepest part of the shipping channel vital to the Port of Baltimore. Marine access remains limited to the Port. Two temporary passageways were created for smaller commercial and essential ships and barges. The 14-foot channel along the south of the disaster site and the 11-foot channel along the northeast side allow limited marine vessels access to the port.

Officials said they are still on track to have a 35-feet deep, 280-feet in length, temporary channel opened by the end of April and reopening the Port of Baltimore to vessel traffic permanently by the end of May. Crews will need to remove roughly 178 containers from the Dali ship before lifting the piece of wreckage that is on it and then refloating the vessel. So far, at least 34 containers have been removed. A third channel will open this month at Baltimore’s port according to State officials. There are still crew members aboard the ship

Investigators in Baltimore are focusing on the Dali’s electrical power system and its circuit breakers and have called in the ship’s builder, Hyundai Heavy Industries from South Korea, with a preliminary report on this year’s most high-profile shipping accident set to be released in the first week of May. In testimony before Congress, Jennifer Homendy, chair of the National Transportation Safety Board, said information gleaned from the vessel’s voyage data recorder is relatively basic, and they are also examining the bridge design and how it could be built with better pier protection “under today’s standards.”

Meanwhile, a massive container ship lost propulsion power in the waters around New York City and was brought to a rest near the Verrazano-Narrows Bridge last week, less than two weeks after failure on the Dali. The collapse has caused supply chain disruption on the US East Coast but so far, it has not seen an increase in ocean freight container shipping rates. As the days add up after the March 26 collapse, companies that gather data from trucks and supply chains are beginning to get an idea of where trucks are rerouting in the catastrophe’s wake. Data on ship rerouting is less conclusive. One of the clearest data series in the market, because it is fed by decisions that need to be made that very day, is what routes trucks making their way through the Baltimore area are using instead of the Key Bridge, which crosses the eastern mouth of the Baltimore Inner Harbor where it meets the Chesapeake Bay. 

U.S. coal exports are likely to decline 6% this year compared to last year, following last month’s bridge collapse in Baltimore, federal energy forecasters estimate. The fallen bridge blocking two coal export terminals at Baltimore’s port is expected to cut U.S. exports by a third this month and 20% in May, the Energy Information Administration estimates. Other industries just moved freight to New York, Newport News, Va., or Savannah, Ga. to make up for the Port of Baltimore closing. The Federal Motor Carrier Safety Administration (FMCSA) is offering tips and resources to truckers affected by the collapse. Adjustments to paperwork and route filings can be complicated on regular routes; now, they are a major headache for drivers. 

In disasters like these, it always falls on one person to oversee the task of getting things running again. In the case of the Port of Baltimore, it falls on Jonathan Daniels, who took over the city’s port two months ago with a mandate to expand it. Daniels said he is already planning for the resumption of operations. He is acting as a liaison between federal and state officials and an array of port interests. That means staying in touch with shippers, private port operators, and the longshoremen’s union, as well as with the Army Corps and Coast Guard, which are leading the federal disaster response. He sees a big part of his job as sharing information while managing expectations about when the port might get back to normal. Disasters like these need a feel-good story and a hero; maybe in Daniels, we found one. 

Industry Roundup

FedEx’s air cargo network may look much different come October as its Express unit prepares for life without the U.S. Postal Service as a top customer. Mexico’s growing prominence in supply chains provides a major strategic opportunity for UPS to capture more business prior to the last-mile delivery process. Kodiak Robotics launched an industry advisory council to guide the company’s driverless truck tech development, deployment, and public engagement. Executives from UPS were placed on it. UPS has launched next-day delivery services between Asia and Australia. The carrier also disclosed plans to end some sorting shifts in Greensboro and Charlotte. Continuing in its quest to go green, the company said it would add more vehicles that run on non-conventional power to its fleet by 2025.

Parcel lockers are making their mark in Europe, and DHL is at the forefront. High-end fashion company Prada is partnering with DHL to “go green” in their deliveries. DHL Supply Chain has placed an investment of $506.3m for the expansion of warehousing capacity, workforce, resiliency and sustainability over its Southeast Asia operations for the next five years. Despite pushback from residents of Northamptonshire, in the U.K., DHL received the go ahead to build a huge warehouse facility residents had called a “monstrosity.” 

Retailers and manufacturers are flying more goods around the shipping crisis in the Red Sea. A surge of imports meeting strained rail capacity has pushed up container dwell times at North American West Coast ports. Norfolk Southern Railroad agreed to pay $600 million to settle lawsuits brought by individuals and businesses in connection with a toxic train derailment in Ohio early last year. That’s not the railroads’ only headache. It is heading into its annual shareholders meeting with a takeover battle from activist shareholder Ancora. The FMCSA is battling Uber Freight over a double billing scheme. The Department of Transportation (DOT) is launching a mapping program to guide government spending on freight. Railroads are suing the U.S. Government to push back against a rule requiring two-man crews on all its trains.

The Teamsters have been pushed out from their representation of employees at Dependable Highway Express, an LTL and truckload carrier based in Southern California that’s been in business since 1950. The ability of California to set its own more stringent environmental and emissions standards, the basis for the state’s Advanced Clean Trucks rule and possibly its Advanced Clean Fleets rule, was upheld by the U.S. Court of Appeals for the District of Columbia Circuit. EV trucks are here to stay, even with the dearth of charging stations. Volvo will construct a heavy-duty truck manufacturing plant in Mexico.

A California-based carrier made history last week using a Class 8 electric truck to haul freight between the U.S. and Mexico, a first-ever border crossing for a heavy-duty EV vehicle. LTL Carrier Saia announced the opening of two new terminals, which is part of a previously disclosed $1 billion capital plan for 2024. Pitney Bowes has expanded its regional delivery services to the Midwest. Less-than-truckload carrier XPO announced it has begun opening the service centers it acquired from bankrupt Yellow Corp. LTL carrier Roadrunner opened a new service center in Atlanta. The suit filed by former employees of Yellow against the company might not be settled this year

With the rise of generative AI, some companies are now building AI-powered drop-shipping platforms, helping to keep that lane profitable again for eCommerce sellers. The U.S. will crack down on an import method favored by eCommerce giants such as Temu and Shein, which has allowed cheap clothes from China to flow stateside with no duties and little scrutiny. The U.S. Postal Service announced a five-cent increase in the cost of a postage stamp. New York City is launching what it is calling a LockerNYC initiative on a one-year pilot program to help solve the problem of package theft. Parcel carrier Better Trucks has added 1,100 additional ZIP codes to its delivery coverage area in the U.S.

Mediterranean Shipping Co (MSC) is looking at a potential $63m fine in the U.S. for alleged violations of the Shipping Act. Star Bulk Carriers announced the completion of its merger with Eagle Bulk Shipping, creating the largest US-listed dry bulk shipping company. Layoffs continue across the freight and logistics industry, with companies in Florida, Georgia, Illinois, Michigan, and Texas announcing job reductions and facility closures over the past two weeks. Apple is moving half its supply chain from China to India. Supply chain stability improved in 2023 despite ongoing challenges, but a complete return to pre-pandemic normalcy remains unlikely in 2024. The ongoing U.S.-China trade war is reaping dividends for Mexico

The White House granted chip giant Taiwan Semiconductor Manufacturing Company $6.6 billion in CHIPS and Science Act funding. TSMC will build another factory in Phoenix. Nearly half of warehouse workers who participated in a recent survey of Amazon and Walmart employees said they feel like they’re being watched at work. The average asking rent for industrial real estate in the first quarter stayed flat at $9.73 per square foot per year, the first time in four years it didn’t increase on a quarterly basis. Amazon unveiled its largest facility in Massachusetts, a staggering five-story warehouse in North Andover with almost 4 million square feet of space. 

Some shoppers are taking advantage of return policies to scam sellers. Amazon is entering into an agreement for a new last-mile facility in Jonesboro, Arkansas. Cognizant is partnering with Shopify and Google to help brands and retailers upgrade their online shops. 

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