Welcome to this week's edition of our maritime and rail insights newsletter. This edition explores the Port of Long Beach's resilience amidst dips in cargo volumes and the pressing post-pandemic challenges U.S. exporters face. We also spotlight the significant surge in inland port activities, the new venture between Crowley and SEACOR, and growing concerns over escalating ship fuel costs. Let's dive in.

Long Beach Port Faces Volume Dip but Stays Resilient

The Port of Long Beach, the U.S.'s second-busiest container port, reported a decline in cargo volumes in August. However, amidst the challenges, port authorities exude cautious optimism. They highlight future initiatives to bolster efficiency and point out that the cumulative figures for 2023 align closely with pre-pandemic norms.

What the Numbers Say

The Port of Long Beach processed 682,312 TEUs in August, reflecting a 15.4% year-over-year drop—its 11th consecutive month of decreased volumes. Although the total for the first eight months of 2023 was on par with pre-pandemic levels at 4.99 million TEUs, other year-to-date metrics still paint a sobering picture:

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• Overall Container Volumes: 4,993,237 TEUs, a 24% year-over-year decrease.
• Loaded Imports: 325,436 TEUs, a drop of 15% compared to the previous year.
• Loaded Exports: 93,402 TEUs, reflecting a 23% year-over-year dip.
• Empties: 263,475 TEUs, a 12% decrease from last year. 

Looking Ahead: A Future of Efficiency

While Mario Cordero, CEO of the Port of Long Beach, acknowledged the numbers and stated that the port foresees a modest peak season, he also voiced a forward-looking perspective. He emphasized the port's commitment to bolstering its competitiveness and highlighted investments in digital and physical infrastructure projects. The goal? To ensure goods move seamlessly and efficiently for many more decades.  

U.S. Export Challenges in a Post-COVID World

As the Port of Long Beach faces a dip in cargo volumes, U.S. exporters simultaneously confront their own post-pandemic issues. Container rates for U.S. exports remain elevated, and logistical complications only exacerbate the situation.

Exporters Struggling with Rates & Communication

U.S. export rates continue to climb, with both spot and contract rates surpassing pre-COVID levels. The World Container Index (WCI) shows that the Los Angeles-to-Shanghai lane's spot rate is now $838 per FEU, reflecting a 66% increase from five years ago. Conversely, WCI's import index for the Shanghai-Los Angeles lane has declined 9% since September 2018. Exporters also face rising costs due to inconsistent sailing schedules and poor communication from ocean carriers. Peter Friedmann of the Agriculture Transportation Coalition pinpoints these as triggers for unforeseen storage and trucking expenses.

A Closer Look at Export Content & Performance

The composition of U.S. exports showcases a significant emphasis on agricultural products and other essential commodities. Data from major West Coast ports reveals only 39% of containers from January–July were laden with exports, with the rest being empty, a shift from 46% in pre-COVID times (January–July 2019). However, U.S. export demand has remained robust, with exports from the top 10 ports rising 1.2% over the past year, even as imports plummeted by 16.7%.

The Rise of Inland Port Performance

Amid concerns about ports like Long Beach and U.S. export challenges, inland ports emerge as a ray of hope. Specifically, South Carolina's inland ports have set impressive records in August.

Unprecedented Rail Moves at Inland Port Greer

August was a historic month for Inland Port Greer, setting a record 16,857 rail moves, a 52% year-over-year increase. Situated strategically in upstate South Carolina between the Charlotte and Atlanta markets, this port, serviced by Norfolk Southern Railway, is an essential hub for manufacturers, auto industries, solar panel producers, and retailers.

A Strong August for Inland Port Dillon & Charleston

Inland Port Dillon also saw a notable performance in August. Located along the North Carolina border and serviced by CSX, it recorded 3,439 rail moves, an 83% year-over-year increase. In contrast, even with a decrease in container volumes for August, the Port of Charleston demonstrated resilience in the vehicle segment, handling 17,876 vehicles — a 9% year-over-year growth.

Crowley and SEACOR’s New Venture: A New Era in U.S. Maritime?

Crowley and SEACOR Holdings, via Seabulk Tankers, are launching a joint venture, Fairwater Holdings. This collaboration, which merges their energy and chemical transport assets, aims to address challenges and capitalize on opportunities within the U.S. domestic market, signaling a notable shift in the maritime industry. 

Introducing Fairwater Holdings

Fairwater Holdings aims to blend the best of what both companies offer. This merger will unite 20 tug barges and 11 tankers, many with long-term charters, while overseeing crewing for 21 vessels from third-party owners. With its headquarters in Fort Lauderdale and branches spreading from Fairfield to Seattle, the enterprise already has quite the footprint. Seabulk's seasoned CEO, Daniel Thorogood, will lead this venture and leverage his deep maritime expertise.

Promising Growth and Innovation

Seabulk Tankers and Crowley's combined fleets position Fairwater distinctively, with the latter boasting a 12-million-barrel capacity. Tom Crowley, chairman and CEO of Crowley, foresees the venture enhancing customer value and resonating with their growth strategy. Both firms prioritize a seamless transition for stakeholders, with the venture expected to launch in early 2024, subject to regulatory clearances.

Last but Not Least: The Rising Tide of Ship Fuel Costs

It's time again to turn our attention to the escalating cost of ship fuel. Just when you think things are returning to normal, the industry revisits the concerns from several years ago as the cost of Very Low Sulfur Fuel Oil (VLSFO) surges.

The Surge in Fuel Prices  

Recent data indicates the cost of VLSFO at the world's top 20 refueling hubs has risen to $668.50 per ton, marking a significant 16% increase from early June. We've seen ship fuel prices soar to such highs during four notable periods: post-Ukraine invasion, shortly after IMO 2020's implementation, between 2011–2013, when crude oil exceeded $100 per barrel, and briefly in 2008, when oil surpassed $150 per barrel.  

BAFs and Their Impact 

Bunker Adjustment Factors (BAFs) are also on an upward trend. Recent data shows the average BAF for Q4 2023 is $623 per FEU for the Asia-West Coast trade and $1,142 per FEU for the Asia-East Coast trade. To put this into context, BAFs now make up 37% and 44% of current contract rates for West and East Coast markets, respectively.

Scrubbers: Diminishing Returns?

While the shipping industry looked to exhaust gas scrubbers to continue using the less expensive High Sulfur Fuel Oil (HSFO), the benefits are dwindling. The price difference between VLSFO and HSFO has dipped below the $100 per ton mark, currently at just $78.50 per ton, making scrubber investments less economical.  

Charting the Maritime Future with Vizion

The maritime industry is at a crossroads, from fluctuating cargo volumes at key ports to unprecedented challenges in U.S. export dynamics and surging ship fuel costs. While these shifts present certain obstacles, they also bring opportunities for better strategies and digital solutions. Vizion steps in here, bridging gaps with its transformative services:

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