Ports pivot as ship lines “blank” sailings to control capacity, shave costs, prop up rates
The coronavirus pandemic shook the maritime industry to its core. Ports and vessel operators moved aggressively to adapt. Where’s the light at the end of the Covid-19 tunnel for ocean shippers?
Gary Frantz is a contributing editor for DC Velocity and its sister publication, Supply Chain Xchange. He is a veteran communications executive with more than 30 years of experience in the transportation and logistics industries. He's served as communications director and strategic media relations counselor for companies including XPO Logistics, Con-way, Menlo Logistics, GT Nexus, Circle International Group, and Consolidated Freightways. Gary is currently principal of GNF Communications LLC, a consultancy providing freelance writing, editorial and media strategy services. He's a proud graduate of the Journalism program at California State University–Chico.
The coronavirus pandemic has roiled the maritime industry unlike any economic or natural disaster event before it. Blank, or canceled, sailings have hit record levels. Operators are laying up vessels, some never to return to service. Seafarers have been stranded on ships for months at a time, well past their contract expirations, essentially quarantined at sea. Slow-steaming and other cost-cutting tactics have been deployed, new ship orders and cap-ex plans slashed.
The ripple effect on the nation’s ports has been dramatic. They’ve reset operations to cope with fewer ship calls, adjusted to having office staff work from home, and for those longshoremen, stevedores, truckers, and other essential workers still on the dock, acquired protective equipment and instituted new procedures to protect their health and safety.
And while many maritime and port executives are encouraged by a slow reawakening of the economy and a modest recovery in import volumes, uncertainty abounds, and a full recovery remains elusive—at least for this year.
FINDING DISCIPLINE (FINALLY)
Containership lines have seen demand contract with unprecedented speed and scope across all trade lanes and, in response, have canceled hundreds of sailings, says Lars Jensen, CEO of SeaIntelligence Consulting. “Carriers have been extremely diligent in removing capacity [such that] freight rates in many cases have gone up,” he adds. The reining-in of capacity has been so tight, Jensen says, that “[carriers] will likely be more profitable in the second quarter than the first” of this year.
Industry consolidation, Jensen notes, “is finally taking hold. The market needed to get to a point where there were sufficiently fewer players such that the others could be disciplined with capacity management.”
Copenhagen, Denmark-based A.P. Møller Maersk, which operates some 700 container vessels, has kept its nominal fleet capacity flat at around 4 million twenty-foot equivalent units (TEUs) since 2018, says spokesperson Tom Boyd. Capital expenditure discipline remains key. “We have no plans for new orders of large vessels,” he adds. The carrier’s strategy for weathering depressed volumes has been maintaining a tight balance between capacity and demand, and “as a logistics operator with assets, to stay agile to respond to market fluctuations quickly and mitigate costs while responding to customers,” he says.
Global containership operator Hapag-Lloyd “will refrain from ordering any new ships, and even if new orders become strategically necessary … we will only make them when the market environment is right again,” says company spokesman Tim Seifert. The Hamburg, Germany-based ship line has “adapted our service network to align with lower demand, and we have screened all cost categories,” he adds.
And vessel operator Mitsui O.S.K. Lines (MOL), Japan’s biggest shipping line, is shrinking its fleet of 800 ships by 5% over the next three years in response to what it expects to be a significant decline in global trade volumes driven by the coronavirus pandemic.
AS VOLUMES DROP, PORTS ADJUST
Like their ocean carrier clients, port operators are scrambling to adapt to the new reality. “With [the number of] blank sailings … we see a double-digit downturn [in activity] through the summer,” says John Reinhart, executive director of the Virginia Port Authority (VPA). The port was notified of 79 blank sailings, or canceled ship calls, starting in April and extending through the end of August, equaling a loss of some 109,000 containers. In response, the port idled one of its facilities, reduced gate hours during the week, and suspended Saturday gate hours.
Successfully navigating the pandemic’s challenges, Reinhart says, has required “understanding your data, [adjusting] your infrastructure [and resources], and making intelligent decisions to deliver exceptional service” while being fiscally responsible. And, he stresses, taking early and aggressive steps to protect the port’s employees, all of whom are considered essential workers.
At the outset, the port established a Covid-19 planning task force, which initially met three times a week. Among its decisions: Those who could were instructed to work from home. Workers still in offices were separated for appropriate social distancing. Touchless temperature scanners and hand-sanitizer stations were installed. Extra sanitizing steps were implemented for public spaces. A “no visitor” policy was put in place. Personal protective gear was acquired and provided. And technology was leveraged, using cameras and remote sensors to control container movement and limit people in container yards physically monitoring equipment. “We really put in best-in-class practices and collaborated with many [port constituencies] to keep the port operating and critical cargo moving safely,” Reinhart notes.
Virginia’s strategy was emulated by many other ports, including Los Angeles, Houston, and Oakland, California, all of which moved aggressively to protect workers and adjust for fewer ship calls and lower volumes.
PORTS PUSH AHEAD WITH EXPANSION PLANS
The pandemic, however, has not curtailed port capital improvement plans.
The Port of Oakland’s largest terminal will take delivery in September of three 300-foot-tall ship-to-shore cranes. Ordered by terminal operator SSA at a collective cost of $30 million, each crane can reach 125 feet across a ship’s deck and can service the ultra-large “mega” containerships operating today.
Oakland’s volumes for the first half of this year are down 7.8%, noted Business Development Manager Andrew Hwang, who believes the pace of sailing cancellations will decline into the fall. He also sees vessel operators pushing more cargo onto bigger ships with fewer port calls. The largest near-term variable to a recovery: a potential second coronavirus surge, “which may plunge the country back into restrictions.”
The Port of Los Angeles, which saw 40 canceled sailings in the first quarter and 23 in the second, is handling about 80% of the cargo it normally would this time of year. Nevertheless, Los Angeles is pushing ahead with $367 million worth of infrastructure improvement and expansion projects, says Executive Director Gene Seroka. “We feel we are in a really good position to be ready when the American economy recovers,” he notes.
Seroka, who lived in China during the SARS epidemic, has seen firsthand what a virus outbreak can do. Covid-19, he observes, is “10, 20, 30 times worse” than SARS. He believes the recovery will be long and protracted, looking “more like a hockey stick, a really long one from a very tall left wing.”
A sustainable recovery won’t take hold until consumers feel they can safely go out and resume normal activity. Given the risks, “people are saying they just aren’t ready to go out yet,” he notes, adding, “If you open too fast, there are no replacements. You can’t just put the B team of longshoremen in. We have to be really sharp about policies … and listen to the medical experts.”
The Port of Houston recently reached a milestone for its billion-dollar Houston Ship Channel widening project, receiving Army Corps of Engineers sign-off on its plan. Planned modifications to the 50-mile-long commercial waterway include easing bends and widening the bay reach of the channel to 700 feet and the Bayport Ship Channel and Barbours Cut Channel to 455 feet.
“We’re pushing hard to make sure [the widening project] is front and center,” says Port Houston Executive Director Roger Guenther. The port also recently won a nearly $80 million federal grant to renovate wharf and yard space at its Barbours Cut Container Terminal.
Guenther noted that while business was down 12% to 15% in the second quarter, overall, 2020’s first-half volumes were up about 1%. “I never thought I’d say I’d be thrilled [with the second quarter], but it’s about what we expected,” he says. “Houston is in a great spot. We’re in this for the long game.”
The Port of Virginia is sailing ahead with infrastructure improvements as well. It spent $320 million at the Virginia International Gateway, adding 13 container stacks and 10,000 feet of double-stack–capable on-dock rail, and increasing annual throughput to 1.2 million container lifts. Another $375 million went to redevelop the Norfolk International Terminal’s south-side container yard. The last eight new gantry cranes went into service in July, increasing container-handling capacity by some 60% to nearly 2.2 million containers a year.
NO MORE CHASING FREIGHT AT ANY PRICE
Given containership operators’ history of embracing mega-ships and then chasing freight at any price to fill them, that they are able to profit at all during the worst economic contraction since the Great Depression has shocked many industry analysts.
John Urban has spent 30-plus years in the ocean freight business, as an executive with American President Lines and later as co-founder and president of software company GT Nexus, which nearly 20 years ago established the first online “portal” that let shippers book freight with multiple ocean carriers over a common platform. With Infor’s purchase of GT Nexus several years ago, Urban shifted to consulting and now sits on several boards.
Ship lines have evolved, he says. Once driven by a quest for market share and a penchant for running ships at little or no profit, they are finally embracing capacity discipline, Urban observes.
“Ten years ago, to access 80% of sailings, you had to deal with up to 25 ocean lines,” he recalls. “Today, to get access to 90% of capacity, you need only deal with 10 alliances because there’s been so much consolidation.”
The result: a market where rising or falling prices do very little to change volume, Urban notes. “Carriers have bought into discipline and are finally managing the capacity they have for profit.”
Warehouse automation orders declined by 3% in 2024, according to a February report from market research firm Interact Analysis. The company said the decline was due to economic, political, and market-specific challenges, including persistently high interest rates in many regions and the residual effects of an oversupply of warehouses built during the Covid-19 pandemic.
The research also found that increasing competition from Chinese vendors is expected to drive down prices and slow revenue growth over the report’s forecast period to 2030.
Global macro-economic factors such as high interest rates, political uncertainty around elections, and the Chinese real estate crisis have “significantly impacted sales cycles, slowing the pace of orders,” according to the report.
Despite the decline, analysts said growth is expected to pick up from 2025, which they said they anticipate will mark a year of slow recovery for the sector. Pre-pandemic growth levels are expected to return in 2026, with long-term expansion projected at a compound annual growth rate (CAGR) of 8% between 2024 and 2030.
The analysis also found two market segments that are bucking the trend: durable manufacturing and food & beverage industries continued to spend on automation during the downturn. Warehouse automation revenues in food & beverage, in particular, were bolstered by cold-chain automation, as well as by large-scale projects from consumer-packaged goods (CPG) manufacturers. The sectors registered the highest growth in warehouse automation revenues between 2022 and 2024, with increases of 11% (durable manufacturing) and 10% (food & beverage), according to the research.
The Swedish supply chain software company Kodiak Hub is expanding into the U.S. market, backed by a $6 million venture capital boost for its supplier relationship management (SRM) platform.
The Stockholm-based company says its move could help U.S. companies build resilient, sustainable supply chains amid growing pressure from regulatory changes, emerging tariffs, and increasing demands for supply chain transparency.
According to the company, its platform gives procurement teams a 360-degree view of supplier risk, resiliency, and performance, helping them to make smarter decisions faster. Kodiak Hub says its artificial intelligence (AI) based tech has helped users to reduce supplier onboarding times by 80%, improve supplier engagement by 90%, achieve 7-10% cost savings on total spend, and save approximately 10 hours per week by automating certain SRM tasks.
The Swedish venture capital firm Oxx had a similar message when it announced in November that it would back Kodiak Hub with new funding. Oxx says that Kodiak Hub is a better tool for chief procurement officers (CPOs) and strategic sourcing managers than existing software platforms like Excel sheets, enterprise resource planning (ERP) systems, or Procure-to-Pay suites.
“As demand for transparency and fair-trade practices grows, organizations must strengthen their supply chains to protect their reputation, profitability, and long-term trust,” Malin Schmidt, founder & CEO of Kodiak Hub, said in a release. “By embedding AI-driven insights directly into procurement workflows, our platform helps procurement teams anticipate these risks and unlock major opportunities for growth.”
Here's our monthly roundup of some of the charitable works and donations by companies in the material handling and logistics space.
For the sixth consecutive year, dedicated contract carriage and freight management services provider Transervice Logistics Inc. collected books, CDs, DVDs, and magazines for Book Fairies, a nonprofit book donation organization in the New York Tri-State area. Transervice employees broke their own in-house record last year by donating 13 boxes of print and video assets to children in under-resourced communities on Long Island and the five boroughs of New York City.
Logistics real estate investment and development firm Dermody Properties has recognized eight community organizations in markets where it operates with its 2024 Annual Thanksgiving Capstone awards. The organizations, which included food banks and disaster relief agencies, received a combined $85,000 in awards ranging from $5,000 to $25,000.
Prime Inc. truck driver Dee Sova has donated $5,000 to Harmony House, an organization that provides shelter and support services to domestic violence survivors in Springfield, Missouri. The donation follows Sova's selection as the 2024 recipient of the Trucking Cares Foundation's John Lex Premier Achievement Award, which was accompanied by a $5,000 check to be given in her name to a charity of her choice.
Employees of dedicated contract carrier Lily Transportation donated dog food and supplies to a local animal shelter at a holiday event held at the company's Fort Worth, Texas, location. The event, which benefited City of Saginaw (Texas) Animal Services, was coordinated by "Lily Paws," a dedicated committee within Lily Transportation that focuses on improving the lives of shelter dogs nationwide.
Freight transportation conglomerate Averitt has continued its support of military service members by participating in the "10,000 for the Troops" card collection program organized by radio station New Country 96.3 KSCS in Dallas/Fort Worth. In 2024, Averitt associates collected and shipped more than 18,000 holiday cards to troops overseas. Contributions included cards from 17 different Averitt facilities, primarily in Texas, along with 4,000 cards from the company's corporate office in Cookeville, Tennessee.
Electric vehicle (EV) sales have seen slow and steady growth, as the vehicles continue to gain converts among consumers and delivery fleet operators alike. But a consistent frustration for drivers has been pulling up to a charging station only to find that the charger has been intentionally broken or disabled.
To address that threat, the EV charging solution provider ChargePoint has launched two products to combat charger vandalism.
The first is a cut-resistant charging cable that's designed to deter theft. The cable, which incorporates what the manufacturer calls "novel cut-resistant materials," is substantially more difficult for would-be vandals to cut but is still flexible enough for drivers to maneuver comfortably, the California firm said. ChargePoint intends to make its cut-resistant cables available for all of its commercial and fleet charging stations, and, starting in the middle of the year, will license the cable design to other charging station manufacturers as part of an industrywide effort to combat cable theft and vandalism.
The second product, ChargePoint Protect, is an alarm system that detects charging cable tampering in real time and literally sounds the alarm using the charger's existing speakers, screens, and lighting system. It also sends SMS or email messages to ChargePoint customers notifying them that the system's alarm has been triggered.
ChargePoint says it expects these two new solutions, when combined, will benefit charging station owners by reducing station repair costs associated with vandalism and EV drivers by ensuring they can trust charging stations to work when and where they need them.
New Jersey is home to the most congested freight bottleneck in the country for the seventh straight year, according to research from the American Transportation Research Institute (ATRI), released today.
ATRI’s annual list of the Top 100 Truck Bottlenecks aims to highlight the nation’s most congested highways and help local, state, and federal governments target funding to areas most in need of relief. The data show ways to reduce chokepoints, lower emissions, and drive economic growth, according to the researchers.
The 2025 Top Truck Bottleneck List measures the level of truck-involved congestion at more than 325 locations on the national highway system. The analysis is based on an extensive database of freight truck GPS data and uses several customized software applications and analysis methods, along with terabytes of data from trucking operations, to produce a congestion impact ranking for each location. The bottleneck locations detailed in the latest ATRI list represent the top 100 congested locations, although ATRI continuously monitors more than 325 freight-critical locations, the group said.
For the seventh straight year, the intersection of I-95 and State Route 4 near the George Washington Bridge in Fort Lee, New Jersey, is the top freight bottleneck in the country. The remaining top 10 bottlenecks include: Chicago, I-294 at I-290/I-88; Houston, I-45 at I-69/US 59; Atlanta, I-285 at I-85 (North); Nashville: I-24/I-40 at I-440 (East); Atlanta: I-75 at I-285 (North); Los Angeles, SR 60 at SR 57; Cincinnati, I-71 at I-75; Houston, I-10 at I-45; and Atlanta, I-20 at I-285 (West).
ATRI’s analysis, which utilized data from 2024, found that traffic conditions continue to deteriorate from recent years, partly due to work zones resulting from increased infrastructure investment. Average rush hour truck speeds were 34.2 miles per hour (MPH), down 3% from the previous year. Among the top 10 locations, average rush hour truck speeds were 29.7 MPH.
In addition to squandering time and money, these delays also waste fuel—with trucks burning an estimated 6.4 billion gallons of diesel fuel and producing more than 65 million metric tons of additional carbon emissions while stuck in traffic jams, according to ATRI.
On a positive note, ATRI said its analysis helps quantify the value of infrastructure investment, pointing to improvements at Chicago’s Jane Byrne Interchange as an example. Once the number one truck bottleneck in the country for three years in a row, the recently constructed interchange saw rush hour truck speeds improve by nearly 25% after construction was completed, according to the report.
“Delays inflicted on truckers by congestion are the equivalent of 436,000 drivers sitting idle for an entire year,” ATRI President and COO Rebecca Brewster said in a statement announcing the findings. “These metrics are getting worse, but the good news is that states do not need to accept the status quo. Illinois was once home to the top bottleneck in the country, but following a sustained effort to expand capacity, the Jane Byrne Interchange in Chicago no longer ranks in the top 10. This data gives policymakers a road map to reduce chokepoints, lower emissions, and drive economic growth.”