Supply Chain Industry Insights

June 2023

Welcome to the PGL Industry Insights report for June 2023. 

This month’s report highlights significant developments in labor talks across various modes of transportation and offers predictions for the second half of the year.

A tentative contract agreement has been reached between maritime employers and the International Longshore and Warehouse Union (ILWU) for all 29 ports along the US West Coast. This resolution ends 13 months of contentious negotiations and disruptive job actions that affected port operations. However, the shortage of lashers and other essential labor positions has left many vessels stranded at berth, impeding their departure and preventing new vessels from entering and unloading.

Although the tentative agreement is positive news, the repercussions of the labor issues will continue to be felt in the near future. The timing of this agreement is particularly crucial as some ocean freight traffic has been diverted to the East and Gulf coasts while Panama is experiencing its worst drought since 1950. This drought restricts ships’ drafts in the Panama Canal, and the Panama Canal Authority (ACP) warns of further water level declines and inevitable economic impacts.

On the heels of a report earlier in June revealing that UPS Inc. has agreed to install air conditioning in package cars purchased after January 1, 2024, UPS Teamsters voted overwhelmingly on June 16th to authorize its leadership to call a strike in the event a contract cannot be reached by the deadline of July 31. 

In other labor news, less-than-truckload carrier, the Yellow Corporation, has informed the Teamsters union that it will run out of funds by August if a proposed change of operations isn’t approved. The union argues that the company has been mismanaged for years and asserts that it will not bail Yellow out again, having already given substantial financial support in the past.

A recent FreightWaves SONAR report indicates a further decline in US containerized import volumes for the second half of 2023. The inventory disruptions caused by the “bullwhip effect” and the risks associated with consumer spending contribute to importers exercising caution during the peak season. Additionally, the weakening global macroeconomic conditions further heighten the risks of declining import volumes.

While ocean container bookings have been on par with 2019 levels in the first half of 2023, a departure from those levels is expected in early Q3, leading to a significant drop of 10% to 20% below the volumes experienced during the second half of 2019. This decline is projected across the Top 10 US ports.

With the latest in supply chain news, labor contracts continue to have a big impact on the industry as high inventories and economic uncertainty continue to fuel speculation that, whatever normal is, we’re not there yet. In the meantime, PGL will continue to keep you moving, 24/7/365.

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