Maersk Owned Performance Team Places Order for 126 Electric Semis
Volvo Trucks North America announced on March 29, 2022, that it received its largest global order of Class 8 electric semi-trucks with the Maersk-owned Performance Team. Volvo said in a release Performance Team will begin operations in Q2 2022 in its Southern California fleet operations serving port drayage and warehouse distribution routes. Performance Team issued another order for 110 additional trucks in an effort “to scale its zero-tailpipe emission freight logistics fleet in 2022.
WCL Consulting’s SoCal Container Drayage Rate 7th Annual Survey Results Are No Surprise
According to Jon DeCesare during the last five years, we continue to see a significant portion of drayage cost contributed to delays, chassis chases, and empty container return issues. It appears according to reliable sources that port congestion and driver delays will continue through to 2023.
Drayage driver employee hourly pay continues to increase averaging $29 per hour in an effort to avoid drivers leaving for less frustrating work at over-the-road or other trucking operations.
West Coast ILWU Contract Talks Concern Many Goods Movement Stakeholders
Contract negotiations between the International Longshore & Warehouse Union and West Coast employers will begin May 12, the two sides recently said, with the talks coming against a backdrop of vessel backlogs, congested marine terminals, and inland supply chains struggling to handle near-record cargo volumes. Automation and compensation are considered the main sticking points.
In the 2008 contract, the ILWU agreed to automation, but with many conditions that gave it power over projects. The Pacific Maritime Association (PMA) has said that the value of wages and benefits it agreed to for the rights to automate has cost its members $800 million.
BNSF Planning Massive Intermodal Hub Near Phoenix
BNSF has acquired a 3,508-acre parcel of land in the Phoenix region with plans to develop it as a Western hub. BNSF purchased the property for $49.1 million when it was the winning and sole bid for land at an Arizona State Land Department auction. BNSF did not provide details about its plans for the site, but public records show that the railway company is proposing a logistics park and an intermodal facility.
Warehouse Indirect Source Rule – Warehouse Operators’ Responsibility
The “Warehouse Indirect Source Rule,” adopted by the South Coast Air Quality Management District on May 7, 2021, requires some warehouse operators to begin collecting compliance information starting July 1, 2021. Formally designated Rule 2305, it is intended to reduce heavy-duty vehicle emissions in the vicinity of warehouses in much of Southern California. The Rule applies to owners and operators of warehouses with at least 100,000 square feet of warehousing floor space within a single building.
The centerpiece of the Rule is the Warehouse Actions and Investments to Reduce Emissions (WAIRE) Program. The WAIRE Program creates a points system that provides financial incentives to reduce emissions from trucks entering and exiting a warehouse’s grounds. Facilities that do not earn sufficient points in a calendar year must pay a “mitigation fee.” The Air District estimates the Rule could generate as much as $1 Billion in mitigation-fee revenue.
Here are the key dates for complying with this new regulation based on warehouse sizes.
The WAIRE program provides a “menu” of implementation measures for impacted businesses to earn points, which must be earned in addition to compliance with existing federal and state warehousing regulations. These measures include the following:
- Acquiring or using Net Zero Emission/Zero Emission trucks;
- Acquiring or using zero emission yard trucks;
- Installing or using zero emission charging/fueling infrastructure such as electric chargers or hydrogen fueling stations;
- Installing or using onsite solar panels; and
- Installing MERV 16 or greater filters or filtration systems in residences, schools, daycares, hospitals or community centers.
Ports of Long Beach & Los Angeles Experience Record Months
The Southern California ports set a new monthly cargo record in March closing out the busiest quarter ever in the history of the two ports.
The Port of Long Beach on Thursday reported handling 863,156 twenty-foot equivalent units (TEU) of container cargo last month, up 2.7% from the previous record set in March 2021. The new record comes as dockworkers continue to move long-dwelling cargo out of marine terminals.
The Port of Los Angeles reported record monthly cargo volumes in March with 958,674 TEUs processed, making for its third-best month ever. Los Angeles also set its all-time record in Q1 2022, processing 3.5% more cargo than in 2021.
Vessel traffic service officials reported this week that the containership backup outside of LA/LB has been reduced to 44 ships, down from a record 109 in early January.
Ports LA/LB Launching Clean Truck Fee
Effective April 1, 2022, the Ports of LA/LB launched the new Clean Truck Fund Rate. The $10 per TEU / $20 per FEU fees to be paid by cargo owners is expected to generate more than $90 million in its first year. The money will fund zero-emission trucks with some initial funds for low NOx trucks. The approach is intended to balance the ports’ environmental goals with the economics of remaining competitive during the transition to zero emissions.
Ocean Shipping Reform Act of 2022
The new bill will require ocean carriers to certify that their detention and demurrage fees comply with U.S. shipping laws. The bipartisan legislation is designed to give Washington more oversight of international shipping by giving regulators more power over ocean carriers’ detention and demurrage billing practices and export services. It will take the FMC a number of months to draft procedures before the new law comes into effect.
Shanghai COVID Lockdown – A Tsunami of Freight Anticipated
The concern is growing that the spread of COVID cases and city lockdowns in China will have massive downstream effects on global supply chains that could dwarf previous disruptions since the start of the pandemic.
The difference this time is that an entire Shanghai metropolis is essentially shut down. Not since the initial 2020 COVID-19 outbreak in Wuhan have lockdowns been this extensive in China.
Shanghai is one of the largest manufacturing centers in China, with heavy concentrations of automotive and electronics suppliers. It is home to the largest container port in the world and a major airport that serves inbound and outbound air cargo.
The slowdown in China exports should provide temporary relief to congestion-plagued U.S. ports on both coasts, as well as in Europe, but logistics experts say the breather is likely to be followed by a tsunami of deferred cargo once the lockdowns are lifted. The cargo volume will far exceed the handling capability of the ports, with containers jamming up terminals faster than they can be transferred to inland transport and pushing vessels into long queues at sea.
SoCal Warehouse Development Challenges in Fringe/Pioneering Locations
The pandemic supply chain meltdown accelerated the trend of corporations prioritizing their supply chain risk mitigation strategies. This is especially critical considering the trend for Southern California’s industrial real estate development evolution in building Fringe or Pioneering locations. These are areas that have little or no warehouse development scale. Warehouse tenants without question will view these locations as “high-risk” decisions.
SOLUTION: Industrial Real Estate developers and broker teams should incorporate Location Logistical Competitive Assessment Profiles to address today’s post-pandemic warehouse tenants’ concerns. The advantage of using Location Logistics Profiles include:
- Increase IRE Financial & Development Partners’ Interests
- Increase Potential Tenants’ Attraction to Warehouse Location
- Provide a stronger position during negotiations
- Provide help in achieving stronger ROI
SoCal Ports Seeing a Reduction in Empty Container Inventory
Los Angeles led empty exports last year with 1.1 million TEU, while Long Beach was at 747,598 TEU. The start of 2022 shows empty exports were up 18 percent through February versus the year-ago period. Since the start of 2022, the number of empty sweepers that have called Los Angeles and Long Beach is more than the total that called the two ports during all of 2021.
One tailwind has been better berth availability than last year at the Los Angeles and Long Beach ports. Small, independent carriers that entered the trans-Pacific market last year are making fewer calls to the West Coast.