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Facts & FIGures
Facts & FIGures is a Falvey Insurance Group (FIG) podcast. Each mini-episode will feature a guest speaker with expert, industry perspective on a topic that relates to our business operations.
Current Events
Industry News Happening Now
Wreckage of Steamship Milwaukee discovered
After nearly 140 years, the wreck of the steamship Milwaukee, which sank in Lake Michigan following a collision in 1886, has been discovered by explorers associated with the Michigan Shipwreck Research Association (MSRA). Located almost 360 feet below the surface, the remarkably intact wreck was found using clues from old newspaper clippings. The vessel, initially designed with three decks, had been repurposed to transport cargo such as iron and lumber. Newspaper accounts of the collision provided vital information leading to the wreck’s location. The collision between Milwaukee and another vessel, the C. Hickox, occurred in 1886 due to thick fog, resulting in Milwaukee sinking within two hours. All aboard were rescued. The wreck’s discovery underscores the importance of adhering to navigational regulations and the lessons learned from maritime accidents. The exploration team found the wreck facing northeast, matching its direction before sinking. Examination revealed modifications to accommodate cargo. Both captains involved in the collision temporarily lost their licenses. The discovery of Milwaukee follows another recent sighting of a shipwreck from 1871 in Lake Michigan, emphasizing the ongoing exploration of the lake’s maritime history.
Source: Explorers Discover Wreckage Of Steamship Milwaukee Lost In 1886 In Lake Michigan (marineinsight.com)
Red Sea shipping attacks and delays
Ships navigating the Red Sea have been targeted with missile attacks by Houthi group forces, a rebel group from Yemen. Yemen has been embroiled in a civil war since 2014 when Iran backed Houthi insurgents rebelled against the Saudi Arabian backed government forces. Over the past week, container ships, tankers, and commercial cargo has been targeted for attack by the group with initial attacks focusing on ships and cargo linked to Israel before widening to a broader group. The area primarily affected is the south section of the Red Sea, particularly the Bab el-Mandeb Strait. Major shippers such as Maersk, CMA CGM, MSC, Hapag-Lloyd, Yang Ming, and BP have instructed some vessels to either pause their voyages or alter course around the Cape of Good Hope, which will 7 – 10 days to voyage times. This is a currently unfolding situation, and alternative solutions and updates are likely to come quickly.
The US and other countries are planning a protection force to patrol the region and ensure the safety of commercial traffic in the region, which is a major choke point for global shipping and ships transiting the Suez Canal. The sudden halting of cargos transiting the region from energy products to commodities to finished consumer goods is likely to affect transit times, supply, and ultimately prices in the short-term. About 12% of seaborne trade passes along this route. This has also affected shipping rates with spot rates in the market soaring 20% since Friday.
Source: Houthi Red Sea Attacks Start Shutting Down Merchant Shipping – Bloomberg
Teamsters: UPS strike in Louisville, DHL strike in Cincinnati
The Teamsters union president warned UPS Thursday that it will strike the company’s Louisville, Kentucky, operations over the company’s alleged firing of 35 specialist employees. He warned that UPS has until Monday to rectify the situation, or the union will take action. The local union represents more than 2,000 workers at the Centennial hub and more than 12,000 Teamsters at its primary air hub, known as Worldport, in Louisville. This could be extremely disruptive to cargo handling and supply chain operations around the holidays.
Sources:Teamsters warn of strike against UPS in Louisville – FreightWaves
DHL Express workers begin strike at Cincinnati air hub – FreightWaves
Casualty Advice – ONE ORPHEUS refloated after blocking Suez Canal
Please see the below casualty advice on containership ONE ORPHEUS making calls between US West Coast, Asia, and Europe. The vessel suffered rudder failure in the Suez Canal and went aground for 5 hours blocking ship traffic before being refloated. Works are currently underway to expand the southern, single-lane section of the canal, after the Ever Given ran aground there in 2021 blocking commerce for 6 days. Up to 9,040 TEUs of cargo were onboard the vessel at the time of incident, and General Average may apply.
Casualty Advice: Containership ‘ONE ORPHEUS’ Refloated in Suez Canal After Grounding (gcaptain.com)
Thanksgiving food trends signaled healthier supply chains
The traditional Thanksgiving food staples such as turkey, cranberries, and leafy greens were cheaper this year by 10% – 20% compared to 2022 despite rises in overall food costs, inflation rates, and other economic factors finds a Wells Fargo report. One of the reasons provided for this trend is the increasing health of the global supply chain. There have been significantly fewer disruptions to the industry this year. Although operations have been smoother, global economic factors have impacted market segments in different ways with increases in other categories.
Source: Thanksgiving food trends signaled healthier supply chains | PropertyCasualty360
Shipping braces for impact as Panama Canal slashes capacity
The Panama Canal Authority (ACP) has significantly reduced its transit capacity to conserve water, a move that will directly impact global shipping.
Due to the driest October ever recorded, the ACP will restrict the number of crossings and draft depth on transiting vessels. Starting November 3rd bookings have been restricted to 25 per day, down from the already reduced levels. That number will be further reduced to 18 per day over the next three months if conditions don’t change.
Approximately 70% of vessels using the canal currently require a 44-foot draft, which is the current limit. That is down from 50 feet earlier this year.
This will certainly affect the cost of shipping goods as well as the average transit times for ships involved.
Source: Shipping braces for impact as Panama Canal slashes capacity (freightwaves.com)
‘Pharmageddon’ is coming: Thousands of pharmacists plot next walkout over work conditions
Workers from some of the nation’s biggest pharmacies have planned walkouts from Monday to Wednesday at Walgreens, RiteAid, and CVS. They are staging these demonstrations to demand guaranteed hours, better pay, and more reasonable scheduling. When pharmacists step away from their stations, the likelihood of mistakes and incidents increases which can have severe consequences. It is unclear how many employees at which locations will be participating. Still, there is an observable rising trend in labor union disputes that have happened this year in transportation and healthcare. If these trends continue, it is possible to see events with more lasting impact and disruption on the supply chain. We will continue to observe and report on relevant topics.
Source: Pharmacists plan walkout from CVS, Walgreens, and RiteAid: ‘Pharmageddon’ (nypost.com)
The largest health care strike in U.S. history
The largest healthcare strike in U.S. history will most likely not impact the pharmaceutical supply chain significantly, but there are still lessons to be learned.
Union workers at Kaiser Permanente hospitals and medical office buildings around the country are on day three of a four-day planned strike over labor shortages and worker burnouts. This is the largest healthcare strike in US history with 75,000 employees participating.
Striking workers include nurses, technicians, and other employees at Kaiser Permanente facilities in California, Oregon, Washington, Colorado, Virginia and Washington, D.C. They serve nearly 13 million patients across 39 hospitals and more than 600 medical offices across eight states and D.C.
The strike is set to end on Saturday, but the union is planning another longer strike in November if a deal is not reached. Significant disruption to patient care is expected although impacts on the supply chain and general pharma product movements should be limited.
Source: Kaiser Permanente health care workers to strike, largest in U.S. history (axios.com)
Update: Government shutdown avoided with little time to spare
As a status update, President Biden signed a temporary funding bill late Saturday night to keep government agencies open with little time to spare before the deadline. The deal dropped aid to Ukraine but increased federal disaster assistance by $16 billion. Although the government shutdown has been averted for now, this bill only funds the government until November 17th, at which point a new longer-term agreement will need to be reached. As previously advised, a shutdown would have limited effects on the shipping supply chain in the immediate term, but impacts would worsen as the situation drags on. We will continue to keep you updated as the situation unfolds.
Ports brace for potential government shutdown
All port interests in the United States are advised to monitor the potential risk of a partial or full government shut down, as House Republicans struggle to come to terms on a spending plan. Congress has a deadline of September 30th, to pass all appropriations bills or a continuing resolution, that would fund the government temporarily.
A potential shutdown impacts the U.S. Coast Guard, Army Corps, USDOT, and the Federal Maritime Commission operations.
Source: Ports Brace for Potential Government Shutdown(gcaptain.com)
Casualty Incident: EVER OATH
Built in 2022, the containership EVER OATH was just reported to face an engine failure during its voyage to Vietnam. The ship was carrying around 2,100 TEUs of containerized and temperature-sensitive cargo, which is currently under tow by tug toward the International Port Tan Cang- Cai Mep to be unloaded. All cargo that was not destined for Vietnam will be transshipped to its destination, and potentially face delays, while the EVER OATH undergoes repairs
As a result of this casualty, General Average/Salvage and associated recovery issues may arise.
Source: Evergreen blames boiler malfunction for Ever Oath’s loss of power (Trade Winds News)
Six hundred shipping containers reported lost overboard after container ship sinks
Another large container loss situation was reported with around 600 containers reported lost from a feeder container ship that sank at the port of Kaohsiung in Taiwan. The 1,262-teu Angel developed a serious list thought to be caused by water ingress just outside the port and eventually was reported as having sunk. Salvage, pollution containment, and rescue operations are underway, but are expected to take several days. The ship was listed as high-risk by Tokyo MOU on port state control and had not been inspected in the region since 2018.
UPS union prepares for strike
The UPS workers union is preparing to strike should they not reach an agreement on part-time wages by the July 31st deadline. This would be hugely impactful to a large number of shippers, including those who rely heavily on UPS for pharma-related shipments. UPS handles a quarter of all US parcel volume and 6% of GDP. A Teamster strike of 10 days could cost the economy up to $7.1 billion in lost wages and production.
Source: UPS Union Asks Biden Not to Intervene in Case of Strike – Bloomberg
June storms raise alarm for Atlantic hurrican season
Tropical Storm Bret is nearing the Caribbean and a second system looks to be gathering strength as well. This would be an unusual amount of activity so early into hurricane season, and in this section of the Caribbean. Typically damaging storms in this region are not seen until mid-August, but with these two weather events so early in the season, many are alarmed. NOAA has previously predicted a 70% chance of near- to below-average hurricane activity, with a high likelihood of El Nino conditions to develop which can suppress storm formations.
Source: June Storms Raise Alarm for Atlantic Hurricane Season (gcaptain.com)
Drug shortages near an all-time high, leading to rationing
Drug shortages in the US are approaching record levels. There have been severe shortages of medications ranging from cancer treatments to over-the-counter pills; hundreds of drugs are in short supply due to disruptions in the supply chain. The White House and Congress have stepped in establishing an emergency response plan to attempt to reverse the trend, but consumers are left without much needed medications in the meantime due in part to government regulations limiting production and drug approval.
Source: Drug Shortages Near an All-Time High, Leading to Rationing – The New York Times (nytimes.com)
Hazmat road accidents in the U.S. have more than doubled in the past decade
Over the last 10 years, the number of incidents involving hazardous materials on the roads in the US has increased by 155%. With recent incidents such as the East Palestine train derailment of 11 tanker cars carrying hazardous materials, government bodies like the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA) have been tracking the transportation of these chemicals through various means such as air, highway, pipeline and rail. There are more than 2 million hazmat shipments in the US per day, and the majority of them are moved by highway. Strict adherence to safety regulations as well as implementation of new technologies and best practices are necessary to ensure safe transportation of these materials.
Source: Hazmat road accidents in the U.S. have more than doubled in the past decade
Bankrupt Bed Bath & Beyond goes after container shipping lines
The retailer Bed Bath & Beyond has declared bankruptcy and has indicated that COVID-era supply chain disruptions played a key role in the company’s demise. As a result, they will be closing all 475 of their stores and will be pursuing multimillion-dollar settlements against their ocean carriers for failure to meet minimum quantity commitments. They are seeking at least $31.7 million from OOCL and $7.8 million from Yang Ming. This incident is not only a huge hit to many retailers and logistics providers that work with BBB but also shows the long-tail of these disruptions on businesses and the importance of the supply chain to company operations. It has been over three years since COVID disruptions began, and we are still seeing the lasting impacts now.
Source: Bankrupt Bed Bath & Beyond goes after container shipping lines
Reports of Double-Brokering Increase
As we have covered an increasing number of times over the past year, cargo theft is on the rise, and illegal brokering schemes such as double-brokering are used more and more frequently. Double-brokering is when a legitimate carrier accepts a load and then illegally re-brokers it to another carrier without the shipper’s knowledge or approval. This poses a major security risk for the custody of goods, cargo insurance coverage, and risk of theft/damage. One load board saw as much as a 400% increase in double-brokering complaints over two-quarters last year, and as the market dips, brokering schemes tend to increase. There are proposed security solutions such as carrier vetting software Carrier Assure by founder Cassandra Gaines, as well as legislation like The Motor Carrier Safety Selection Standard Act introduced in February that would implement an interim motor carrier selection standard that requires entities like shippers and brokers to verify certain trucking registration requirements before selecting them. These measures look to shed light on carrier practices and provide a pathway to better selection and vetting. With the rising rate of incidents, it is very important that shippers are diligent in choosing and monitoring the performance of their truckers and carriers.
Source: Reports of Double-Brokering Increase
Container Ship Count in US Waters Falls by Half as Trading Slows
A warning sign of slowing trade can be measured in the number of ships calling US ports. That number has fallen to less than half of what it was one year ago. There were 106 container ships reported in US ports and costal waters over the weekend, while that number was reported as 218 one year ago. The numbers show that the count of weekly port calls is down significantly as well. Several factors to point to are slowing consumer demand, high inflation, and economic uncertainty. Relieved congestion in the US ports and global supply chain may also have some impact on the year-over-year numbers, but slowing trade is a concerning economic indicator.
Source: Container Ship Count in US Waters Falls by Half as Trading Slows
Container Imports Expected to Slowly Climb from February Low
The volume of ocean shipments and specifically container imports has been falling over the past several months with February experiencing one of the lowest levels since the pandemic began. The NRF/Hackett Associates Global Port Tracker is projecting an unusually large drop for import cargo volume for the month, down 26.2% compared to the previous year. This would make February the slowest month since May 2020. It is important to remember that February is typically the slowest month of the year being post-holiday retail season, and with many businesses shut down for the Chinese New Year. Over the coming months, import volumes are expected to steadily increase, but still be down significantly ~ 25% compared to last year. This reflects uncertainty about the strength of the economy.
Source: Container Imports Expected to Slowly Climb from February Low
U.S. Container Imports See Biggest Drop in Over a Decade
Inbound containers at the ten largest US ports have declined 17.9% year over year in January which is the highest monthly decline since the financial crisis of 2008. This also represents seven consecutive months of year over year declines. West Coast ports are down the most with a 23.5% decline as compared to the East Coast and Gulf Coast port decline of 12.6%. The full article analyzing volume metrics, industry trends, and shipping costs can be found in the below post from the report’s author, John McCown, and goes into much greater detail. Ocean shipping is a key indicator of the global economic market, and these numbers could be warning signs of a slowing market to come.
Sources:
U.S. Container Imports See Biggest Drop in Over a Decade
17.9% January Drop For Inbound Containers To U.S.