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Tag: ocean carriers

Port of Va. is already handling cargo diverted from Baltimore

On Tuesday afternoon, workers at the Port of Virginia’s Virginia International Gateway facility in Portsmouth unloaded cargo that had been scheduled for the Baltimore Harbor before a container ship struck and destroyed the Francis Scott Key Bridge in a fatal accident that has left the shipping channel closed for at least several weeks to come.

“The ship was already in Virginia for a normally scheduled port of call and was headed to [Baltimore] afterward,” Port of Virginia spokesperson Joe Harris said in a statement to Virginia Business. “The accident happened, [and] the [Baltimore] cargo was offloaded here.”

The port expects these diverted volumes of cargo to increase. “​​It is, however, too early to discuss specific impacts to our operation,” Harris said.

Speaking to press during a bill-signing ceremony Tuesday, Virginia Gov. Glenn Youngkin pledged to assist Maryland during the disaster with everything from additional port capacity to emergency search and rescue services, saying the “entire commonwealth’s capabilities are at the ready.”

If assistance is requested, Virginia emergency resources available to Maryland include the Virginia State Police, the Virginia Department of Emergency Management and the Virginia Department of Fire Programs, according to a spokesperson for the governor.

On Wednesday afternoon, rescue workers recovered the bodies of two of six road construction workers killed in the accident in which the Singapore-flagged container ship Dali collided with the Key Bridge around 1:29 a.m. Tuesday, shortly after the ship lost power and its pilots issued a mayday call. National Transportation Safety Board investigators and other federal officials continued looking into the cause of the crash Wednesday, as the Biden administration pledged federal support to rebuild the bridge, calling on Congress to authorize hundreds of millions in funding likely needed for the bridge’s replacement, an undertaking that could take at least a year.

In the aftermath of the bridge collapse, supply chain experts warned it could have a major ripple effect on East Coast trade for some time to come, though at least one major shipping executive was optimistic that the Port of Baltimore could reopen sometime in May.

It’s unclear, Harris said, how many additional vessels and what volume of cargo the Port of Virginia will ultimately see, especially since no one knows how long the Port of Baltimore will remain closed to all ship traffic. All vessel traffic in and out of Baltimore’s port has been suspended until further notice, Maryland’s transportation secretary announced Tuesday morning.

Ocean carriers will decide how Baltimore-bound imports and exports will be diverted to other ports, Harris said, adding that ships presently in transit with cargo bound for Baltimore will likely unload in the ports of Virginia, Philadelphia, or New York and New Jersey.

“Our effort today is continuing to communicate with the ocean carriers and cargo owners to let them know that we have ample capacity to handle additional cargo and vessels,” he said. 

 The increased traffic won’t impact the Port of Virginia’s service levels, according to Harris. “This is a modern, 21st century port that has a significant amount of experience in handling surges of import and export cargo.” 

Virginia Business Editor Richard Foster contributed to this story.

Editor’s note: An earlier version of this article listed an incorrect summary of cargo diverted to the Port of Virginia and an incorrect estimate for the replacement cost of the Key Bridge. The story has been corrected and updated. 

 

 

 

New rules

In theory, the Ocean Shipping Reform Act (OSRA) would, among other things, help reduce inflation by adding transparency to container handling fees. In practice, though, it’s not that simple.

When President Joe Biden signed OSRA into law in June 2022, he touted it as a weapon against shipping costs that had soared during the pandemic. One of OSRA’s objectives was to give the Federal Maritime Commission more power over monitoring and investigating shipping practices. But almost a year later, experts say the law will have little, if any, impact on inflation.

“Most in Congress don’t really understand the shipping industry,” says Christine McDaniel, senior research fellow at the Mercatus Center, a market-oriented think tank based at George Mason University. “They saw rising prices during COVID and thought there must be collusion. But, in fact, it was supply and demand. There was a huge spike in demand that overwhelmed supply.”

Supply not meeting demand created numerous problems, including a shortage of semiconductor chips affecting electronics and automobiles. But most noticeably, it caused shipping rates to skyrocket. During the pandemic, the charge for shipping 40-foot containers from the West Coast to China jumped from around $1,400 to more than $20,000. The cost has since dropped back to about $1,500.

“OSRA will not impact the rates charged,” says Brian Whitlock, an analyst specializing in global logistics with Connecticut-based Gartner Consulting. “OSRA gives the Federal Maritime Commission the ability to enforce the reasonableness of how rates are charged. As a result, it will likely not have a material impact on inflation.”

Joe Harris, spokesman for the Port of Virginia, says OSRA “doesn’t have a lot of bearing on” the port.

“We do not set rates,” Harris explains. “Those contracts are negotiated between the ocean carrier and cargo owner. What is important to ports is vessel schedule. When the carriers get off schedule as badly as they did during the pandemic, it’s felt at the ports.”

Shippers haven’t felt the impact of OSRA yet because the industry is waiting on the Federal Maritime Commission to rule how the law will be practically implemented, says Mike Coleman, president and CEO of Norfolk-based logistics and shipping firms CV International Inc. and Capes Shipping Agencies.

“I do not expect any appreciable impact until the final rules are implemented by the FMC, though freight providers will be preparing in advance,” he says. “OSRA was born out of the pandemic and the challenges it presented in shipping, specifically regarding equipment availability and associated costs.”

A secondary objective of OSRA is to address the issue of shipping companies refusing agricultural cargo and instead sending empty containers to foreign ports, often China, to be filled and returned. Many shippers preferred to send empty containers to China, where they could be quickly loaded with more profitable, high-demand cargo. In one two-month span in late 2020, U.S. carriers rejected almost 200,000 containers, according to a CNBC report. Under OSRA, there is more pressure on shippers to accept containers for export when space is available.

“But again, that happened during COVID, when U.S. demand for imported goods increased sharply,” says McDaniel. “So those price hikes and practices were largely the market’s response to supply and demand.”

OSRA also shifts the burden of proof in disputes from the shippers to the carriers, “a huge benefit to shippers who did not file complaints in the past due to this burden,” says Whitlock.

But, he adds, the impact of that “will rest squarely on the FMC and how they define and enforce the new rules. For example, fining Hapag-Lloyd [AG] $2 million for unfair detention charges when their first quarter [earnings before interest and taxes] exceeded $4 billion is hardly going to make a dent in ocean carrier behavior.”

McDaniel is concerned about recent discussions involving the Federal Maritime Commission that would single out ocean carriers as “special” and not subject to general antitrust regulations.

“That worries me because the big competition principles should be the same across industries and sectors,” she says. “Carving out one industry as ‘special’ is dangerous.

“The shipping industry is vital. Don’t mess it up.”