The Softwood Forest Products Buyer - March/April 2024

TRANSPORTATION SURVEY —Continued from page 7
its power on the West Coast of both the U.S. and Canada. Montreal port workers
and employers have hit an impasse in contract negotiations, bringing back memories
of a five-day strike in 2021 and a 19-day strike in 2020 at Canada’s secondlargest
port. And the International Longshoremen’s Association (ILA) has already
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BLACKSTONE, VA
LEOLA, PA
LANCASTER, MA
SHELBYVILLE, IN
FRUITLAND, MD
ROANOKE RAPIDS, NC
COLUMBIA, SC
BRANCHVILLE, SC
raised the prospect of a strike at U.S. East and Gulf coast ports after its contract
expires at the end of September 2024, the first time that would happen since 1977.
Sustainability has taken center stage in the maritime sector. With increasing
awareness of environmental issues, there is a growing emphasis on adopting
eco-friendly practices. Shipowners are investing in green technologies, including
alternative fuels, wind-assisted propulsion, and energy-efficient designs, to reduce
the carbon footprint of ocean transportation. Regulatory bodies are also tightening
environmental standards, pushing the industry towards more sustainable practices.
The push for sustainable shipping practices is expected to gain even more
momentum in 2024. Governments, consumers and industry players are likely to
collaborate further to implement stricter environmental regulations. The adoption
of alternative fuels, such as hydrogen and ammonia, is expected to increase, and
more vessels will incorporate green technologies to meet evolving sustainability
standards, such as the EU Emission Trading System (ETS) surcharges from
carriers.
Looking ahead to 2024, the industry is poised for further transformation, driven
by a collective commitment to efficiency, sustainability and adaptability. The key
to success lies in embracing change, leveraging technology, and forging strategic
partnerships to sail through the challenges and opportunities that lie on the
horizon.
I would like to take this opportunity to wish everyone in our industry a healthy
and prosperous 2024. Thank you all for your continued support through out the
years.
As we bring in 2024 a little
advice on progress from Mr.
Lincoln: “I’m a slow walker but I
never walk backwards.”
CULPEPER, VA
FREDERICKSBURG, VA
ATHENS, NY
BELCHERTOWN, MA
FEDERALSBURG, MD
COLERIDGE, NC
COVE CITY, NC
ORANGEBURG, SC
SWEETWATER, TN
Stephen A. Zambo
Stephen A. Zambo
The AGL Group
Jacksonville, FL
2023 was a very interesting
year. There are trends within the
marketplace that we see year over
year, decade over decade. The
trends may have some variability,
think COVID, but outside of that,
trends have remained relatively
spot on over the long term. In
2023, we saw the first quarter
buck normal export trends. We
typically see a slow January and
February with freight picking up
in March. This past year we saw a
very strong first and second quarter.
Export volumes took a large
hit from June all the way through
about October in 2023. That is
more in line with how traditional
markets have been in the past.
In 2023, the supply chain issues
were nothing in comparison to
2021 and 2022. 2023 has been
stable. Trucking availability has
been a non-issue and steamship
lines on most lanes have availability.
Of course, this fluctuates
from time to time, but rarely is a
booking more than two weeks out
as it stands. One item to keep an
eye on is a potential strike on the
East Coast sometime in 2024. After
negotiating record deals on the
West Coast, the union on the East
Coast is saying that it will hold firm
by striking in 2024 if there is not
a new deal negotiated. That would
be a very large issue for the forest
products industry as 80 percent of
hardwood exports are routed via the
East Coast. Until there is more concrete
information and the date of
strike approaches, this is something
to monitor.
A very important topic no one
talks about when looking forward
at freight rates is the amount of
steamship line capacity coming
onto the market in the next 18
months. On average there are about
375,000 containers worth of new
space entering the market annually.
In 2024 alone there is north of
1,200,000 containers worth of new
ship builds coming online. Unit
economics lead us to the obvious
conclusion of continued cheap
freight rates. More space with the
same demand equals low freight
rates. More space with less demand
equals low freight rates. I am
confused as to what the steamship
line carriers are doing from a unit
economics standpoint.
At the end of 2023, we were
back to enjoying historically low
freight rate levels. The rates have
no where to go but up. I do not
believe we will see large increases,
10-15 percent over the course of
2024 on the ocean carrier side.
Trucking companies on the other
hand are having a very challenging
time. There is less freight both on
the export and import side, with
more trucking capacity leading to
reduced trucking rates over the last
six months. I believe you will see
some companies reduce fleet size,
close their doors or start to increase
prices. They do not have an option.
Containers are readily available at the ports and are not readily available at
some inland locations. I expect this trend to remain as it typically does. The cost
of containers are stable for now, and may increase over the next year or so by
about 10-15 percent.
Shipping volumes in the fourth quarter were higher than what we forecasted
based off of the second quarter and the third quarter. Economists and banks are
calling for around 2 percent global growth in 2024. If that actually happens, we
will see modest gains in export volumes, however, I am not so certain that we will
actually see 2 percent growth. Asking me to predict shipping volumes in the first
quarter of 2024 is akin to throwing spaghetti at the wall and seeing “what sticks.”
Where the economy goes is anyone’s guess. We are heading into an election
year with much uncertainty. There are currently multiple wars globally, interest
rates have been elevated compared to the last decade and inflation has been
a major issue. The only constant across all industries is that margins are being
squeezed. Going into the New Year, we can all be hopeful that the economy starts
to pick back up, but I am not sure that is what we will see.
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Continued on page 40
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