Zim continues to outpace growth rates of rival container shipping lines, but investor demand fears are on the rise.
Zim, the world’s tenth largest container shipping line, posted the best quarterly results in its history on Wednesday. It hiked its full-year guidance and now predicts 2022 earnings will be around 20% higher than in 2021. And yet, shares of Zim — by far the largest U.S.-listed shipping company by market cap — fell as much as 8% in the hours after its earnings release.
The record results from Zim (NYSE: ZIM) came on the same day as a 25% plunge in shares of Target (NYSE: TGT) and a 1,165-point drop in the Dow amid investor fears of inflation and rising retail inventories.
Ample retail inventories imply reduced import demand, a negative for container freight rates. Inventories are up 43% year on year at Target, 32% at Walmart (NYSE: WMT) and Home Depot (NYSE: HD), and 10% at Lowe’s (NYSE: LOW).
Zim outpaces other container shipping lines
Zim reported net income of $1.7 billion for Q1 2022, almost triple net income of $590 million in the same period last year.
Throughout the pandemic era, Israel-based Zim has boosted quarterly revenues at a much faster pace than its larger competitors.
Between Q4 2019 — the last quarter unaffected by COVID — and the most recent quarter, Zim’s quarterly revenues have surged by 349%. Over the same period, Hapag-Lloyd’s quarterly revenues are up 187% and Maersk’s ocean revenues are up 121%.
Zim has outpaced its much larger container shipping rivals by concentrating more of its fleet on higher-paying markets like the trans-Pacific, by keeping more of its capacity in the spot market than some other carriers do, and by growing its fleet more quickly.
Higher freight rates, faster volume growth
Zim’s average freight rate came in at $3,848 per twenty-foot equivalent unit in Q1 2022, double its rate in Q1 2021.
Maersk and Hapag-Lloyd cover a much more diversified range of container shipping trades than Zim does and have higher contract coverage. As a result, Zim’s first-quarter average rates were 69% higher than Maersk’s and 39% higher than Hapag-Lloyd’s.
Since Q4 2019, Zim’s average quarterly freight rates are up 278%. In contrast, Hapag-Lloyd’s are up 161% and Maersk’s 145%.
Cargo volume is the other key driver of Zim’s revenue-growth outperformance.
Maersk and Hapag-Lloyd have low fleet growth in percentage terms (off a much larger base), and much of the incremental capacity has been offset by port congestion. Zim has dramatically expanded its fleet size off a small base over the past two years, primarily by leasing ships. The more ships Zim leases, the more revenue it generates in the near term (and more risk from lease costs it faces in the medium term).
Zim carried 859,000 TEUs in Q1 2022, up 5% year on year. Since Q4 2019, pre-COVID, Zim’s quarterly volumes have risen 23%. In sharp contrast, Hapag-Lloyd’s are down 1% and Maersk’s are down 9%.
More sector focus on contract rates
Last year, the story of container shipping’s boom was largely focused on spiking spot rates. This year, attention has turned to contract rates.
The thesis that 2022 container shipping profits will top 2021 profits goes like this: Spot rates, even though they’re on the decline, will end up much higher on average for the first half of this year compared to the first half of last year. Second-half spot rates will probably fall year on year, offsetting some of the gains in the first half.
But even if second-half spot-rate declines are extreme, contract rates should come to the rescue. In the trans-Pacific trade, annual contracts often run from May 1 to April 30. Contract rates during the first half of 2022 (signed last year) are much higher than the previous annual rates. And the new contracts that started May 1 are up sharply yet again, which should buoy average rates (including both contract and spot) in the second half of 2022.
Maersk has 71% of its 2022 volumes on contract, Hapag-Lloyd 50%. A little over 25% of Zim’s global business is on contract, including 50% of its trans-Pacific business.
During Wednesday’s call, Zim CEO Eli Glickman confirmed that contract rates for this year have more than doubled.
Zim increased guidance for full-year earnings before interest, taxes, depreciation and amortization to $7.8 billion-$8.2 billion (up from $7.1 billion-$7.5 billion previously, or by $700 million at the range midpoints). “The main reason for the improved outlook is better than initially anticipated contract rates,” said Zim CFO Xavier Destriau. “Those contract rates kicked in on May 1, so that will largely impact Q3 and Q4.”
Spot rates could soon fall below contract rates
Destriau said that Zim’s guidance assumes “spot rates would start to normalize in the second half and to some extent, the reduction in the spot market would be offset by the incremental revenue we generate on the contract cargo compared to last year.”
As spot rates pull back, the market focus is turning toward how spot rates compare to contract rates. Historically, if spot rates fall too far below contract rates, cargo shippers switch volume to spot, given that most annual contracts are not legally binding.
Xeneta reported during a webinar on Tuesday that Asia-East Coast spot rates are already below contract rates.
Xeneta’s data also shows that the spot-to-contract rate gap in the Asia-West Coast trade narrowed dramatically between mid-March and mid-May.
Destriau confirmed that the average rate of Zim’s trans-Pacific annual contracts starting in May “is not that far off from where the spot rate is today.”
While drayage has faced demand surges, they have often been the relatively short-lived consequences of labor strikes or steamship company shutdowns. The impact of the pandemic has been much greater, and it is here to stay.
Before the coronavirus pandemic prompted a serious surge in online shopping — therefore increasing port congestion manifold — companies would typically get away with submitting drayage and transloading work orders with little notice. That has all changed over the past two years.
While drayage has faced demand surges, they have often been the relatively short-lived consequences of labor strikes or steamship company shutdowns. The impact of the pandemic has been much greater, and it is here to stay.
“The pandemic created some problems and it has highlighted existing issues in the supply chain,” Port X partner Tom Zeis said. “Drayage and transloading cannot be taken as an afterthought anymore. People can’t rely on sending a work order the day of arrival. They can’t get away with that anymore.”
Now, companies waiting until the last minute will find themselves racking up thousands of dollars in fees and surcharges while their freight sits in the port for days or weeks waiting for drivers and equipment to become available.
Port X helps their customers avoid serious holdups and staggering fees by helping them plan shipments as far ahead as possible and supplying all members of the supply chain with the access and visibility they need to get each shipment from its origin to its destination without delay.
While drayage-specific tech innovations have largely lagged behind the rest of the industry, Port X has worked with its technology partners to improve and increase their multimodal offerings.
“We rely on a number of pieces of tech. At the heart of it is our TMS platform,” Zeis said. “We started with Turvo at our inception four and a half years ago. It wasn’t built for multimodal transportation or drayage, but we have worked with them in enhancing and developing the platform to where it is today and where it continues to grow.”
Ultimately, the recipe to succeeding in drayage today is about planning, executing and communicating. Port X provides each member of the supply chain with the ability to see when a vessel is going to arrive and when a container goes on line hold. This visibility drives the workflows necessary to complete the shipment, including preparing drivers and alerting warehouses to incoming arrivals.
FreightWaves Classics profiles the Illinois & Michigan Canal, which connected the Great Lakes to the Gulf of Mexico.
The first canal built in the United States was constructed during 1792-1796. Built with private funds, it circumvented the South Hadley Falls on the Connecticut River in Massachusetts. Other small-scale private ventures followed this one.
However, that changed in 1817 when construction of the state-funded Erie Canal began. It was a huge undertaking at that time; it was planned to connect Buffalo (which is located on Lake Erie) with the state capital of Albany (which is located on the Hudson River). The canal’s path was a distance of 350 miles, and it cut across the length of the state of New York. Because the Hudson flowed seaward to New York City and then into the Atlantic Ocean, the possibilities for agriculture and commerce were significant, but the canal’s estimated cost of $7 million (over $152 million today) was also quite significant. However, when the Erie Canal opened in 1825 it began collecting over $1 million in annual tolls.
Other canals follow the Erie
The rapid success of the Erie Canal generated the start of other publicly funded canal projects. In Ohio, the Ohio and Erie Canal, which began in the southern part of the state (in Portsmouth on the Ohio River) and ran northward to Cleveland on Lake Erie, opened to traffic in 1832.
During the 1827-1834 period, Pennsylvania built a canal to connect Philadelphia on the Delaware River (and from there to the Atlantic Ocean) with Pittsburgh, which was built at the confluence of the Allegheny and Monongahela rivers, and formed the Ohio River to the west. Although primarily a canal, certain portions of the system used other transportation methods, including a portage railroad that was largely propelled by stationary engines running over a 37-mile section that crossed the Allegheny Mountains.
The plan for a canal in Illinois
Connecting the Great Lakes to the Mississippi River and then on to the Gulf of Mexico via a canal that joined the Chicago and Illinois rivers had first been proposed by the French explorer Louis Joliet as early as 1673, which was shortly after his passage through what would become the greater Chicago area.
Illinois became a state in 1818; at that time its border had been extended northward by 60 miles from the foot of Lake Michigan (where the Northwest Ordinance earlier had prescribed it to be). The outcome of that addition was the site of Chicago, as well as a key footing on the Great Lakes.
After a proposal and lobbying by the Illinois delegation, in 1822 the U.S. Congress authorized the state to build a canal that would run from the mouth of the Chicago River to a specific point on the Illinois River. As part of the proposal, Illinois would receive the canal path itself as well as 90 feet of land extending outward from each side of the path. Timber and other resources could be harvested by the state on what had previously been federal land. However, the grant would be voided if the route had not been surveyed within three years or if the canal had not been completed within 12 years.
Unsuccessful efforts in Illinois
Action by Congress led the Illinois General Assembly to approve legislation appointing five canal commissioners to lay out the canal’s route and estimate its costs. Civil engineers made the first survey of possible routes. Total construction costs were estimated to be $713,000 (Note that $1 in 1822 would be worth over $247 today). The legislature then enacted legislation that chartered a private corporation to undertake construction of the canal. However, the corporation was unable to raise the necessary capital for the project, and it surrendered its charter on January 12, 1826.
In 1827, Daniel P. Cook, the lone member of the U.S. House of Representatives from Illinois (and the namesake for Illinois’ Cook County), convinced Congress to make a better offer. Another act of Congress gave the state alternate sections of land extending five miles from each side of the proposed canal (a total of 284,000 acres of federal land).
Once again the Illinois General Assembly passed an act that provided for a board of canal commissioners who were to lay out the route, select the alternate sections of federal land, and begin land sales to raise the funds required to finance the canal. Public land sales were conducted in Springfield in April and in Chicago in September 1830. However, during 1830-1832 only $18,799 was raised from canal land sales and $14,704 was paid out for canal commissioner expenses.
In England, George Stephenson invented the first successful steam-powered locomotive. (To learn more about early English railways, read this article). He built efficient locomotives for the Stockton and Darlington Railway, which began operations in 1825 and for the Liverpool and Manchester line in 1829. These advances led to the beginning of railroads in the United States. The South Carolina Railroad first introduced American-built steam locomotives for regular service in January 1831. Within two years the railroad had extended its line 136 miles (from Charleston to Hamburg); for a short time it was the longest steam railroad in the world. By the early 1830s railroads extended from New York City, Boston and Baltimore.
The “railroad revolution” meant that canals were less important than they had been previously.
The Illinois and Michigan (I&M) Canal project was floundering. Moreover, there were proposals put forward for a railroad connecting Lake Michigan and the Illinois River rather than a canal.
More political wrangling leads to the project’s (slow) start
The U.S. Congress once again stepped in. On March 2, 1833 it passed a law that allowed Illinois to use the federal lands previously donated for canal purposes for either a canal or a railroad, and left the decision up to the Illinois state legislature. In 1835 the Illinois General Assembly voted to proceed with a state-controlled canal. It was to be financed by a $500,000 loan, which was backed by the security of the federal land donation and anticipated tolls. Three new canal commissioners were appointed; they sought to raise funds for the canal’s construction. However, eastern U.S. and European lenders were unwilling to subscribe to the loan unless Illinois pledged its full credit to back the loans. The General Assembly met in a special session and passed an act to this effect on January 9, 1836.
Groundbreaking for the canal took place near Chicago on July 4, 1836. However, more issues arose; during the first year of construction bad weather and a lack of both manpower and equipment slowed progress. The majority of activity was not on the canal itself, but “building access roads, acquiring equipment, recruiting laborers, and putting up crude structures to house the workforce.”
However, other state improvement projects also were being promoted. As the United States grew westward, improved transportation was considered the primary method to attract settlers and exploit natural resources. “If Illinois failed to implement improvements, many feared that the rest of the country would outpace it.”
The 1835-36 Illinois General Assembly chartered 16 railroad companies; if completed they would link virtually all of the state’s major communities. However, by the end of 1836 the early railroad companies had been unable to raise enough money to undertake construction.
That led the state legislature to pass “an act to establish and maintain a General system of Internal Improvement” on February 27, 1837. The legislation committed the state of Illinois to the oversight of construction and operation of 1,300 miles of railroads and the improvement of all of its larger rivers for navigation.
The legislators who passed the bill counted on population growth to make this plan successful. “Bonds were to be issued on the state’s credit to pay for this massive public works project,” construction of which was to occur while the Illinois and Michigan Canal was being built.
Panic of 1837 slows the economy (and canal construction)
However, the Panic of 1837 (a major financial depression) severely impacted the values of stocks, commodities and land sales prices. The depression became a global event; banks failed, factories closed and unemployment surged.
Nonetheless, canal construction continued into 1841, largely through creative financing such as special bond sales at discounted rates. However, the economic hard times finally caused Illinois to issue scrip to contractors. The scrip promised to pay face values of the scrip plus interest whenever funds became available. But by the end of 1841 almost all work on the canal and the railroads had stopped; it was evident that the state was unable to meet its financial obligations. In 1842 the Illinois state treasury collected only $98,546 in tax revenue, while the interest charges on its debt was nearly $800,000 – just for that year! Illinois was pushed to near-bankruptcy.
Construction finally ends
The Illinois and Michigan Canal was finally completed in 1845 following another financial and administrative reorganization. The majority of the work on the canal was done by Irish immigrants; they lived and worked in transient work camps along the canal.
The 96-mile construction project included 15 lift locks, five aqueducts, and four hydraulic power basins that were built along the canal’s length.
The canal opened to navigation when the freight boat General Fry traveled northwest from the town of Lockport to the then-small city of Chicago. Although the formal dedication ceremonies for the I&M Canal did not take place until six days later, the journey of the General Fry generated crowds and fanfare.
People gathered along the canal to cheer the boat, which was “filled with passengers and decorated with flags.” Also carrying a full load of passengers, the tugboat A. Rossiter met the General Fry that evening to tow the freight boat through the section of the canal in Chicago.
“As the boats passed through the city they were greeted with cheering, which was renewed at the different bridges, and points at which the citizens were collected,” reported the Chicago Daily Democrat newspaper. “Altogether there was considerable excitement in the city, and all appeared rejoiced at the realization of the long-promised event – the opening of the Illinois and Michigan Canal.”
The canal’s impact
After finally being completed, the canal was pivotal to the growth and prosperity of the region it served during its first years. However, the most critical reason for the I&M Canal’s importance was that it connected Lake Michigan to the Mississippi River via the Illinois River, serving as the last link in an extensive water route that connected the Gulf of Mexico to the Eastern Seaboard.
Moreover, the canal helped to transform Chicago from a small town to a major American city, a center of commerce and the key transportation hub of the Midwest. The presence of the canal attracted railroads and key industries to Chicago. The city’s population boomed; increasing from 20,000 in 1848 to 75,000 in 1854.
By providing a direct water link between the Great Lakes and the Mississippi River, the canal helped to shift the center of trade in the Midwest from St. Louis to Chicago.
Use of the canal from 1848-1900
Canal boats carried passengers as well as freight in the first few years after 1848. However, passenger traffic disappeared rapidly when the Chicago & Rock Island Railroad began competing in 1854.
When the canal opened in April 1848 there were no railroads serving Chicago. However, by 1852 it had a connection to New York City, and by 1854 it was the railroad center of the Midwest. The new railroads were privately owned, and only some received government aid. With railroads a direct threat to the canal, it was a bitter twist when the Chicago & Rock Island Railroad obtained a right-of-way along the canal that it would be competing with. The railroad was supposed to compensate the canal for the loss of tolls, but a legal quirk nullified that provision. The railroad was built between Chicago on Lake Michigan and Rock Island on the Mississippi River. It became fully operational in the summer of 1854; almost immediately passengers and small bulk goods shifted from the canal to the railroad, which was faster and more cost-effective. In addition, the railroad operated year-round, while the canal froze over during the winter.
Despite these setbacks, commodity traffic on the canal continued to grow. In particular, heavy bulk items such as grain (the largest commodity), coal, lumber and stone were shipped via the canal. Nearly 300 boats regularly plied the canal in 1864, and it reached its peak tonnage (over 1 million tons) in 1882. In addition, tolls and land sales along its length allowed the canal’s managers to pay off its debt in 1871. It was one of the few canals built during that period to do so. In addition, a cash balance of $95,742 was turned over to the state treasury.
In 1871 the I&M Canal was also the first inland canal to shift from mule-drawn towlines to steam-propelled boats. However, the canal and the railroad continuously changed their rates in order to undercut the other. For a time the canal was able to lower tolls while increasing revenue through increased tonnage. But navigation along the canal was increasingly difficult after the state stopped investing in its maintenance. In addition, the Illinois River (which connected the canal to the Mississippi River) was never an overly dependable route. The river was often too shallow for boats to navigate from La Salle to Grafton. Both the state and federal governments were reluctant to spend the funds necessary to dredge that portion of the river.
Therefore, by the late 1890s commercial traffic on the canal had diminished significantly.
Chicago’s problems impact the canal
Near the end of the Civil War, the pollution of Chicago’s drinking water supply had reached the crisis level. The Chicago River was virtually stagnant; hard rains caused its contents to back into Lake Michigan (“where intake cribs had been built to siphon lake water for the city’s use”). Chicago’s population was just under 179,000 in 1865; their garbage and waste was dumped directly into the river, which became an open sewer.
The “solution” was to deepen the cut of the Illinois and Michigan canal so the Chicago River would flow south to Lockport, where the canal intersected the Des Plaines River. Downstate residents’ drinking water came from the Des Plaines and the Upper Illinois rivers, and they complained mightily. However, the Illinois General Assembly gave the city authority to proceed when it passed a law in February 1865. The project was built in stages, primarily when the canal was closed in the winter. The construction was finished in 1871; Chicago had spent nearly $3 million on the project.
However, by the early 1880s Chicago residents’ health was threatened again due to its contaminated water supply. By 1880 the city’s population had increased to over 500,000. This huge influx of people was depositing much more waste into the Chicago River, which was polluting Lake Michigan. The canal was unable to handle the increased garbage and sewage.
That led to the creation of the Chicago Sanitary District in 1889. It began construction on September 3, 1892 of the 28-mile Chicago Sanitary and Ship Canal that connected the Chicago and Des Plaines Rivers at Lockport. When completed in January 1900, it made the eastern portion of the Illinois & Michigan Canal obsolete; it was soon closed permanently to navigation. From then, canal traffic between Chicago and Joliet used the Sanitary and Ship Canal; although the I&M Canal maintained its land and water power lease concessions along the closed section of its line, it was unable to collect further tolls.
World War I through the 1930s
World War I began in August 1914. By that time commercial traffic along the canal was negligible. However, the Joliet to LaSalle section of the canal was revived with federal funds for what was then considered defense and war-related purposes. But this was the last major financial funding provided to sustain the Illinois & Michigan Canal as a working entity. By the 1920s the canal extending from Bridgeport had become a dumping ground for garbage and waste.
The Illinois Waterway opened in June 1933. It connected the Chicago Sanitary and Ship Canal at Lockport and extended 60 miles to Starved Rock State Park near Utica. On June 22 a flotilla of Mississippi River barges from New Orleans arrived in Chicago. This was the death knell for use of the Illinois & Michigan Canal for commercial traffic, which had been insignificant in recent years.
Beginning around 1900, use of the canal shifted primarily to recreation. Excursion boats of various sizes served a number of amusement parks near the canal, such as Rock Run outside Joliet.
In 1935, the Civilian Conservation Corps, which was a New Deal agency, worked with the National Park Service to restore some of the canal’s locks and began other projects intended for historic preservation and recreation. The outbreak of World War II ended these efforts. However, the efforts began again after the U.S. Congress designated the canal route the “Illinois and Michigan Canal National Heritage Corridor” in 1984.
President Ronald Reagan signed the legislation into law, which created the nation’s first heritage corridor. The designation “encouraged canal trails and nature preserves, and helped the downtowns along the canal by emphasizing economic development based upon history and historic preservation.”
Financial issues meant that building the Illinois & Michigan Canal took much longer than originally planned. In addition, the advent of railroads (particularly direct competition from the Chicago & Rock Island Railroad) cut into the canal’s revenue base. Other issues outlined above meant that the canal never lived up to the initial plans for it.
However, when it was finally completed in 1848 (more than 25 years after it was first authorized), it joined the Chicago River at Bridgeport near Chicago with the Illinois River at LaSalle, 96 miles away.
The canal linked the Great Lakes to the Mississippi River (and consequently southern and eastern U.S. markets). To a degree this occurred, particularly in the canal’s early years when southern sugar was brought north to Chicago and then across the Great Lakes and through the Erie Canal to the eastern U.S. seaboard. On the reverse route, eastern manufactured goods reached Chicago and then many passed down the Illinois River into the Mississippi River and to southern markets.
But the canal era in the United States was supplanted by the railroad era, which was subsequently supplanted by the era of trucking.
The Port of New York and New Jersey’s outgoing and incoming directors discuss container migration, reliance on data and how they avoided problems plaguing West Coast ports.
The East Coast ports have become a big winner in the trade game as more logistics managers diversify away from the West Coast. The Port of New York and New Jersey is just one of the ports reaping the benefits of this container migration.
American Shipper recently spoke with outgoing Port Director Sam Ruda and successor Bethann Rooney on their assessment of these historic times and how Rooney will continue to bring all stakeholders together.
Port Master Plan impact
AMERICAN SHIPPER: Both of you have overseen the development and implementation of the Port Master Plan — a 30-year strategy set to guide the port’s growth and manage the expected increase in cargo volumes. Given the historic volumes of containers, how many years did this propel you in the plan?
SAM RUDA: “From a cargo demand and capacity perspective, the cargo volume increase over the last two-plus years has propelled the seaport about five to six years forward. Just isolating capacity, we need to be mindful that effective capacity has a number of moving parts.
“One important component of that is the current high-volume period has also come with sharp increases in dwell time of containers, both empty and full. This is not a development that you can plan for. To the degree that cargo volume remains elevated, capacity can be increased through corresponding decreases in box dwell.
“The supply chain, at least at present, remains in flux, and while there are early signs of a trend toward reduced dwell, it has not happened yet. Short term, this is where capacity gains can be found.”
BETHANN ROONEY: “In 2021, the seaport handled just shy of 9 million TEUs. The Port Master Plan 2050’s container forecast includes a high and a low forecast depending on whether our strategy is to focus predominantly on our local cargo market (low end — 12 million TEUs by 2050) or to push to maximize our share of the discretionary market in addition to the local market (high end — 17 million TEUs by 2050).
“During the master planning process, the Port Authority decided to develop the plan around maximizing our local share and capturing a moderate share of the discretionary market (14 million-15 million by 2050).
“With that in mind, in 2021 the Port of New York and New Jersey handled the cargo volume that had not been anticipated by the plan until closer to 2027. That meant seven years of growth without any time for the supply chain to prepare and make the investment in the links of that chain, from additional trucks, chassis and warehouse capacity to additional personnel resources to new operating models such as additional hours of service.”
Predictive trade platforms
AMERICAN SHIPPER: The paradigm shift in e-commerce has catapulted digital logistics, some say, by 10 years. Is there a need for more predictive trade platforms to quantify the anticipated amount of trade coming in?
RUDA: “Data is indeed king. But good data is emperor (or empress). The key here is that a lot of stakeholders in the supply chain require different data sets. But the data needs to be accessible and customizable with fewer discrete platforms.
“Technology is less of the issue. What needs to occur is that data dashboards need to be utilized in a way that drives more collective decision-making beyond individual or modal silos. A good portion of the data exists. It’s just not being efficiently deployed and used to drive collective decision-making.”
ROONEY: “There is power in data that collectively we need to harness. For some supply chain stakeholders, data is nothing more than information and transparency. To them, it is: ‘Where is my cargo and is it available for pickup?’
“We need to go beyond that.
“The true power that the data holds is in being able to use that information, the data, to improve planning and resource allocation. Dozens of predictive analytics scenarios, depending on where you sit in the supply chain, exist for how data can be leveraged to help optimize resources and provide vastly improved information and transparency.
“For example, one question that data might be able to answer is, ‘When is the most probable time to schedule my trucker to pick up the container based on the location of my container on the ship and historical crane productivity?’
“One scenario related to the discretionary market that we have discussed is, for example, using manifest information when the ship sails from the last foreign port to extract the volume of IPI containers by railroad and destination and providing that information to the Class I railroads well in advance of the vessel’s arrival, so that the railroads can plan the number of empty rail cars that will be needed and have them already spotted in the Port of New York and New Jersey when the vessel arrives.”
Council on Port Performance
AMERICAN SHIPPER: Sam, the Port of New York and New Jersey, along with other ports across the nation, have had double-digit growth. Despite being a landlord port, you have not seen the problems the Ports of Los Angeles and Long Beach have seen with the stakeholders not working as one for efficient trade flow. What has the Port of New York and New Jersey along with their stakeholders done to be so united? Is it the Council on Port Performance?
RUDA: “At nearly 9 million TEUs, cargo volume through the Port of New York and New Jersey comes with its own set of challenges. This is especially true when you are experiencing a global pandemic. Nevertheless, what works well here is that we have strong leadership across the supply chain stakeholders and modal providers. This includes the ILA (labor), the railroads (Conrail, NS and CSX), the NYSA, as well as the terminal operators, trucking industry, equipment providers and depot operators, to name a few.
“There is a long history of the Port Authority of New York and New Jersey playing an active role as a convenor. We did not need to create a new forum to deal with the pandemic.
“The Council on Port Performance has been in existence since 2014 and includes 18 different sectors of the supply chain. The only thing we changed was the frequency of the meetings, which moved to weekly for the first year of the pandemic.
“As cargo volumes rebounded, however, we identified the need for a more narrowly focused stakeholder forum which included the terminal and depot operators, trucking, equipment providers, rail, and labor, which met on a biweekly basis. It is really important to have a common platform for sharing and reacting to real-time information. This is the tradition at the Port of NY and NJ, and it is a major reason for our collective success.
“As a final note on this, the seaport also has a productive and ongoing engagement with our federal partners. More specifically, the Coast Guard, the Army Corps of Engineers, Customs and Border Protection and the Maritime Administration. There are so many moving parts to efficient cargo movement. But our federal partners are real partners and we work very closely with them.”
Watch: Lori Ann LaRocco interviews Sam Ruda
AMERICAN SHIPPER: Beth, you are the architect of this council. Can you talk more about the performance, efficiency imperatives as well as the environmental sustainability measures you and the stakeholders are working on?
ROONEY: “First, it is important to recognize that the council is set up to work in an advisory capacity only. The council does not have the authority to require or enforce the adoption of recommendations by individual stakeholders. The council’s bylaws cite that ‘the Council on Port Performance (CPP) functions in an advisory capacity to provide advice, counsel and recommendations on matters relating to improved efficiency and service reliability in the Port of New York and New Jersey.’
“I believe that the most significant accomplishment of the CPP, dating back to its founding, is the recognition by all stakeholder segments that if one part of the supply chain is not performing well, the entire supply chain — upstream and downstream — is affected.
“The CPP helped break down the traditional silos wherein each segment was focused on their performance only to the point of recognition that an issue in one link could affect the rest of the chain (and its ability to make money). Having a forum for entities that do not have a formal business relationship to collaborate, communicate and coordinate allows each entity/segment to consider the upstream and downstream effects of a business decision that was traditionally made with blinders on.
“Now, decisions in one sector are made with a more holistic view of the entire gateway and with an understanding that when one segment does well, they all do well. Everyone is on the same team working for the good of the whole.
“That is not to say that all decisions made by individual sectors or entities are always welcomed by the other sectors and that there is never any conflict, but there is at least a dialogue in advance and consideration given to the rest of the supply chain.
“Currently, the council is focused on two key issues: 1) Long-dwelling imports and the need to have them removed from the container terminals to off terminal container yards, and 2) the evacuation of empty containers and the availability of empty container return locations.
“While the CPP does not address sustainability explicitly, improvements to efficiency and service reliability will have a positive impact on sustainability.”
Looking back and looking ahead
AMERICAN SHIPPER: Sam, you have worked at the Port of New York and New Jersey since 2015. What would you consider your biggest accomplishment?
RUDA: “The first is that the Port Department staff at the Port Authority is as engaged with our tenants as we have ever been. And this, in turn, develops into a productive two-way dialogue that collectively moves the needle in the right direction.
“The second accomplishment is leading the seaport through the COVID pandemic. As an industry that was deemed ‘essential’ for all the right reasons, keeping the cargo moving was key. But of higher importance was keeping the cargo moving while also keeping the front-line workers safe and healthy.
“Very early in the pandemic, I was not going to allow this port to be at the mercy of PPE handouts. We developed our own supply lines, and it was a shared and collaborative effort.”
AMERICAN SHIPPER: Beth, are you expecting in the coming months more TEUs coming your way as a result of logistics managers choosing the East Coast in an effort to circumvent any disruption or slowdown because of the ILWU negotiations?
ROONEY: “All indications are that we have been and will continue to see containers that would have otherwise moved over to the West Coast, but in fear of the ILWU negotiations, have shifted their volume to our seaport (and other U.S. East Coast ports).
“It is nearly impossible to accurately forecast the volume that is expected to shift to the East Coast, but in conversations with ocean carriers, shippers and beneficial cargo owners, the shift appears to be more proactive than was experienced in the early phase of the last set of ILWU negotiations.
“We have heard several examples of shippers who typically transport their products that originate in Asia through San Pedro Bay ports to warehouses in or around the central coast of California. They are now using the all-water route to our port and then land-bridging back to California, which is currently faster, cheaper and more reliable.”
AMERICAN SHIPPER: Multiple logistics providers in Europe are concerned the shipping delays coupled with the blank sailings has eaten into the supply of empty containers. What is your outlook as we navigate this uncertainty all stemming from “zero COVID”?
ROONEY: “There is no shortage of empty containers needed to support the Port of New York and New Jersey’s export market. We are encouraging the ocean carriers to deploy sweeper vessels to evacuate large numbers of empty containers. Sending the empties to Europe rather than back to Asia would benefit the Port of New York and New Jersey, particularly if the sweeper vessels can immediately return for a subsequent voyage to pick up the next group of empties.”
AMERICAN SHIPPER: The high freight rate has attracted five new entrants that are not engaging in reciprocal trade. Bal Shipping only transported 45 loaded U.S. exports last year. All the other entrants, including the Alibaba-backed Transfar, did not fill their vessels with loaded U.S. exports. Have you spoken with Transportation Secretary Pete Buttigieg on these new entrants?
ROONEY: “Of the new entrants, the Port of New York and New Jersey has only seen activity from three of five new entrants: Transfar, X-Press and Lihua. The first one didn’t start to call our port until August 2021.
“Given that these carriers entered the U.S. market to help pick up the extra inbound volume, it is not surprising that they did not fill their vessels with loaded exports. I believe there are a variety of reasons for that, including that the U.S. exports had service contracts with other carriers.
“Given the entrance late in the year, time is also needed for the containers to cycle through and be available for export. From August 2021 through March 2022, those three carriers have imported just 5,208 TEUs into the Port of New York & New Jersey. During that same time, those three carriers have exported 2,049 TEUs or 40% of the import volume — dramatically more than in other U.S. ports.”
China and the eventual surge in containers
AMERICAN SHIPPER: How concerned are you about China’s “zero-COVID” policies and the anticipated surge in containers that will follow?
ROONEY: “Undoubtedly we will experience a hockey stick-style surge beginning approximately six to eight weeks after the reopening in China. Import containers originating in China represent 29.6% of our total imports, which pales in comparison to the China market share in the combined Ports of Los Angeles and Long Beach, where it is more than twice as much.
“Hence, the effect will not be as significant here as it will be on the West Coast. Nonetheless, if we are unable to reduce the amount of long-dwelling imports and empties in the next several weeks, the surge will be very difficult to handle.”
Bubbles and thinking big
AMERICAN SHIPPER: The ports around the world work in bubbles. The World Bank and the United Nations Conference on Trade and Development have spoken about the need for global customs, a more transparent digital platform for more efficient trade. How can these multitude of bubbles pop in order to achieve data sharing so trade can be tracked, traced and moved efficiently?
RUDA: “I remember something that the late Bruce Seaton (former head of American President Lines) said about this industry. I am paraphrasing here, but he effectively said that the shipping industry is about efficient handoffs of the cargo (the container).
“While the industry was born right here at Port Newark, it has evolved in ways that ensure less efficiency in these cargo handoffs. This, ultimately, is the core problem that needs to be solved. Anything that simplifies, adds speed, reduces duplication of effort will add value toward streamlining this age-old bubble issue.”
ROONEY: “The concept of a centralized information system for global trade gives me great cause for concern. While technology and data platforms have the potential to help improve transparency and efficiency, those incremental benefits need to be carefully weighed against the risks of cybersecurity — namely data protection and the associated confidential and proprietary information that could be compromised.”
AMERICAN SHIPPER: Sam, how does the U.S. tackle its own bubbles?
RUDA: “I recently hosted a Q&A with Secretary of Transportation Buttigieg in Washington. …. I asked the secretary what he would like to see from U.S. ports. His answer was spot-on. He said, ‘Think big.’ Old problems require new solutions. And this is what makes this industry so interesting and fascinating.”
According to maritime expert John McCown, the U.S. ports with the strongest April performance were Charleston, South Carolina; Houston; and New York/New Jersey.
“Cargo continues to move at a record-setting pace and may not slow down anytime soon,” according to Mario Cordero, executive director of the Port of Long Beach.
The port on California’s San Pedro Bay recorded its busiest April ever. Its neighbor, the Port of Los Angeles, had the second-busiest April in its history even though it posted a year-over-year cargo volume decrease. But the strongest performances in April took place at ports on the Gulf and East coasts.
The Port of Long Beach last month moved 820,718 twenty-foot equivalent units, up 10% from the previous record set in April 2021. Imports increased 9.2% year-over-year to 400,803 TEUs, while exports dipped 1.8% to 121,876 TEUs.
Empty containers moved saw the biggest increase, 16.9% year-over-year, to 298,039 TEUs.
The port handled 3,281,377 TEUs during the first four months of 2022, a 5.1% increase from the same period in 2021.
Cordero said the port is not anticipating any lazy days of summer.
“We are preparing for a likely summertime surge as China recovers from an extended shutdown due to COVID-19,” he said in the port’s volumes report. “Shippers are quickly moving imports and empties from the docks, terminals are staying open longer and we are working to finalize our new Supply Chain Information Highway data-tracking solution.”
Trans-Pacific flows steady
Gene Seroka, executive director of the Port of LA, said in a press release Tuesday that trans-Pacific trade “has held steady” despite the COVID lockdowns in China.
The Port of LA handled 887,357 TEUs in April. The port’s busiest April occurred last year, when it moved 946,966 TEUs.
The more than 3.5 million TEUs moved in the first four months of 2022 at the Port of LA is 1% ahead of last year’s record pace.
The port did report declines. Loaded imports in April totaled 456,670 TEUs, a 6.8% decrease year-over-year. Loaded exports totaled 99,878 TEUs, a 12.7% decrease from April 2021.
While the number of empty containers moved at the Port of Long Beach increased by more than 15%, the Port of LA saw a 3.4% year-over-year decrease, handling 330,810 TEUs of empties.
“The 10 largest U.S. ports saw inbound box volume grow 7.1% in April, an increase from the 3.5% gain in March but below February’s 13.7% gain,” maritime expert John McCown wrote in The McCown Report.
April’s overall inbound volume at the top 10 ports of 2,189,744 TEUs was the third-highest total ever and just 1.8% below the record 2,230,919 TEUs set just a month earlier, McCown said.
“April was the 11th straight month in which the year-over-year percent change in volume at East/Gulf Coast ports outperformed West Coast ports,” he noted. “In April, there was a 22.1 percentage-point coastal gap resulting from an 18.7% gain at East/Gulf Coast ports and a 3.4% decline at West Coast ports. This is the fourth-highest monthly gap ever in those measures and above the average 16.6 percentage-point difference over the 11-month period.”
He attributed the stronger relative performance of ports on the Gulf and East coasts to the initial pandemic volume surge disproportionately benefiting West Coast ports and impacting comparisons; shippers rerouting cargo to “avoid the widely reported congestion” in LA and Long Beach; and lower linehaul costs from the Gulf and East coasts compared to cross-country intermodal service from the West Coast.
Shanghai volume redirected
April was strong at U.S. ports because China’s total container volume was down only 2.5%, McCown pointed out.
“As a result of the lockdown in Shanghai related to a COVID variant, the Port of Shanghai, the largest container port in the world, saw a 25% reduction in its volume in April. However, with seven of the 10 largest container ports in the world in China, that volume was redirected,” he explained.
According to McCown, the U.S. ports with the strongest April performance were Charleston, South Carolina, up 34%; Houston, up 26.5%; and New York/New Jersey, up 22.4%.
“The weakest performance in April came in at Seattle/Tacoma, down 20.1%; Oakland, down 15.8%; and Los Angeles, down 6.2%,” he wrote.
McCown forecast May’s numbers “will likely show an overall decline as it will be measured against the busiest-ever month for West Coast ports in May 2021.”
Container shipping spot rates are easing, at least temporarily, and far fewer ships are stuck waiting off U.S. ports.
It’s still very expensive to ship containers full of goods across the oceans. Spot rates globally are still more than quadruple pre-pandemic levels. But rates are now materially lower than they were a few months ago — and falling by the week. The Shanghai Containerized Freight Index (SCFI) logged its 15th consecutive weekly loss on Friday.
The question ahead is whether peak season volumes, the end of China lockdowns and port labor unrest will cause spot rates to spike yet again in the second half, or whether falling import demand due to inflation and the end of stimulus will pull ocean spot rates lower still — perhaps even below annual contract rates.
Container shipping rates off highs
Weakness in the Asia-West Coast trade is now showing up in the Freightos Baltic Daily Index (FBX). This mirrors the trend previously shown by the weekly Drewry World Container Index.
Between May 2 and May 11, the FBX Asia-West Coast assessment — which includes premium charges — sank 25% to $12,217 per FEU. It subsequently rose to $13,806 per FEU as of Friday. But even so, Friday’s rate was down 33% from the lane’s all-time high in late September.
The Drewry Shanghai-Los Angeles assessment, which doesn’t include premiums, was down to $8,666 per FEU as of last week.
That’s 23% below levels in the third week of January and 30% below the index’s late-September record.
Asia-East Coast routes show the same directional trend: down. The FBX Asia-East Coast rate assessment fell 15% from $18,711 per TEU on May 2 to $15,982 per FEU on Friday. The index was down 28% from the record high in late September.
The Drewry Shanghai-New York rate assessment was $10,926 per FEU last week, down 22% from mid-January and 32% from the all-time high in mid-September.
The Platts Container Rate Index previously showed a different pattern than several other indexes, with its Asia-East Coast spot rates still rising. Now, Platts is also showing declines. It put Asia-East Coast spot rates at $10,500 per FEU as of Friday, down 11% from the all-time high of $11,850 in mid- to late April.
Platts’ Asia-West Coast assessment declined to $8,000 per FEU, 16% below the index’s all-time high in February.
Platts, which is a part of S&P Global Commodities, said Monday that “persistent weak demand and a bearish sentiment over the market pressured rates to multi-month lows.” Spot rates are now “edging closer to contracted term rates,” it added.
Blank sailings for Asia export services
The three alliances — 2M, Ocean Alliance and THE Alliance — “blanked” (canceled) sailings during the initial Q2 2020 lockdowns due to falling import demand. Blank sailings artificially reduced sailing capacity to prop up rates. During the height of congestion in late 2021 and early 2022, carriers blanked sailing for a different reason: There were too many ships stuck waiting at export ports to pick up imports on the other side of the ocean.
Now, it appears carriers are blanking sailings for a mixture of reasons: congestion, reduced exports out of China, as well as reduced import demand.
“Shipowners have continued announcing blanked [canceled] sailings and port omissions as volumes wane, in a bid to prop up freight rates,” said Platts.
One U.S. freight forwarder source told Platts that it has seen “drastic volume declines for the past six weeks. It’s all the blank sailings now. That’s going to stabilize rates, in my opinion.”
Simon Sundboell, founder of eeSea, believes China lockdowns are playing a role in blank sailings. “During the early stage of lockdowns, carriers might have accepted a slightly lower utilization to keep the vessels and equipment conveyor belt moving,” he told American Shipper. “But below a certain utilization, it does make sense to blank the vessel instead.”
According to project44, the 2M Alliance will blank 39% of its sailings globally between April 25 and June 12 “due to a drop in [vessel] demand caused by the situation in China.” The Ocean Alliance will blank 37%, THE Alliance 33%.
Last week, Xeneta CEO Peter Berglund said that 63 sailings with capacity of 517,300 twenty-foot equivalent units had been blanked from the Asia-West Coast lane over the prior five weeks.
Berglund attributed the move to “both a softening of the demand picture as well as a strengthening of carrier resolve to protect the healthy spot rates which have served them so well.”
US port congestion off its highs
Blank sailings can reduce ship queues at ports, due to reduced arrivals.
FreightWaves founder and CEO Craig Fuller lays out the premise of Freedom Trade.
American enterprises and consumers should move away from Chinese dependency and demand that supply chains are orientated toward what I call the “Freedom Trade,” a system built on the idea that the rule of law, domestic free markets, human rights, and environmental standards are necessary for global prosperity and peace.
Supply chains operate best when there is predictability and peace – and the only way to guarantee this is to ensure that countries operate within the Freedom Trade system.
Post-Cold War prosperity for much of the world
The most productive and safest period in human history has taken place over the past 30 years, thanks to the foundation that America helped to build during the Cold War. The implosion of communism in what was then the Union of Soviet Socialist Republics (USSR) left the world with an uncontested superpower (at least for a period of time). China’s entry into the World Trade Organization in 2001 began a new era of global economic integration.
Capitalism spread wealth far and wide, benefiting nearly every civilization and country. Living standards increased to unprecedented levels. The world became oriented toward market-driven economies and countries participated in free trade. American-designed technology and information networks proliferated, offering electronic commerce and the ability for countries and entrepreneurs to sell their goods to a worldwide audience.
The world became connected in ways that few would have imagined in the Cold War era. Countries that shifted their economies toward global markets were largely rewarded with capital investment and prosperity.
The United States played global policeman; we weren’t perfect, but the international order was far more predictable than during the great power near-peer conflicts that plagued the past few centuries. The world became a much more peaceful place under the American globalization system than it had been before it. (And that doesn’t mean that there haven’t been conflicts within or between nations and terrorism has been a cancer across the globe.)
The U.S. Navy aircraft carrier groups that were built after World War II and since have practiced ‘gunboat diplomacy,’ ensuring that trade lanes were open and protected from those that would jeopardize commerce and (relative) peace.
The world’s economies since the end of the Soviet Union
Since the break-up of the Soviet Union, America’s primary expectation of and for other countries was to allow global commerce to proliferate. If a country participated in the U.S.-led international trade regime, it gained far more than it gave up.
Countries that had once been mired in poverty due to lack of capital found that if they participated in the American free-market system, they generally would be rewarded with peace and prosperity. And many countries did participate.
This was first seen in Germany and Japan, the nations that lost World War II. The United States helped rebuild their economies, and since then they have prospered mightily. Others followed, including China, Vietnam, Russia, Colombia, Mexico, the Philippines, and countries throughout Eastern Europe. All experienced rapid growth and prosperity – often benefiting from America’s free trade system far more than America itself did.
When nations joined the American free trade system, they were expected to create open and free markets at home. Countries were also expected to ensure (to one degree or another) standards for human rights, the environment, and rule of law that were more common in advanced Western-oriented economies.
The strength of the American free-market system was that it relied less on hard power (military) and more on market power and consumer opinion. American free markets had always relied upon proxy power in the form of a global currency and the purchasing power of global consumers. If a country violated rules that either the market or consumers had established, the violating country or business would be punished by losing American dollars.
And for the first 20 years after the fall of the Iron Curtain, the proxy power of American free markets worked exceptionally well. Countries and businesses that operated under this model were rewarded with unprecedented prosperity. In nearly all parts of the world, the standard of living quickly increased.
The People’s Republic of China does it differently
No country benefited more than the People’s Republic of China.
China, which suffered under some of the most incompetent and unjust leadership in the period from 1949 through the Cold War, began to ascend from an impoverished backwater to a world economic and military power. From 2000 to 2010, China’s GDP per capita more than quadrupled.
In the earliest part of its ascension towards economic prosperity, China did develop a stronger orientation toward American free markets. It even developed a semi-market-driven domestic economy that allowed Chinese citizens to benefit significantly from prosperity and acquire property.
But as China became wealthier, the American version of the free market became far less appealing to the Chinese Communist Party (CCP). The CCP wanted American free-market prosperity, but without offering the rule of law, domestic free markets, human rights, or environmental standards. The Chinese wanted to mooch off the free market but offer little in return.
The United States paid a massive price for allowing China to “have its cake and eat it too.” The American working class was hollowed out as jobs and production were outsourced to Chinese manufacturers. Moreover, Chinese markets were never truly open to American businesses and the Chinese track record on human and environmental rights is abysmal.
And the world was willing to play along… As long as China was willing to build the infrastructure and systems that enabled global supply chains to benefit from cheap labor and manufactured goods, the free market looked beyond the failings of the Chinese government and its unwillingness to participate in American-led standards.
But that recently changed.
When China locked down roughly half of its economy, it exposed the world to a disturbing reality – the more dependent we are on Chinese supply chains, the more vulnerable the American free-market system is, thus endangering peaceful trade and global prosperity.
China has attacked the very system that has enabled it to prosper and has stated its intention to create a new system, based on Chinese governing principles. It aspires for a world not of American principles of economics, but rather centrally planned control and artificial prosperity. The Chinese version of a prosperous system has little regard for individual rights, environmental standards, or free markets.
Therefore, Freedom Trade demands that autocratic regimes stop trying to manipulate the markets in which they operate. Otherwise, they artificially impact the supply chains that global businesses depend on and can cause great damage to the entire Freedom Trade system.
And since supply chains prosper when all parties have a mutual understanding and aligned goals, the world will once again enjoy supply chain prosperity and transparency.
FreightWaves Classics recognizes Asian/Pacific American Heritage Month with a profile of Melvin K. Bell.
May is Asian/Pacific American Heritage Month. Organizations across the United States are paying tribute to “generations of Asian and Pacific Islanders who have enriched America’s history and are instrumental in its future success.” FreightWaves joins in that tribute.
Melvin Bell’s childhood and early history
Melvin Kealoha Bell was born in 1920 in Hilo, on the island of Hawaii (the “Big Island”), in what was then the U.S. territory of Hawaii.
Following a widely practiced Hawaiian custom, his parents placed him with John Bell, his maternal grandfather, to be raised through what is now known as middle school. Melvin then returned to his parents, but he kept the surname Bell for life.
Bell’s father worked as a chief wireman for the Hawaiian Telephone Company. He also had a second job, running a small radio repair shop from his home’s garage. With a “strong technical aptitude and an insatiable curiosity,” Bell helped his father in the repair shop; he learned how various electrical and mechanical devices functioned. His father taught him how to repair a variety of electrical equipment and appliances. In fact, despite his mother’s wishes to the contrary, Bell would often take apart the family’s toaster, vacuum cleaner and other household appliances and then put them back together.
The Coast Guard and World War II
In 1938 Bell graduated from high school; he then moved to Honolulu on the island of Oahu. He met several U.S. Coast Guard (USCG) servicemen, whose stories about the Coast Guard inspired him to join that branch of the U.S. military. He enlisted in the Coast Guard on November 5, 1938, and was assigned to the USCGC cutter Taney in Honolulu harbor. He enlisted as a mess steward because this was the only rating available to him as a Native American. Bell later said, “I just accepted it as a fact of life that my opportunities would be limited because of my race.”
Because of his interest in radios and electronics, Bell spent much of his off-duty time in the Taney’s radio room. In 1939 Bell diagnosed and repaired a broken high-frequency transmitter on the Taney that the ship’s radioman as well as the District Communications Officer had been unable to fix. Bell impressed officers aboard the ship with his in-depth knowledge of radio technology and he was rewarded by being promoted to Radioman Third Class. In 1940 Bell was transferred to the Cutter USCGC Reliance as its radioman-in-charge.
Bell had additional responsibilities on board the Reliance, including monitoring the patrols of a USCG seaplane that was based at the U.S. naval base at Pearl Harbor. In 1941, Bell was reassigned to the USCG’s district communications station, which was located at the Diamond Head Lighthouse. His primary responsibility was to listen for international distress transmissions. Early on the morning of December 7, 1941, Bell was on duty when the Japanese Imperial Navy launched its surprise aerial assault on Pearl Harbor. He received a teletype dispatch from the Coast Guard District Office ordering him to transmit on the distress frequency to all ships and stations that Pearl Harbor was being bombed.
Bell’s radio messages were the first to warn commercial vessels in the region of Japan’s deadly attack. He also transmitted similar alerts to other U.S. military installations throughout the region.
Following the Japanese attack and the declaration of war by the United States on December 8, 1941, Bell was sent to a Navy radio operating station. With other radio operators, he listened to Japanese radio code broadcasts, which he typed and sent to Navy cryptographers. Next, he was assigned to the U.S. Navy’s Fleet Radio Unit-Pacific, where he continued to log Japanese coded messages. He worked in “communications intelligence,” and with many others Bell helped to break the secret Japanese Imperial Navy code.
For their work in intercepting and recording Japanese code messages prior to the Battle of Midway, Bell and his “shipmates” were awarded the Navy Unit Commendation.
Because the U.S. was able to decipher most of the Japanese messages, the U.S. Navy was able to win one battle after another in the Pacific Theater. During the war the highly decorated Bell became the first Pacific Islander to be promoted to chief petty officer in the U.S. military.
About six months after the Battle of Midway, Bell was transferred to the Coast Guard Intelligence Unit at New Smyrna Beach, Florida. He was then transferred to a similar unit on Long Island, New York. At this location he wore civilian clothes, as this work was highly classified. He was stationed there until the end of World War II. Following the war he learned that the radio messages he copied came from a German safe house in Manhattan, and that his work was instrumental in a joint FBI/Office of Naval Intelligence operation that broke up a Nazi espionage network in New York City.
Post-World War II
After World War II, Bell remained on active duty and next served as a radioman aboard USCGC Sagebrush, which was stationed in San Juan, Puerto Rico. He was reinstated to the rating of Chief Radioman aboard the Sagebrush. His next assignment was as an instructor at the new Electronics Technician School at the Coast Guard Training Center in Groton, Connecticut.
While in Groton, Bell met the woman who became his wife; they were married in May 1950. His next assignment was as Executive Officer of USCG Loran Station, on Panay Island, Philippines. His final assignment was on the USCGC Casco, which was based in Boston.
In 1959, Bell retired from the Coast Guard after more than 20 years of service. He was the service branch’s first Master Chief Electronics Technician and the first Master Chief Petty Officer of color. He returned to Hawaii as a civilian employee of the Coast Guard. Bell then spent the next 45 years as a civil service employee of the U.S. Department of the Navy, serving as a quality engineer.
He retired in September 2004. Altogether, he had served for nearly 66 years, an unprecedented length of federal service, both military and civilian. He received official recognition from President George W. Bush for having one of the longest federal government careers in American history.
Bell died in September 2018 at the age of 98 at his home in Westminster, California. He was survived by his wife, nine children, 26 grandchildren, and 37 great-grandchildren.
According to an article in Maritime Executive following his death, Bell was to be “honored as the namesake of a (USCG) Fast Response Cutter.”
Author’s note: FreightWaves Classics thanks transportationhistory.org, navymemorial.org and Maritime Executive for information that contributed to this article.
When it comes to lifting lockdowns in China, false hope will remain the norm.
Another week — and another pledge that the lockdown in Shanghai may be lifted. It’s not the first time this has been announced.
And it won’t be the last.
The city’s vice mayor, Wu Qing, said at a news conference Thursday that there would be an “orderly opening, limited [population] flow and differentiated management.” Yet, no date has been set.
How many times do these false alarms have to be stated? “Actions speak louder than words” applies to this situation. The government’s actions are not reflecting the rhetoric that officials are putting out.
Anyone who has been reading the logistics reports knows the truth. The message is simple: The Chinese government, not the local level, is in control of the flow of manufacturing and trade.
Crane Worldwide Logistics informed clients in its Thursdayupdate: “For export, we still need to check with suppliers whether their local government allows container drayage or trucking service with truck drivers from Shanghai; or whether they can send cargo to our warehouse in Shanghai. We need to coordinate with the consignee for the document turnover and delivery schedule case by case for import.”
Worldwide Logistics offered a wide breakout on the “zero-COVID” status and impacts across the country to customers.
“We can see the Shanghai pandemic situation is trending towards a good prospect steadily,” the company said. “However, in some areas like Tai cang, Zhang jia gang and Chang shu, the COVID cases figure is rebounding, which causes the problem of cross-city delivery and containers stuffing. It should still take some time for the cross-city transportation to recover to the normal. The whole market is still impacted by the COVID situation, and the recovery depends on when the pandemic situation can be totally controlled in the country.’
Seko Logistics informed clients on Friday, “Trucking in and out of Shanghai requires a traffic permit, which is only valid for 24 hours and only on specific routes. Even with this arranged, it is possible for booked trucks to be commandeered by the government to transport aid supplies.”
This comment after China saying it has increased the list of companies that can reopen under a “closed loop system “ to 2000. The lack of ability for trucks to deliver raw materials into these “closed loop” companies has impacted companies like Tesla, which had to stop production.
Now the government is trying to help.
The insanity of this situation has created a dense fog, making the logistics planning picture beyond murky. The obstruction created by Shanghai has gummed up vessel schedules.
American Shipper reviewed a booking confirmation from Oakland, California, to Great Britain where the booking was on its 60th update. The estimated delivery went from late May to late June.
Once the roads are truly open and products can be completed and transported, a flood of containers is expected to arrive in the United States, at least a month or two after a real opening.
“Right now, the Trans Pacific Eastbound market reminds one of being in the eye of a hurricane,” said Alan Baer, CEO of OL USA. “Blue sky, available space and moderation of pricing. However, soon enough the 100 miles per hour wind and rain could be battering supply chains all over again.”
No slicker or umbrella will protect the fragile U.S. logistics system when this container storm hits. The problems plaguing the Port of LA and Long Beach are still there, no matter what messaging we hear from the Biden administration on improvements.
The dwell time of the containers, and the continued long line of vessels waiting for berth, are a physical reminder of the inefficiencies.
FreightWaves Classics profiles the Montauk Point Lighthouse.
William Kidd, also known as Captain Kidd, was a Scottish sea captain who was commissioned as a privateer and was also a pirate. Following a trial that heavily involved politics, he was executed in London in 1701 for murder and piracy. Stories swirl that Captain Kidd buried treasure in two ponds that are near the foot of where the Montauk Point Lighthouse now stands. This supposedly took place around 1699, and the two ponds are called “Money Ponds” today.
Early history of the lighthouse
Pirate lore aside, the Montauk Point Lighthouse was commissioned by President George Washington in 1792 and the Second U.S. Congress authorized its construction. The Montauk Point Lighthouse was the first public works project of the United States of America.
Although commissioned by President Washington and authorized by Congress, the man most responsible for getting the lighthouse approved and built was Ezra L’Hommedieu, a lawyer who represented the New York Chamber of Commerce who had been a member of the Continental Congress prior to the American War for Independence.
When he promoted the importance of and need for a lighthouse, L’Hommedieu pointed to New York City’s leadership role among the American ports that then existed. He stressed that New York City “was first among American ports in the volume of its foreign commerce.” L’Hommedieu also pointed to New York City’s key role in the transatlantic trade between the U.S. and England. Despite the fact that the Revolutionary War had only ended a decade before, England was still the young nation’s largest trading partner. By 1797, New York City’s harbor was handling one-third of the U.S. trade with other nations. Whether in the 1790s or today, international commerce was (and is) essential to the economic health of the United States.
L’Hommedieu and three veteran sea captains traveled to the east end of the-then sparsely populated Long Island to assess where a lighthouse should be located. Using their navigational expertise, the sea captains identified the area near Montauk as a particularly dangerous shoreline that needed a lighthouse to help guide ships safely through those waters and toward New York Harbor.
Interestingly, the need for a lighthouse was more critical during the winter months due to the prevailing winds that blew during that season. Ships powered by sails were more vulnerable to the stronger-than-usual northerly winds that would often blow at gale force. Ships approaching from sea needed a lighthouse at the end of Long Island to guide them safely along the south side into New York harbor.
Construction of the lighthouse
In addition to finding the best site for the lighthouse, L’Hommedieu also designed it. As noted above, although the lighthouse was authorized by Congress on April 12, 1792, actual construction did not begin until June 7, 1796.
The first Montauk Point Lighthouse was finished on November 5, 1796. The lighthouse was also the first built in New York state. In early April 1797, lighthouse keeper Jacob Hand lit the wicks in the lamps in the tower, and the lighthouse went into operation. It was manned by civilian keepers until World War II, when the U.S. Army took control.
Located at the very tip of eastern Long Island, the lighthouse’s tower is 110-feet, 6-inches high. The current light was installed in July 2001. Its beam is equivalent to 290,000 candle power and flashes every five seconds. It can be seen at a distance of 19 nautical miles, considerably further than the first light lit by Jacob Hand.
From the lighthouse there are 360° views of Block Island Sound, the Atlantic Ocean and points west. Located in a relatively desolate area when first built, the area around the Montauk Point Light has grown considerably since then. Montauk Point State Park is now located adjacent to the lighthouse property. The hamlet of Montauk is part of the Town of East Hampton in Suffolk County, New York.
As the eastern sentinel for New York Harbor, the lighthouse was a key reason for the port’s importance to the nation’s commerce. Montauk Point Lighthouse is the fourth-oldest active lighthouse in the United States, and was designated as a National Historic Landmark in 2012 (one of only 12 lighthouses with that distinction).
About 64 years after its initial construction, the Montauk Point Lighthouse underwent a significant renovation in 1860. Among the changes, two new levels and a larger lantern were added. The two new levels increased the tower’s height from 80 feet to 110-feet, 6-inches (which is its current height). A Fresnel lens that was 12-feet high and 6-feet in diameter (and also weighed approximately 10,000 pounds) was installed.
In addition, the current keeper’s dwelling was built next to the lighthouse tower, while the first dwelling that dated to 1796 was torn down.
Additional renovations continued. In 1873 a steam-powered fog signal was installed, followed by a fog signal building in 1897. In 1903 a fixed red range-light was added to the watch deck of the lighthouse’s tower. The range-light was to warn ships of Shagwong Reef, which is a navigational hazard about 3.5 miles northwest of the lighthouse. However, a hurricane that hit Long Island on September 21, 1938 severely damaged the range-light. (The practice of naming hurricanes did not begin until 1953.) The damaged light was removed on July 1, 1940 at the same time that the lighthouse was electrified. The first Fresnel lens was replaced in 1903 with a bi-valve Fresnel lens. This lens was in service until February 3, 1987; it was subsequently replaced by an airport beacon with “a strength of 2.5 million candela.”
World War II
Following the entry of the United States into World War II, the lighthouse became part of the Eastern Coastal Defense Shield and was manned by the U.S. Army. The last three civilian light keepers left the lighthouse in the spring of 1943. The Army opened Camp Hero adjacent to the lighthouse in 1942. It had two 16-inch gun batteries of two guns each, and a battery of two six-inch guns. (The 16-inch guns were the same size as the largest guns on the nation’s largest battleships of the time.) The casemates, gun emplacements and concrete fire control towers were built at what is now Shadmoor State Park, and are still visible 80 years later.
Following the end of World War II, the United States Coast Guard took over the operation and maintenance of Montauk Point Lighthouse. The Coast Guard operated the lighthouse until it was automated on February 3, 1987.
In May 1987, the lighthouse museum was opened to the public; it is operated by the Montauk Historical Society, which had leased the property from the Coast Guard. Nearly 20 years later (September 30, 1996), President Bill Clinton signed legislation into law that transferred the lighthouse property to the historical society.
The impact of erosion
When the lighthouse was built in 1796 on Turtle Hill, it was 300 feet from the edge of the cliff. Today, due to the effects of shoreline erosion, it is now 100 feet from the edge. At the end of World War II the U.S. Army Corps of Engineers built a seawall at its base; however erosion continued.
The Coast Guard considered a plan to demolish the lighthouse in 1967 and to replace it with a steel tower further from the edge of the bluff. This plan came under strong protest, and U.S. Rep. Michael Forbes authored legislation that transferred the lighthouse to the Montauk Historical Society so that the lighthouse would be preserved. The legislation was passed by Congress.
While there have been several different efforts to slow the erosion over the past 55 years, it has continued. The latest Corps of Engineers contracted work is underway.
The early lighthouses of the United States were built primarily along the Atlantic Ocean. They were not only beacons meant to protect ships and their crews, but to also help maintain the nation’s critical international commerce. The Montauk Point Lighthouse has served those purposes for over 225 years. There is no doubt of the lighthouse’s significance to New York’s maritime commerce in the early Federal period.