⚠️ Freight Under Attack

Good Monday morning. The feature story covers shippers halting operations in the Red Sea region and its impact on global logistics. We'll also cover Arrive Logistics market analysis, Coyote Logistics workforce reduction strategy, and Harry Giles's transition from NBA courts to the world of trucking and back again.

In today's email:

• Three Freight Headlines: Arrive's freight market update, Coyote's new staff reduction strategy, and NBA's Harry Giles III's stint in trucking.
• Shipping Giants Pause Operations After Red Sea Attacks
• Around the Freight Web: CBP suspends rail operations, Load Broker comedy, and an underground logistics success.
• Freight Meme of the Day

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🐔 WHAT’S COOKIN’ IN FREIGHT

📊 Arrive's December 2023 Market Update. November's freight market showcased varied trends: Van rates spiked post-Thanksgiving, while reefer rates climbed in early November but later fell. Flatbed rates remained steady with minor changes. Truckload capacity was adequate for the holiday season, though some regional tightness was anticipated. Van tender rejections stayed below 4%, reflecting strong compliance with contracts. Despite slight inflation, consumer spending remained high, influencing the Federal Reserve to keep interest rates steady. The freight market is moving towards equilibrium in 2024, with potential rate convergences and increased spot rates.

📦 Coyote Logistics Voluntary Separation Program. Coyote Logistics is implementing a voluntary separation program targeting senior managers and directors. This marks the fourth staff cut in 2023 as the company attempts to optimize operations amidst the freight market downturn. While participation in the program is optional, there's an implication that non-participants may face eventual layoffs. According to LinkedIn data, Coyote has seen a 7% reduction in its workforce over the past two years.

🏀 Harry Giles III: From NBA to Trucking and Back Again. Harry Giles III, once an NBA first-round pick, faced career challenges due to knee injuries. Embracing entrepreneurship during his NBA hiatus in 2022-23, Giles founded Lee G Logistics LLC, a North Carolina-based trucking company. Established in January 2022, the company specializes in interstate general freight with a single truck. Seeing how quickly a sports career could turn, he found investing in a more stable financial plan important. Giles has made a striking comeback to the NBA, signing with the Brooklyn Nets.

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Shipping Giants Pause Operations After Red Sea Attacks

There is another geopolitical issue affecting global shipping: recent attacks on vessels transiting the Red Sea by Yemen's Houthi rebels have prompted major shipping companies to reconsider their routes. The situation has far-reaching implications for logistics and the supply chain.

Escalating Risks in the Red Sea

The Red Sea is a critical maritime route. There has been an alarming rise in attacks on container ships, particularly at the Bab-el-Mandab Strait.

• December 3, 2023: Yemen’s Houthi rebels hit the OOCL-chartered vessel Number 9.
• December 15, 2023: The Maersk Gibraltar narrowly avoids a missile attack while transiting near Yemen.
• December 16, 2023:
  • Early in the day, Hapag-Lloyd's Al Jasrah is struck by an aerial projectile in the Bab Al Mandab Strait. The attack causes a fire on deck and a container to fall overboard.
  • The MSC Alanya performs evasive maneuvers close to Yemeni waters due to the heightened risk of attack.
  • The Maersk Gibraltar experiences another close call with a missile.
  • A Navibulgar bulk carrier, Ruen, is boarded in an incident resembling Somali pirate tactics.
  • The MSC Palatium III, operated by the Mediterranean Shipping Co., is hit by a missile from Houthi rebels.

Major shipping lines like Maersk, Hapag-Lloyd, and CMA CGM have suspended transits through the Bab al-Mandab Strait. MSC removed MSC Palatium III from service due to fire damage and canceled all transits of the Suez, with some vessels rerouted around the Cape of Good Hope​.

Global Trade Impact

These attacks are a big threat to global commerce. Around 40% of international trade passes through the Red Sea, leading to the Suez Canal and southern port facilities in Israel. Insurance costs have spiked for ships entering the area– driving prices up by tens of thousands for larger vessels like oil tankers.

Ryan Petersen, CEO of Flexport: Petersen's comments on Twitter shed light on the immediate and practical impact of the attacks on logistics companies. He shared the challenges Flexport faced, with 2206 TEUs on container ships expected to transit the southern Red Sea and Gulf of Aden over the weekend. Additionally, he:

• Anticipates large rate increases, potentially four times higher than recent lows.
• Warns of a 20% drop in effective network capacity due to rerouting around the Cape of Good Hope.

The situation has become so grave that the U.S. has proposed the formation of a multinational naval force in the Red Sea to safeguard commercial vessels.

Market Responses to the Crisis

Despite the direct threat to shipping operations, the crisis in the Red Sea has led to a rise in the stock prices of major shipping companies.

• Zim: 18% increase
• Hapag-Lloyd: 16% increase
• Maersk: 8% increase

Greg Miller, Senior Editor at FreightWaves: Miller points out the paradoxical market response to the attacks in the Red Sea. He notes, "The view in the stock market is that disruptions in the Red Sea will cause more ships to reroute around the Cape of Good Hope, with longer average voyage distance helping to offset oversupply, supporting rates higher than they’d be minus the Red Sea attacks."

Potential Long-Term Effects

The current disruptions in the Red Sea could have lasting implications. Alphaliner speculates that ongoing problems could boost tonnage demand in 2024, as carriers will need more ships for the longer routes, and this could reduce overcapacity in the shipping market.

Historic Significance: Petersen also points out the importance of the southern Red Sea chokepoint throughout history, reaching back to the Roman invasion of Yemen in 1 B.C.

Looking Forward: The U.S. is set to announce Operation Prosperity Guardian, an expanded maritime protection force for the region. It is believed to have secured the involvement of Jordan, the UAE, Saudia Arabia, Qatar, Egypt, and Bahrain. They are hopeful that China will lend its support as well, given its economic stake.

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AROUND THE FREIGHT WEB

🛤️ CPB Ceases Rail Operations. CBP to suspend railway operations in Eagle Pass and El Paso for migrant custody support starting December 18. The suspension is temporary, but no date for resuming operations was given in the initial report.

🎤 Load Broker Laughs. Comedian Joey Avery poked fun at a self-proclaimed "load broker" in the audience at a recent show. Catch the video here.

🚇 Underground Network Triumph. Garrett Scott of Pipedream Labs celebrates defying the odds to build an underground logistics network, sharing insights on its creation and future.

📉 FourKites Trims Team. FourKites makes a 15% global cut, with key execs departing to pave a path to profitability.

🚚 Theft Spike in Mexico. Mexico's cargo thefts climb, averaging 57 daily in Q3, with auto parts and pharmaceuticals most targeted.

FREIGHT CONFERENCES WE'RE ATTENDING

Manifest Vegas, February 5 - 7, 2024, is the world's largest global supply chain & logistics tech event, bringing together Fortune 500 global supply chain executives, logistics service providers, cutting-edge startups, venture investors, and technology leaders.  Join 4,500+ supply chain innovators to foster new strategies and relationships. Receive $200 off your ticket with our exclusive link.

FREIGHT MEME OF THE DAY

Also, check out:

• 🎧 The FreightCaviar Podcast. Listen to this week's podcast on Spotify & Apple Podcasts.
• ☕️ FreightCaviar Essentials. Purchase a FreightCaviar hoodie, long-sleeve, or mug by clicking here.
• 🎧 The Bootstrapper's Guide to Logistics is a podcast that highlights and inspires supply chain entrepreneurs, sharing their stories and building a community from the ground up.
• Need a TMS (Transportation Management System)? Use our referral code RA-FreightCaviar! to receive 3 months of AscendTMS Premium for free. It only takes 20 seconds to sign up and no credit card is required. Click here to learn more.