Not for the first time the parcel market appears like a battleground to expand or shrink margins, and predictions of an end to free delivery may get a boost from a new round of surcharges by FedEx and UPS in their home market.

This month they are introducing delivery surcharges in 82 postal codes, although they already apply to many zipcodes in the US – for the most part areas with lower population density, which affect yields for the parcel carriers.

Now the integrators are extending the surcharges to more densely populated regions, with many of the zipcodes affected in major urban population centres, including New York, Boston, Chicago, Los Angeles and San Francisco.

Depending on mode (air or ground), and residential vs commercial delivery, the surcharges range from $3.95 to $5.85, but can be higher in areas categorised as ‘extended’ or ‘remote’.

UPS implemented its surcharge on Monday, and FedEx is set to follow suit a week later.

According to one report, the integrators have now extended the delivery surcharge to cover more than half of all zipcodes in the US.

With the additional surcharge on sectors where they see higher yields owing to better traffic density, FedEx and UPS stand to enjoy a nice boost to their bottom lines. While they are engaged in huge cost reduction efforts, the pair are increasingly using accessorial charges to raise yields.

As the latest TD Cowen/AFS Freight Index (published yesterday) points out, they have raised fuel surcharges more than once and boosted demand surcharges since the announcement of their general rate increase for 2024. Historically, updates of accessorial charges were communicated with annual price changes, but now shippers are faced with price fluctuations at other times in the year.

Given the higher density and volume of shipments to the new areas where delivery surcharges apply, shippers are bound to see a significantly stronger increase in costs than those with lower population density. They may be able to mitigate this by consolidating shipments or encouraging customers to collect parcels from less-expensive commercial points, but the associated tweaks to their system may raise internal costs.

According to the TD Cowen/AFS Index, in the express parcel segment the combined effect of the general annual rate increase, fuel surcharge adjustments, a shift to more premium services and higher average billed weight more than offset carrier discounting, resulting in a significant net increase in cost per package in in the first quarter, jumping from 0.9% above the January 2018 baseline in Q4 23, to 3.9%.

The upward push on pricing from parcel carriers is playing out in an environment where observers have speculated about the demise of the free shipping concept. This has been predicted many times over the past few years, but some analysts argue that this time it may happen.

In November, retail research firm First Insight suggested one-third of consumers were willing to spend at least $10 for shipping.

“The days of high consumer expectation for free and fast shipping may be in the rear-view mirror, and retailers may no longer have to automatically offer free shipping simply to remain competitive,” commented First Insight CEO Greg Petro.

Consumers appear to have swallowed the emergence of charges for product returns.

But Rick Watson, founder and CEO of e-commerce consulting firm RMW, has misgivings. From an affordability point of view for merchants, free shipping should not be around any more, but sellers are afraid of how much business they could lose if they ceased to offer it, he said.

He pointed to a recent survey by PYMNTS and Adobe, which found that 66% of consumers considered free shipping key to customer loyalty.

“Retailers must figure out a way to subsidise free shipping if they want to grow,” he commented, adding that the best strategy toward that end may be loyalty programmes.

“Consumers are still willing to pay for loyalty, at least when there is a wide assortment and fast delivery involved.”

This suggests free shipping will likely survive a few more predictions of its imminent demise, but the pressure on shippers from rising fulfilment costs may force a growing number of them out of the game.

A Maersk-operated 2M Alliance container vessel with two pilots onboard crashed into a support pylon of the Francis Scott Key Bridge in Baltimore, Maryland, in the early hours of this morning, demolishing the 1.6 mile bridge and plunging at least 20 people into the Patapsco River.

Authorities described the collision as a “mass-casualty incident” and said emergency services were still searching the river for seven people.

You can see the bridge collapsing here on YouTube.

The 2015-built 9,962 teu Dali was less than 30 minutes into its backhaul voyage to Asia, after completing two days of cargo operations at the Seagirt Marine Terminal, when the incident happened.

According to eeSea data, the vessel is deployed on Maersk’s Asia-US east coast TP12 loop and MSC’s Empire service, with the 2M partners also having a slot charter agreement with Zim which the Israeli carrier has dubbed its ZBA service.

Marine cargo insurers, WK Webster, warned Maersk’s customers that delays or loss would be inevitable.

“There is likely to be significant cargo loss and damage as a result of this very serious incident, including to a number of containers which are reported to be hanging from the bridge. It also seems almost certain that the vessel will not be proceeding with the voyage in the near future resulting in serious delays to all cargo on board.”

Vespucci Maritime’s Lars Jensen said the collapse of the bridge would effectively cut off the container terminals and its other cargo facilities.

 

Baltimore handles around 21,000 teu a week, which will now have to be routed via other ports in the region.

“Additionally, this means that the cargo already gated into the Baltimore terminals would either have to wait an unknown period for the sealane to reopen, or be gated out and shifted to a different port,” said Mr Jensen.

This is the second incident within 10 days of a large container vessel seemingly losing control of its steering.

On 16 March, the 2015-built 14,000 teu YM Witness, with pilots onboard and tugs in attendance, crashed into the quay while attempting to berth at Turkey’s Evyapport, destroying three ship-to-shore gantry cranes.

Maersk said this morning: “We are horrified by what has happened in Baltimore, and our thoughts are with all of those affected.

“We can confirm that the container vessel Dali, operated by charter vessel company Synergy Group, is time-chartered by Maersk and is carrying Maersk customers’ cargo. No Maersk crew and personnel were onboard.

“We are closely following the investigations conducted by authorities and Synergy, and we will do our utmost to keep our customers informed.”

The Dali‘s headhaul itinerary was via the Panama Canal, but the service is currently routed via the Cape of Good Hope on the backhaul voyage. Prior to Baltimore, the Dali called at New York and Norfolk, Virginia, with Colombo, Sri Lanka, the next scheduled call.

Maersk agreed a five-year extension to the vessel’s time charter in April 2020 with Singapore-based shipowners Grace Ocean Investment with the daily hire rate not disclosed. However according to Vesselsvalue data Maersk was paying a rate of $40,600 per day for the five-year prior period.

According to the ship’s manager, Synergy Marine Corp, there are no reports of any injuries to the Dali’s crew or the pilots as a result of the incident.

In July 2016 the ship was involved in a collision in the port of Antwerp during unmooring manoeuvres when leaving the berth in good weather, causing significant damage to the ship and the quay with the blame attributed to errors by the Master and pilot onboard.

Cosco Shipping Lines and its subsidiary, OOCL, have apparently backtracked on halting calls to Israeli ports.

In December, Cosco announced that Israel-bound services would be suspended due to “operational difficulties”.

Both lines are still calling at Haifa and Ashdod ports, with long-haul shipments facilitated through transhipment at Piraeus in Greece and Velncia in Spain.

In Haifa, Cosco and OOCL use the SIPG Bayport Terminal, operated by the China state-owned Shanghai International Port Group.

Israel’s transport ministry was said to have questioned why Cosco halted calls, although it appeared that it was due to the difficulties of accessing the country through the Red Sea, due to the risk of Houthi attacks.

Israeli publication Globes, citing sources, said the decision had created a “diplomatic fuss”, with China’s ambassador to Israel, Cai Run, being summoned to a meeting by the foreign affairs ministry in January. Globes reported that Israel’s Ministry of Foreign Affairs was striving to keep shipping lanes to Israel open and wanted to resolve the situation with the Chinese state-owned shipping group.

Iran is supporting the Houthi rebels, but China is the largest importer of Iranian crude oil, which implies Chinese ships are unlikely to be harmed, even if they call at Israeli ports. The precarious situation in the region has seen several ships broadcasting AIS messages saying they are not going to Israel or that they have an all-Chinese crew.

From Wednesday, Cosco and OOCL will be starting their Mediterranean feeder service by adding a ship to Zim Line’s Tyrrhenian Container Service. Cosco has been taking slots on the Zim service since November.

The loop connects Ashdod, Haifa, Fos, Genoa and Salerno and has a three-week rotation with three 1,100-1,400 teu ships. Cosco will deploy the 1,223 teu Frederik to join Zim’s 1,134 teu Asiatic King and 1,421 teu Navi Baltic.

Meanwhile, Cosco has been using the 13,092 teu Cosco Development for extra feedering between Piraeus and Belgium’s Zeebrugge port as tonnage continues to be held up by diversions round the Cape of Good Hope. The ship was taken out of the Chinese operator’s transatlantic service and substituted with the 8,063 teu OOCL Seoul.

Liner operators say they are unlikely to emulate Maersk in using land transport to circumvent the Panama Canal  restrictions, as moving containers by land in the Americas could drive costs up more than 30%.

In January, the Panama Canal Authority increased the number of daily transit slots to 24, despite first announcing a reduction to 18 for February. However, this is still fewer than the usual 36 daily transits through the waterway.

In response, Maersk announced its OC1 service from Oceania to North and South America would instead call at Balboa port in Panama on the Pacific side, and discharge boxes there.

In the opposite direction, vessels would discharge shipments for Australia and New Zealand at Panama’s port of Manzanillo, on the Atlantic side. These containers are sent by rail across the canal to be transhipped.

Last month’s Clarksons’ Container Intelligence Monthly stated that ONE had followed Maersk by announcing it would be using a ‘land bridge’ involving rail across Panama for some services, omitting canal transits.

However, a ONE spokesperson clarified to The Loadstar: “This is just a temporary land bridge operation for destinations of small volumes in the Caribbean Sea and South American east coast. We have conducted this operation in the past, even before the Panama congestion this time.

“This is just a similar case to past initiatives and, hence, we didn’t ‘follow in Maersk’s footsteps’.”

The spokesperson added: “Our service which hasn’t been able to pass the Panama Canal calls at Rodman port. Since there isn’t any rail service to Rodman, we’re temporarily adopting inland truck service if needed.”

A representative of ONE’s THE Alliance partner, Yang Ming, told The Loadstar land bridge options were not cost-effective.

“Land bridge movements account for just 10% of our US east coast services; because empty containers can only be transported back to Asia by seaborne transport, the cost of a landbridge is too high.

“Today, the freight rate from Asia to the US east coast is around $5,900 per 40ft. A normal Panama transit will take 37 days, but with the diversion round the Cape of Good Hope, you add five to six days. Using a land option will take around 30 days, but add nearly $2,000 to the cost,” he explained.

Linerlytica analyst Tan Hua Joo told The Loadstar he was not aware of any other liner operator using a land option. He explained: “The land bridge option is clearly more expensive, and unfeasible in the long run. I do not see any other carrier taking this option as there are better alternatives available, including the Cape route being used by some carriers.

“THE Alliance has also shifted some of their diverted services back to the Panama Canal with the increased number of slots available,” he added.

Chinese authorities are reporting that a small cargo ship traveling on the Hingqili near the industrial southern city of Guangzhou hit a bridge crossing the waterway causing a section of the roadway to collapse. At least five vehicles plunged off the bridge with the latest reports saying five people have been killed, two are being treated in the hospital, and a search of the river was continuing.

The unidentified vessel was reported to be traveling in the Pearl River delta between Foshan and Guangzhou when the side of the vessel struck one support pillar of the bridge. According to the maritime authorities, the vessel twisted with the bow then coming in contact with a second support pillar. The roadway section between the two supports collapsed.

They believe that three small trucks, a minibus, and a motorcycle all plunged off the bridge. The small bus, one of the vehicles, and the motorcycle plunged into the open hopper barge. The other two vehicles fell into the river.

 

 

Authorities are saying the accident happened at 5:30 a.m. local time which may have helped to limit the number of causalities. The small bus was reported to only have a driver aboard and the wreckage can be seen in pictures of the cargo ship as it was being taken away.

The authorities in a news conference after the accident blamed the accident on “improper operation” of the cargo vessel. They said the owner of the ship had been detained. One crewmember aboard the vessel was reported to have suffered minor injuries.

 

 

Chinese TV reported that six scuba divers were seen scouring the river. Multiple salvage ships were also in the area.

The two-lane Lixinsha Bridge connected a rural island area to the industrial city. Officials said at least 8,000 people, mostly farmers would be isolated on the island without the roadway. They were starting a temporary ferry service while an investigation was also underway into the cause of the accident.