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January 6 2020

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4 The Journal of Commerce | Januar y 6 2020 www.joc.com ANNUAL REVIEW & OUTLOOK Editor's Note 2020 By Mark Szakonyi IN AN INDUSTRY where nothing is guaranteed until the freight is delivered, there's few cer- tainties. We'll leave the wild 2020 predictions of the next big M&A deal in container shipping to the analysts and bookies. Here's what The Journal of Commerce editorial team is sure is coming down the line — and what's likely but not definite. l A clearer view. Despite so-called visibility still being sold as a perk, rather than a feature, shippers will get a clearer picture of how to weave a basket of systems toward "end-to- end" insights. With it becoming increasingly unlikely a single provider will have all the vis- ibility answers across all freight modes, it will be incumbent upon shippers (or 3PLs) to put those pieces together in a meaningful way. l Digital migration. Spot ocean rates likely will migrate to purely digital environments, as both shippers and capacity sellers look to spend fewer resources on ad hoc shipments. The only question is whether shippers will gravitate toward aggregation environments, or digitally book spot freight directly with their favored providers. l Sailing through sulfur. Despite scattered fears of low-sulfur fuel shortages, container lines will have no issue meeting the Interna- tional Maritime Organization's low-sulfur fuel mandate. Come Jan. 1, carriers may have to burn more expensive marine gasoil at second- ary ports without new low-sulfur fuels, but the ships will keep sailing and refiners will fill in vacuums of significant demand. l Hot (fuel) potato. There's no guarantee that container lines will be able to fully pass on the higher operating cost tied to the IMO 2020 mandate, but they'll likely get there eventually, even if it means a few quarters in which they end up eating some of the costs. For the smaller of the top-10 carriers, the pressure to ease base cargo rates will be most severe if ship utilization rates dip into the mid-90s percentile. l Performance progress. US marine ter- minal operators will improve performance as they expand the use of appointment systems to manage truck traffic at the gates. All 12 terminals in Los Angeles-Long Beach have mandatory appointments, and average turn times in September and October were the fast- est ever. With terminal operators in Oakland, Seattle-Tacoma, New York-New Jersey, and Virginia already using trucker appointments as needed, truckers will buy in gradually if they result in improved turn times. l Capping capacity. Given their track record for the last 18 months, trans-Pacific carriers are geared to keep capacity in tune with volume despite the temptation to lower rates if there is less cargo. Depending upon the size of the customer, some carriers may fiddle with the base ocean rate in order to show some discipline in implementing higher bunker fuel surcharges. l Tracking back. Domestic intermodal volume won't be positive year-over-year in the first quarter of 2020, nor will dry van truck- load spot shipments. Railroads and truckload carriers will struggle to win more than a mod- est inflation in contract rates to cover inflation in the first half of 2020, and shippers could see no contract rate increases in trucking. l In reverse. The wave of excess truck capacity that crested in 2019 will ebb in 2020, as new truck orders continue to plummet, but there still will be plenty of capacity for ship- pers. Truckload carriers will be more cautious about adding new capacity as long as economic uncertainty lasts and growth is slow. Carriers with underutilized capacity will attempt to rationalize it. LTL carriers will continue to restructure their terminal networks to build density and bolster bottom-line profits. l Eking out utilization. In an era of slower growth and lower demand, shippers and their trucking and third-party logistics partners will have more reason and opportunity to collabo- rate. Technology that helps them better create, access, and manage asset-based transportation networks will generate savings and begin to improve utilization of trucks, especially appli- cations that offer "predictive capacity." l Classification fever. First in California and now in New Jersey, legislation is in the works across the country that would rede- fine whether a driver is an owner-operator or employee. With attention to the downsides of the gig economy building and the likes of ride-hailing companies Uber and Lyft in the regulatory crosshairs, what states are the new battleground? Such legislation won't likely fly in the South but there could be traction in the Northeast and Northwest. JOC email: mark.szakonyi@ihsmarkti.com twitter: @MarkSzakonyi Manifest 2020 We'll leave the wild 2020 predictions to the analysts and bookies.

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