15 March 2024

Logistically Speaking - Hot Sheet Week 10



The Bank for International Settlements (BIS) suggests that inflation may persist despite a global economic slowdown, with services becoming the dominant driver.
United States Technology
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Inflation May Linger Due to Services

The Bank for International Settlements (BIS) suggests that inflation may persist despite a global economic slowdown, with services becoming the dominant driver. Unlike goods, services are less sensitive to energy costs, making them more resistant to lower commodity prices. Additionally, the higher labor intensity of services makes their inflation more persistent. The BIS warns that the larger contribution of services to inflation could maintain underlying inflationary pressures, requiring central banks to keep monetary policy tighter. The shift in inflation sources from supply bottlenecks to services, exacerbated by the pandemic, poses challenges for central banks in deciding when to lower interest rates without reigniting consumer-price pressures. (Source: Alexander Weber)

Concern Over Cyber-Physical Attacks

The increasing integration of artificial intelligence (AI) into cyberattacks has raised concerns among experts, leading to fears of a new era termed "cyber-physical attacks." The FBI has warned Congress that Chinese hackers are targeting critical infrastructure within the United States, such as water treatment plants, the electrical grid, and transportation systems, with the potential to cause physical damage. MIT professor Stuart Madnick, co-founder of Cybersecurity at MIT Sloan, emphasizes that the widespread use of generative AI could escalate cybercrime into physical attacks. Madnick's simulations show that AI-driven attacks on computer-controlled systems can lead to explosions and other catastrophic consequences, surpassing the typical disruption caused by traditional cyberattacks.

While some experts, like Tim Chase, CISO at Lacework, express concerns about the vulnerability of programmable logic controllers (PLCs) in the nation's infrastructure, others argue that the motivation for large-scale cyber-physical attacks remains limited. Sivan Tehila, program director at Yeshiva University, acknowledges the growing threat but highlights the role of AI in enhancing cyber defenses and detecting malicious activities in real time. Despite differing opinions on the immediate risk, the potential for AI-assisted cyber-physical attacks underscores the need for robust cybersecurity measures to safeguard critical infrastructure and prevent devastating consequences. (Source: Kevin Williams)

Ongoing Challenges in 2024

The global supply chain faces numerous challenges in 2024, accentuated by recent disruptions and interconnected events. The Houthi attacks on merchant ships in the Red Sea have diverted over $80 billion in cargo, causing massive logistics efforts to ensure timely delivery. The resulting chaos has led to delays and surges in goods inflation. Additionally, geopolitical risks, such as the impending strike by the U.S.'s International Longshoremen's Association (ILA) and potential disruptions related to the U.S. presidential election, China-Taiwan tensions, and conflicts in Ukraine and the Middle East, pose further threats.

The Panama Canal, already strained by a historic drought, adds another layer of complexity to the supply chain. Strict weight limits and rising surcharges due to low water levels at Gatun Lake have reduced canal transits, impacting seaborne trade flows. McKinsey estimates that around 35% of the total cargo traversing the canal in 2022 could be affected, potentially diverting ships to longer routes, increasing costs, and causing significant disruptions. To navigate these challenges, companies are advised to focus on preparing alternate sources, establishing clear priority structures for freight, and diversifying partners and shipping options to build resilience in the face of the unpredictable supply chain landscape in 2024. (Source: Glenn Riggs and Sean Ashcroft)

Dunavant Solution: In light of the ongoing challenges in the global supply chain, Dunavant Logistics remains committed to ensuring the seamless movement of your cargo. To mitigate potential delays and increased costs, we recommend proactively diversifying shipping options, preparing alternative sources, and establishing clear priority structures for your freight, enabling us to navigate the dynamic and interconnected landscape of 2024. Contact us.

TSA Rule Change Provides Relief

The Transportation Security Administration (TSA) has revised regulations for airfreight intermediaries, allowing them to renew security credentials once every three years instead of annually. This change, effective immediately, affects approximately 3,800 indirect air carriers registered with the TSA, which consolidate cargo from multiple shippers and coordinate its transport with various airlines. The TSA anticipates a cost-saving of $5.5 million over a decade due to reduced work hours and administrative burden without compromising aviation security. The Air Forwarders Association supported the rule adjustment, emphasizing alignment with the Certificated Cargo Screening Program's certification cycle to streamline administrative processes.

Despite the positive reception from the Airforwarders Association, the Air Line Pilots Association expressed concerns, contending that a triennial renewal cycle might diminish the ability to detect evolving security threats and highlighting the need for annual audits and training verification. The TSA responded, asserting that indirect air carriers will remain subject to regular inspection and enforcement programs. Under the final rule, air forwarders will undergo at least one comprehensive triennial inspection, two targeted annual inspections in alternate years, and additional inspections as deemed necessary by the TSA. (Source: FreightWaves)

Dunavant Solution: In response to the escalating challenges in sea shipments due to the Red Sea conflict and the Panama Canal Draught, see if air freight is the right solution. Dunavant's air freight services provide a swift and secure alternative for at-risk shipments. Contact us.

Port Houston Hits Import Record for January

In January of this year, Port Houston experienced a 4% increase in container volumes, reaching 332,961 TEU (twenty-foot equivalent units) compared to last year. Container imports rose by 3%, with 154,493 TEU, driven by robust imports from China ahead of the Lunar New Year. Loaded export volumes also saw a notable increase, setting a new record for January at 124,137 TEU, reflecting a 9% growth from the previous year. However, steel throughput at Port Houston's multipurpose facilities declined by 46% in January, contributing to a 6% decrease in total tonnage, which reached 4,187,541 tonnes. Despite the decline in steel throughput, Roger Guenther, Executive Director at Port Houston, emphasized the continued strength of import and export demand, expressing optimism for a positive start in 2024. (Source: Dom Magli)

Dunavant Solution: As the Port of Houston grows, Dunavant is well situated with a dedicated fleet of owner-operators and over 1,000,000 square feet of warehousing, including Haz-Mat space. Reach out to Dunavant Trans-Gulf or Dunavant Distribution for a solution.

Threat of Labor Strikes Hang over Gulf & East Coast Ports

There is growing concern about the future of East and Gulf Coast ports as the labor contract between the International Longshoremen's Association (ILA) and the United States Maritime Alliance (USMX) expires in September. The ILA, representing around 70,000 dockworkers, and the USMX, representing employers at 36 coastal ports, including major ones like the Port of New York and New Jersey, the Port of Savannah, and the Port of Houston, have faced challenges in negotiations, particularly regarding wage increases. The ILA has warned of a potential coastwide strike in October 2024 if an agreement is not reached by the expiration date.

Trade associations, including the National Retail Federation, express concern about the potential disruptions, emphasizing the negative economic impact on covered ports, especially during the crucial peak shipping season. The ILA's tough stance against continuing operations without a contract and the fragile state of ports represented by the USMX raises fears of swift and immediate stoppages if a strike occurs. While retailers may pull forward their peak season freight to avoid issues, the situation could favor the West Coast if negotiations further deteriorate, potentially leading to the first coastwide strike since 1977. (Source: Michael Rudolph)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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