Kuehne+Nagel’s Rooney says Iran War costing ocean carriers over €340M per day

Bill Rooney, Vice President, Strategic Development, Kuehne+Nagel, told the Agriculture Transportation Coalition (AgTC) that the Iran War was costing ocean carriers around €340 million per day ($394.4 million).

In his report to the AgTC conference in Tacoma, Washington on May 19th, Rooney noted the following: “Iran War cost to ocean carriers could impact shippers. Rooney said that published reports projected the Iran war was costing €340 million a day for the entire industry. That's all kinds of ships. Hapag Lloyd, a month or so ago, came out and said their costs were going up by $40 to $50 million a week. That's obviously big dollars. And obviously, this is how this is going to flow through the industry, and who pays is going to be a significant topic for everybody in this room.”

China targets companies that have shifted production. Rooney said that China has begun to target companies that shifted production out of China to other countries, in some cases, to avoid the higher Trump administration tariffs on Chinese-made goods headed for the United States: “This one caught me by surprise, and it's very interesting where the Chinese are looking at companies that are trying to de-risk. By de-risk, they mean moving business out of China to other locales. And they have put out measures that make those companies subject to investigation and punishment if they de-risk. I haven't seen this happen yet, but it's out there. I would say it's pretty concerning.”

China targets Panama

Rooney said China is also targeting Panamanian-flag vessels in retaliation against a Chinese terminal operator being forced to sell its operations in Panama. “Hutchinson agreed to sell their … port activities to MSC and BlackRock. That really irritated the Chinese, and to fast forward, … they've stopped investing in capital projects in Panama and OOCL, “and COSCO stopped calling Panama. And in fact, they are now detaining Panamanian-flagged ships in China … 136 in April, … which is a sixfold increase over what they've done in the past. Very concerning … It's more or less they’re poking their finger at the Panamanians, and it's 16% of the global container ship fleet. So, it's a material number.”

Impact of El Niño on the Panama Canal. Rooney said 2026 is projected to be an El Niño year: “We all remember what happened a couple of years ago, low water levels. In the Panama Canal, they dropped the maximum draft, I think from 50 feet to 44. They dropped the number of transits a day from 36 to 40. I think they got as low as 19. The good news is they're in much better shape now … A lot of people aren't anticipating a problem, and [Panama] is investing in overcoming the problem … a couple of years ago by investing in a new reservoir. “

IMO (International Maritime Organization) greenhouse gas regulations: “The greenhouse gas regulations are going to accomplish three things. They're going to slow down your supply chain, they're going to make it more expensive, but they're also going to reduce greenhouse gas emissions. What's in the news these days is not people saying, we don't need to reduce greenhouse gas emissions. Nobody is saying that. Everybody agrees. It's more of a dispute about how you do it. The dispute is basically between the IMO, which is the International Maritime Organization, a United Nations organization, and the United States and some friends who have said you're not doing it the right way. And what they're relying on largely are exotic zero emission fuels … what the US and others are saying …What they're saying is we need to find a different way to do it” on a more gradualist level.

As a result, “Many people think that's a better approach than sticking to the IMO plan. I suspect at the end of the day, it will bring the two together somehow.”

Chassis rules: “I used to be the chairman of OCEMA … It's the Ocean Carrier Equipment Management Association … we basically managed several hundred thousand chassis. And if you remember, two years ago, the court ruled against box rules when the carrier sold their chassis … to the IEPs. Three basically private equity-funded firms. They put in part of that deal that in the future, as shippers did business with the carrier who had sold the chassis, that shipper was required to use the chassis that was just sold to a different company, which I thought was screwy from the get-go. [It] took 10 or 12 years, the judge ruled against it, but only in Los Angeles, Long Beach, Chicago, Memphis, and Savannah. Rooney said pressure on the Federal Maritime Commission (FMC) will hopefully result in the elimination of these practices: “They're going to eliminate box rules wherever they happen in the United States. The sooner the better.”

US West Coast Longshore contract is up for renewal in 2028: “I was on the Board of both the PMA and USMX … which negotiate with the two unions on each coast. And as you remember, the ILA (International Longshoremen’s Association), a couple of years ago, their settlement was for 62% wage increase. Raise your hand the last time you got a 62% wage increase? And I suspect when the International Longshore and Warehouse Union (ILWU) contract is up in 28, which means the negotiations start in less than two years, I would be very surprised if they don't ask for at least 62%… since that's what the ILA got …now that may put the carriers in a position to dig their heels in not wanting to pay 62% on already very high wages. So, we'll see where that goes.”

Ocean carrier schedule reliability. Rooney described ocean carrier reliability as “still a dumpster fire. The results from the latest [scheduling] data are in March, and I think I've said this before … would get anybody in this room fired if that was your personal … performance. It's not very encouraging, although I will say that the equilibrium point has been reached over many, many years between shippers and carriers. And that equilibrium point is sort of defined by the shippers telling the carriers two things: your service really sucks, but we like the rates. And when you have to, when you have to hedge against carrier transit times by adding a week to the transit time, you've got to fund the inventory. The way you fund the inventory is because you're paying lower rates. So, it works in the business, but it's still not a very good performance.”

Rooney said that one of the reasons for low on-time reliability is slower vessel speeds, and these are caused by three factors: “Number one, fuel is expensive. They don't want to spend as much on fuel. Number two, carriers want ships to produce fewer greenhouse gas emissions, which we applaud. And three, which is sort of hidden a little bit. It reduces capacity.”

Northwest Seaport Alliance

In other news, John Wolfe, CEO of the Northwest Seaport Alliance, told AgTC: “We're also super excited about the progress we're making on our strategy to reach inland to markets beyond Seattle and Tacoma. So, as an example, we've established a partnership with other states’ inland logistics facilities in North Dakota and Idaho. And the most recent partnership is right here in our backyard in the Tri-Cities eastern Washington … So, we're working together with our deep-water ports and those inland ports and the industrial lands that they have there, and the heavy export product that is coming out of the Eastern Washington marketplace using short haul rail with our rail … partners and Tri-City Intermodal, which is a great partner for us. And we're building that business, taking some of the truck traffic off of I-90, serving those exports through rail.”