"Free space" partition is unformatable/unerasable/unmergeable from Disk Utiliy
Welcome to the joys of a not quite fully functional Disk Utility in the land of APFS. To be fair, it's difficult in a GUI for the app to figure out exactly what you want to do.

I can't see the container list in the left pane of Disk Utility but I'm assuming that "APPLESSD" is living in an APFS container all of it's own. To reclaim that space you need to "grow" that container to gobble it up.

This page has a fair explanation of the process.

With APFS you are actually better to add a volume to the container rather than partition it. All the volumes in a single container share the space so you don't need to worry about getting the size wrong and adding and deleting volumes is a trivial task. Once your container is back to the right size select it in the left pane and then "Add APFS Volume" in the Edit menu.