Freight Insights for August 2022
The following insights are provided by Sunset’s Strategic Account Management team.
Trends and discussions range from seasonal manufacturing and agriculture trends that affect available capacity to general insight into outside factors affecting freight volumes.
Below is a summary of the August insights:
DOMESTIC
Capacity
- National Average price of Diesel at $4.91/gal as of 8/15/2022.
- The current load-to-truck ratio is 3.30 as of 8/14/2022, further softening was realized this week. We should see some tightening as we move closer to Labor Day.
- Brake Safety week is next week, August 21-27. Capacity impact is most likely.
- With the Supreme Court’s refusal to hear the challenged AB5 case, the future is uncertain for many owner-operators working out of CA.
- The percentage of professional drivers who are female has increased to 13.7% in 2022, an increase of more than 3% since 2019.
- Total employment for the sector rose by 3,500 jobs in July, according to the Bureau of Labor Statistics. Jobs in the truck transportation sector now stand at 1,595,000.
Demand
- With the tight supply-demand balance in US trucking markets easing considerably this year, industry rates are topping out and set to slow sharply in the months to come. Based on the weekly trends, downward fluctuations in the price of fuel should provide additional relief in August as well.
- The ton-mileage index from the ATA saw a 7.9% increase YoY for the month of June, continuing to prove a true freight recession failed to materialize in Q2. This index is derived from the physical quantity output for 41 different industry sectors which generate freight data.
- The Senate voted to advance a $280B bill subsidizing chip manufacturing and funding research and advanced tech. The package is expected to boost domestic chip production, an item which is critical to the U.S. supply chain and national security, as most semiconductors are imported from overseas. Shortages have also driven prices higher for many goods in recent years, and proponents say the bill will help cool consumer costs.
- U.S. households’ spending rose more rapidly last month as annual inflation hit a 4-decade high, outpacing income growth. Consumers boosted their seasonally adjusted spending by 1.1% in June, up from 0.3% increase in May. Personal income rose by 0.6% last month, the same as the prior month.
- U.S. retail sales have been slowing, creating an imbalance with the high inventory retailers are facing amid front-loaded cargo, maxed-out warehouses, and a shift in consumer demand. Consumer sentiment rose from 50 in June to 51.5 in July, however, these are the two lowest scores the index has measured since its inception.
Service/Cost
- The US producer price index (PPI) for trucking dropped .5% for both June and July. However, the truck transportation PPI is still 23.1% higher YoY. The monthly decline in PPIs may show truck pricing is bumping against a ceiling and is preparing to go flat or moderate.
- The Biden administration’s appointed council has facilitated meetings between the BLET (Brotherhood of Locomotive Engineers and Trainmen) and all involved parties in the hopes to prevent a rail strike. Hearings and negotiations continued through 7/28. A second 30-day cooling off period started on 08/15. And will last through 09/15. At this time, no agreements have been made.
- Rail transportation accounts for approximately 28% of domestic transportation. If rail does strike, this will greatly increase demand and reduce capacity.
- FedEx Ground to stop Sunday deliveries in certain lower populated markets.
- Spending on trucking increased 3.3% from Q1 and 19.7% YoY, according to US Bank. The highest increases were in the West and Southwest regions at 30.2% and 29.7%, respectively. The index is adjusted for seasonality, but not inflation.
INTERNATIONAL
Capacity
- No solution has yet been met in the ILWU contract negotiations. The key factor in these negotiations seems to be retaining human jobs at the ports when the trend is to favor automation. Both sides have stated that a lockout or strike is not an option and negotiations will continue until an agreement is reached.
- North American chassis manufactures have run into production delays in 2022 for the second year in a row. This means we will continue to see the widespread shortages of marine chassis increase. This shortage is causing shippers to retain chassis rather than returning them timely – creating more bottlenecking at the ports.
- Drayage carriers at the Port of New York and New Jersey are finding daily operation hindered because of the scarcity of appointments at marine terminals for returning empty containers. This is contributing to a capacity shortage since empty equipment is not finding its way to be refilled timely.
- The Intermodal Association of North America (IANA) said during the first half of 2022 that it had 2,600 new motor carriers register for interchange agreements to haul containers, a 30% percent increase in the total number of intermodal carriers.
Demand
- It was another record-breaking month for most US imports in terms of volume. Port of LA workers processed 876,611 20’ containers in June. That marked the highest volume for the month in the facility’s 115-year history. The Port of Virginia reported a 12.9% YoY increase, processing 317,742 containers compared with 281,346 in 2021. Port Houston handed 11% more containers YoY — 323,823 compared with 292,627 and announced it was expanding its weekly hours and adding Saturday truck availability.
- The shift in import volumes away from the West Coast continued in July. Gulf Coast Ports and East Coast ports are up 24.2% and 8.3% respectively, YoY. West Coast volumes are down 7% YoY.
- Despite the softening imports we are currently seeing, the National Retail Federation’s GPT (Global Port Tracker) is forecasting 2022 calendar year imports to be up 2% from the record year in 2021.
- We are seeing the bull whip effect in full force – importers increase production and import beyond the consumer need. This results in having more inventory than can be sold.
- Rail container dwell times in Los Angeles-Long Beach reached a record high of 13.3 days in June, up from the already high average of 11.3 days in May, according to the Pacific Merchant Shipping Association (PMSA).
Service/Cost
- The container shipping market is softening; however, operational bottlenecks are keeping the brakes on this downturn. As of mid-August, 9.3% of global container ship capacity remains unavailable due to schedule delays. This is an improvement from the 14% in January 2022, but still far from business as usual.
- In this shipping climate, smaller ships – specifically tankers – are outperforming their larger counterparts in 2022 with spot rates 15x’s higher per day, YTD in Shanghai.
- The Port of New York and New Jersey are currently handling 33% more containers than they were at the same period in 2019. Congestion at these ports is causing the harbor to look for nearby land to store imports and empty containers.
- Prices for new 40’ containers are softening, but congestion is keeping supply tight. On the flip side, 20’ used containers are currently selling for more than their original cost.
- At this time, the Biden administration has not made a decision regarding reducing or eliminating tariffs on imports from China. With a deadline looming regarding the legitimacy of the tariffs in a lawsuit against The Office of U.S. Trade – we may see some forward movement on a reevaluation of these tariffs.
Industry data is pulled and summarized weekly from key proprietors and industry experts using multiple publications and sources. Sources include, but not limited to: FreightWaves, Cass Transportation Index, DAT, Journal of Commerce (JOC), PYMNTS, NRF, Cleveland Research. The information is discussed with Sunset Managing Directors and validated prior to publication of summary data in this posting.
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