November 29 2022

Freight Insights for November 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 November insights:

DOMESTIC

Capacity

  • Good news – anyone who wants a Christmas tree this year should be able to find one – but shop early!  The American Christmas Tree Association (ACTA) stated that to pre-empt the supply chain disruption which impacted the availability of artificial trees across the country in 2021, Christmas tree retailers have been bringing in products much earlier than in previous years.
  • Tesla completed their first test drive with their electric semi-truck while fully loaded at 81,000lbs over the holiday weekend.
  • The number of carriers posting their equipment in search of loads is now 17% higher than last year, a sign that spot market capacity is oversupplied.
  • C.H. Robinson and Amazon had some significant layoffs in November.  CH Robinson laid off approx. 650 employees this month, which was lower than the estimated layoff number of 1,000.  Amazon’s cut was around 10,000 employees representing approximately 3% of its workforce. Most of these cuts were positions hired over the last 3 years to tackle the surge of internet orders.
  • Under an initiative announced at a United Nations climate gathering on November 16, preliminary plans are in the works for a Great Lakes – St. Lawrence Seaway System Green Shipping Corridor Network.  The announcement noted that the U.S. Department of Transportation, the U.S. Department of State, and Transport Canada will work with private-sector and nongovernmental leaders around the area as well as The Indigenous Peoples of U.S & Canada to host consultations with ports and other stakeholders. The goal: facilitate the establishment of green corridors throughout the region, including by convening stakeholders, contributing to assessments and analyses relating to alternative fuels, and reinvigorating power options within the system.
  • The current load-to-truck ratio as reported by DAT on 11/27 is 2.18.  Overall, November has shown a loosening in capacity which is expected to continue through the end of 2022.

Demand

  • The US industrial freight market remains resilient according to JOC analyst Justin Miller. Data for wholesaling machinery, equipment, supplies, chemicals, and allied products suggest we are not yet seeing a pronounced slowdown of industrial activity, a finding supported by continued y/y growth of manufacturing output. 
  • According to the NRF (National Retail Federation) 166.3 million people planned to shop from Thanksgiving Day through Cyber Monday this year. This figure is up by almost 8 million people from last year and is the highest estimate since NRF began tracking this data in 2017.
  • October’s truck tonnage increased compared with year-ago levels but declined on a m/m basis; a sign that the freight market is reacting to economic and consumer trends.  The ATA (American Trucking Association) For-Hire Truck Tonnage Index rose 2.8% annually to 116.3 in October but slid 2.3% from a reading of 119.1 in September.
  • Trucking gained 19,800 unadjusted jobs in October – a 1.2% gain month to month, recovering from a 17,800-job loss in September. Year over year, trucking employment was up by 67,700 jobs – a 4.4% increase.  Such a high job loss followed by a high gain at specifically courier and messenger firms suggest a correlation between truck drivers choosing jobs which keep them closer to home rather than long-distance driving.
  • US truck freight volumes in October declined 1.4% from September but remained 2.9% above year-ago levels, according to the Cass Freight Index. The YoY gains in volume can be attributed to repositioning of inventory, consumers buying in advance of rising interest rates, and easing manufacturing supply constraints.
  • Redwood Materials Inc. has reached a deal to supply Panasonic with billions of dollars in critical electric vehicle battery components – namely for Tesla – which will be produced in the U.S. for the first time.  Their plant will be in Kansas City, KS and set for opening in 2025.
  • Loaded intermodal container volumes on the rails (ORAILL) are down 7% versus mid-November 2019 levels.  Some of this is attributed to current dry van spot rates being lower than rail rates.  Additionally, uncertainty surrounding union contracts continues to impact shipper confidence with intermodal shipping.
  • The rise can be linked to trailer manufacturers being more comfortable accepting orders due to an easing of supply chain constraints.

Service/Cost

  • The Farmer’s Almanac is prepping for quite a few significant winter weather disturbances nationwide this season.  Please be aware any amount of snow or ice build-up on the roads will cause service delays across the country.
  • Flatbed loads historically fall significantly in Q4; this year that slow-down has hit later than normal because of historically high temperatures sticking around nationwide.  We are now seeing that seasonal downtick, representing a 13% decrease from October to November.
  • US trucking costs declined in October, with the US producer price index (PPI) for truckload service falling 3.1% from September, according to the US Bureau of Labor Statistics (BLS).  Year over year, total Truckload costs are up 9.2% and nearly 35% higher than 2019.  The LTL PPI was essentially flat, dropping just 0.3% after rising 0.3% the previous month. Year over year, total LTL costs are up 14.4%.
  • Water levels on the Mississippi River remain at historic lows, causing delays and restricting how much cargo can be loaded per barge.  Shipments have been taking from 30% to 50% longer than normal as reported by Float Freight.
  • With supply chain congestion easing, automotive manufacturers are now able to finish vehicles which have been awaiting completion and ship them to consumers.  Auto demand and order completion has been strong so far in Q4.
  • The average price of Diesel in the US is $5.14 as of 11/28, down $.09 from the week prior.

Expectations

Sunset expects capacity and demand to decrease over the next 30 days.  Cost fluctuations are dependent on the mode of transportation in the current freight environment – we see TL costs declining and LTL costs increasing through the end of the year and into 2023.

INTERNATIONAL

Capacity

  • Eight of twelve Unions voted to accept the new agreement with the nation’s freight railroads; four of the twelve unions have rejected the deal.  The four unions who have rejected the deal will reengage into a negotiation period which currently ends on Dec 9.  Over 400 business groups have requested congress to get involved as they reconvene in D.C. this week.
  • Longshore workers at the Port of Mobile plan to strike Tuesday after a month-long mediation process yielded no progress in securing a new contract. The strike is not expected to affect the port’s container operations.
  • The ILWU (Longshoreman) at LA/LB clerks walked off the job 11/02 which led to the shutdown of the port terminals until 6pm the same day with little impact to ocean imports. Resolution on their new contract is not expected until the beginning of 2023.
  • Mexico reigned supreme as the United States’ top trading partner for the second consecutive month in September, as total trade with the U.S. was at $67.4B, representing a 23% YoY increase. Canada was second, with a 22% YoY increase of $66.5B. China came in third with $61.1B+.
  • The US’ two largest container gateways, Los Angeles-Long Beach and New York-New Jersey are thankfully reaching toward pre-pandemic efficiency levels regarding vessel backlogs, although it will take some time for ports along the South Atlantic and Gulf Coast to achieve more normal cargo flow.

Demand

  • US importers are increasingly tapping India for sourcing, with inbound shipments from the country rising 12.4% YoY in the first six months of 2022, according to PIERS.
  • Import volumes are clearly decreasing in the US, although they are still expected to remain more than 10% higher than the end of 2019. 
  • The Port of New York and New Jersey is handling nearly 20% more trade volume than it did pre-Covid, leading it to top California as the nation’s busiest port in October for the third consecutive month.
  • The East and Gulf Coasts have been marked as preferred destinations for importers looking to avoid port strikes, slowdowns, and vessel congestion levels. According to JOC Analyst Jason Miller, speaking on a metric tonnage basis, containerized imports from Asia entering through the Gulf and East Coast have increased almost 50% from their 2018 levels. Even with the recent slowdown, we are still above 2019 levels.  This seems to indicate the shift of imports to the East Coast might remain permanent.

Service/Cost

  • China COVID outbreaks are causing shutdowns and restrictions to take place in Guangzhou, Zhengzhou, and Beijing.  We can expect slowdowns in manufacturing, trucking, and at ports.  Additionally, the geopolitical landscape in China is changing through protests amid lockdown. China to US Ocean transit time has dropped consistently this year from a peak of 80 days in Dec 2021 to 61 days in Sept 2022.  Please note this includes transit time to all US ports.
  • Global Schedule Reliability declined to 45.5% in September – this is a decrease of 0.7% M/M.
  • Maersk signed a deal with the Spanish government that could deliver it up to 2 million tons of green fuels a year as the carrier moves to lock in greater access to renewable energy sources prior to the start of IMO 2023. 
  • Average Global 40’ container rates have dropped 8% from a week ago at $2,786.00 according to Freightos Global Container Freight Index. 
  • Union Pacific Railroad (UP) will remove the caps on demurrage fees at seven inland terminals effective Nov. 28. The caps were put in place because penalties in excess of $10,000 were not uncommon on containers which were inaccessible while they were buried in stacks. The included terminals are Council Bluffs (Iowa), Dallas, Denver, Houston, Memphis, Salt Lake City, and St. Louis.  Fee caps will remain in place in Chicago, El Paso, and Kansas City for now.
  • US consumer spending increased in October although demand for ocean freight has continued to dip, leading carriers to reduce capacity. Along with efforts by the ports, lowered demand has reduced port congestion: LA/Long Beach and NY/NJ are almost back to normal, although there is still congestion at Southeast and Gulf ports.

Expectations

Sunset expects ocean capacity to remain available and import demand to continue to slow through 2022 – continuing into 2023. Rates to flatline as we move out of retail season. We expect small blips to rates and service leading into and during the Chinese New Year 2023.

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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