Freight Insights for September 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 September insights:
DOMESTIC
Capacity
- U.S. Freight Railroads have reached a tentative deal with all 12 unions, extending the negotiation period until later in 2022. The unions will vote on the proposed contracts and decide to accept or decline.
- The current load-to-truck ratio is 3.63 as of 9/26/2022. Slight tightening since the week prior. We expect capacity to tighten further in the next few weeks.
- The Logistics Managers’ Index (LMI) showed warehouse capacity tightened in August. This index shows the market is still growing, albeit at a slower pace than what has been seen recently – driven by elevated inventory levels and increased warehousing costs.
- Tesla’s 500-mile range Semi-Truck is to start shipping this year. Frito Lay has an order for the first 15 trucks to be put to work in Modesto CA. Estimated fuel savings are $200K over three years.
- According to the US Bureau of Labor Statistics (BLS), warehousing jobs have dropped in four of the past five months, falling 1.5K in August. For-hire trucking firms are seeing large growth by hiring 4.7K employees in August, after hiring 10K in July.
Demand
- US manufacturers moved more goods by truck rather than intermodally in August, increasing their average shipping volume 1% YoY and 1.6% from July.
- The flood of shipments from retailers and manufacturers has evened out and demand continues to decline in certain markets due to built up inventories, high inflation and shifting consumer buying patterns.
- The US unemployment rate rose to 3.7% percent in August.
- Freight demand has flattened out this year with inflation near 9% and a significant buyer trend switch from goods back to services.
- Non-seasonally adjusted retail sales* rose 1.7% last month and 8.4% YoY. The inflation rate in August was 8.3%, as reported by the US Census Bureau. This indicates a large part of the retail sales leap is reflective of inflated costs for retail items.
- *Excluding fuel, motor vehicles, and automotive parts
- Industrial demand has been supporting the US trucking market all year. The S&P Global manufacturing PMI has decreased from 59.2 in April to 51.5 in August, signifying slower growth but continuing to indicate expansion.
Service/Cost
- The national average price of Diesel is $4.89/gal as of 9/26/2022.
- According to the Cass Linehaul Index, spot truckload rates fell for the third straight month in August.
- Several retailers and carriers are announcing a ‘holiday peak fulfillment fee’ in 2022. Amazon is adding an average charge of .35$ per item for ‘Fulfilled by Amazon’ products beginning Oct 15 through the end of the year.
- For the second month in a row, we are seeing relief in cost for both spot and contract rates at a national level.
- The US District Court in Rhode Island has declared tolls on tractor-trailers a violation of the US constitution by discriminating against interstate commerce.
Expectations
Sunset expects capacity to reduce, demand to increase, and costs to increase over the next 60 days as retail season is upon us. Expect capacity to loosen toward the end of the year.
INTERNATIONAL
Capacity
- US Freight Railroads have reached a tentative deal with all 12 unions, extending the negotiation period until Sept 29. The unions will vote on the proposed contracts prior to this date and decide to accept or decline.
- Norfolk Southern Railway (NS) has recently opened two auxiliary container lots in the Memphis area after its primary terminal in the market hit capacity. Imports moving from Savannah to Memphis on NS have surged 72% since July 1 YoY.
- Port markets have seen warehouse vacancies stay below 2% this year – pushing overflow demand and development into adjacent markets like Chicago, Indianapolis, Houston, and eastern Pennsylvania.
- In 2023, the next phase of the International Maritime Organization’s (IMO) program to reduce carbon emissions will take vessels out of rotation to be refitted, putting more put pressure on freight capacity and price.
- Last week, members of the International Longshore and Warehouse Union (ILWU) purposely delayed job actions in Oakland and Seattle/Tacoma which slowed down operations and prevented some terminal operators from working night shifts.
Demand
- For the first time ever, the ports of NY/NJ have taken the title of busiest port in North America, moving 843,191 TEUs & bypassing the ports of LA/LB.
- Expectations of cargo volumes falling have not yet materialized. Asian imports in August totaled 1.72M TEU, up 3.5% from July and 8.3% higher than August 2021, according to PIERS, a JOC.com sister product.
- Maersk put a temporary halt on new import bookings through Fort Worth, Texas. The backlog of marine containers idling at the port’s main rail ramp has nearly doubled since June.
- Cargo volumes are still solidly above pre-pandemic levels, but the rate of growth has slowed compared to unusually high volumes last year.
- Peak Season is underway.
- US imports from Asia this year through July are up 5.9% from 2021, which was a record year for imports.
- For the first time on record, the ports of NY/NJ have claimed the title of busiest port in North America for August, moving 843,191 TEUs, bypassing the ports of LA/LB by nearly 38K TEUs.
- Heading into Golden Week, the eight-day holiday in the first week of October in China, more sailings are expected to be cancelled as manufacturers will be shut down.
- The Ports of Los Angeles & Long Beach are reporting a 90% decrease in backlogged ships compared to the beginning of the year.
Service/Cost
- With shippers at full capacity, we should see cost loosen as goods are moved out of warehouses for the peak season.
- Two typhoons have caused several days of delay out of China, South Korea, and Taiwan. Two earthquakes centered in Taiwan last week are causing additional minimal delays.
- There was a 6.5 magnitude earthquake in Taiwan on Sept 17, which has caused shipping and manufacturing delays.
- The price of fuel for commercial ships spiked after Russia invaded Ukraine and hit all-time highs in May and June, but that trend has now reversed. The price of ship fuel plunged is now back to roughly pre-war levels.
- Freightos’ Global Container Freight Index is showing a steady decrease on container prices, dropping $4,620 compared to last year.
Expectations
Sunset expects ocean capacity to remain available, intermodal to remain tight and import demand to slow as we near the end of 2022 into 2023. Rates to stop their decline and flatline as we move out of retail season.
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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