Freight Insights for Week of April 26
The following insights are taken from a weekly discussion between Sunset’s nine US/MX branches.
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 April 27 call:
FREIGHT VOLUMES & CAPACITY
- International Road Check Week 5/4-5/6. Carriers are preparing fleets ahead of the blitz, and some are preparing to remove them off the road for that duration of time. Be mindful of extra shut downs or holding loads causing late deliveries.
- Diesel FSC average at $3.124 this week, FLAT week-over-week. Analysts expect prices to hold for another 2 weeks, then start to climb. Prices for diesel are .687 cents up YOY for the U.S. average.
- Reefer – West Coast is cooling down a bit, omitting S. California, and produce points across the U.S. are beginning to ramp up. There is an expected brief leveling of prices before the capacity imbalance puts pressure on the equipment and brings prices back up. Outbound TX and produce markets are the main areas to focus for additional lead times and shifting to cost-plus pricing where you can to avoid service failures. GA continues to be a sore spot for opportunities, and have continued to see outbound rejection rates increasing and prices coming in well above surrounding state averages.
- Dry Van – heavy outbound movement from the Midwest, produce movement, and capacity crunches in port regions are causing spotty capacity and rates. Total volume posted saw an increase, along with rejection rate averages. Outbound GA and the St. Louis region will struggle this week.
- Flatbed – we are deep in construction season, and with additional projects coming into play as COVID restrictions are lifted, this category is expected to feel significant pressure in the next three weeks. Prices are anticipated to jump by 23% in the next month, given supply and demand changes. Produce/Steel/Lumber are all competing. Home construction is rebounding and demand is driving capacity constraints. Prices are expected to start rising quickly for freight over the next few weeks; preliminary figures show close to 161% cost rise by 6/1.
- Ports – shippers are trying to disperse container ships evenly across large and small ports and take advantage of any availability. Overall, the sea congestion has lessened. Projections show May to be booked out for 52% of shipping companies. Volumes are far exceeding the ones seen over the last two months, and the imbalance is expected to make port congestion even worse than earlier this year. Internationally, the Port of Montreal called a strike, but officials are trying to intervene or postpone the shutdown to keep congestion down and commodities moving in the economy.
- Rail – rates remain high and are expected to climb in all of the high density areas (super cities). Discussions surrounding international expansion with top rail leaders has not gone well, and hopes for additional support and volume into the already challenged industry is not looking positive. Finally, the imbalance of heavy port inbound U.S. causes a lack of container rotations, so companies are continuing to charge round trip for rail usage. The drive up in these costs are being leveraged by the truckload market, and used to keep transportation spend high across all sectors.
- LTL – cargo shipping tests did not go as planned, and multiple cargo options are being pulled out of the air. Additional pressure and congestion on the air sector of LTL, freight forwarders are opting to pull out of O’Hare and look to other available points to move freight. Global parcel rates expected to see large fee increase as USPS is expected to leave the UPU. Cargo shippers are preparing for the shift, and raising costs in anticipation of the shift early this fall. Finally, air freight demand is at record highs as manufacturers are looking to find alternatives to port congestion and coastal capacity concerns.
- Outbound tender volumes are up, as manufactured goods and sales climbed for March and April and are trended to be record breaking for May. Import volumes are putting capacity for warehousing/rail/ and truckload in port cities on alert as May is expecting record volume shifts. Transportation growth hitting wall with multiple factors fighting against growth including: Drug and Alcohol Clearinghouse impacting driver capacity, new recruits coming in slow, baby boomer retirements, and aging equipment with used market tapped out and new sales facing extremely long production times. Spot market rates are well above normal and will bump higher this week.
- Weather Updates:
- Threat of tornados and straight line winds with front coming across Texas today, then up through the MW followed with NE into Thursday.
- Rainfall spanning from TX up to NY with two fronts bringing in some average rainfall and some flash flooding risks.
- Several laws and regulation changes are being discussed that could impact the industry. California emissions is a hot topic at the moment, with the anticipated reinstatement of state mandates without equipment restriction in the next few weeks, along with new proposed changes and harsher regulations on the drayage sector of the industry. There is a proposed Bill in the House reviewing allowance for younger drivers (18+) to be allowed full Class A driving certification for interstate hauling. Transportation Infrastructure funding measure is continuing to move forward in legislation, but is receiving multiple modifications to help appeal to both sides of the political view. Drug and Alcohol Clearinghouse assigned additional resources and plan to dig further into company non-compliance.
Industry data is pulled and summarized weekly from key proprietors and industry experts using multiple publications and sources. Some examples of the publications used are Freightwaves, Transport Topics, American Shipper, American Cranes & Transport, FMCSA, DOT, SC&RA. The information is discussed with Sunset Managing Directors and validated prior to publication of summary data in this posting.