Freight Insights for Week of May 10
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 May 11 call:
FREIGHT VOLUMES & CAPACITY
- Unexpected Road Closure – I-40 AR/TN bridge is CLOSED
- Due to the shut down of the I-40 bridge from AR/TN, river traffic is being fully halted on the Mississippi. The timing of shutdown is unknown and diverting river moves is much more difficult than road traffic. River traffic feeds into a lot of our customer products, so this delay will start to have more of an impact in the next week or so. Until decisions are made for barges on how to get some through the area or offload onto other modes of equipment, freight coming north will begin to tighten as trucks are chosen over barges to get products to destination ahead of outages. Expect a large impact to general dry produce – ex. corn and steel/lumber/grain/etc. this comes at a bad time as the next two weeks are already expecting surges from the South, and equipment shortages have already been felt.
- Diesel shortage in areas along East Coast were sparked by a pipeline shutdown during a cyberattack, and consumer reactions are placing a surge on the commodity. Prices for Diesel have not yet seen a spike due to the issue, but analysts predict increases into next week. Large stations are posting out of fuel or putting restrictions on amounts that consumers can purchase. Resources with main station updates:
- Reefer – shift into the East Coast, leaving rejection rates higher along the West coast. Overall rejection rates have leveled, but rates have not followed the trend on average. AZ/CA/MN/IN are seeing imbalance, and causing significant swings in rates this week. GA/OH/S. Calif/TX capacity is still tight and there is a struggle to get loads covered. The produce market and high volume items shipping late May/early June will make this situation harder as Southern states begin to raise rates to ensure fast delivery on time sensitive goods.
- Dry Van – rejection rates are extremely elevated and starting to trend back up. Data supports spot rates expecting to rise between now and the upcoming holiday. Due to high pay rates coming out of the West coast, there is a drop in capacity across the Midwest with a boost of capacity into CA and surrounding states. Port imbalance is a main driver, and will continue to be a factor in pricing through the end of this year. OH/PA/TX/IL/TN are showing some of the highest spot rate increases over the U.S. Produce markets have an impact for dry goods (hay/potatoes/etc.) and with those picking up, we will see some price driving coming from the West further shifting the imbalance.
- Flatbed – Lumber hits record high prices along with heightened demand. Steel demand is at one of the highest points in recent years and expected shortages in the next month are causing consumer panic. Early purchasing and hoarding of materials for projects ahead of the shortage is causing additional disproportion. Prices have been on a steady upward trajectory, and are picking up pace. (Avg rates Jan 2.56 mile/Feb 2.76 mile/ Apr 2.94 mile/May 3.08 mile – DAT) These are expected to start rising between .15 and .20 per month going forward.
- Ports – US Demand is rising, and retailers are pushing for orders ahead of the summer start up. Additional material shortages in steel are making the current container shortages a higher priority of concern. Global container shippers are trying to keep pace with demand, but the expected surge on ports will be worse in the next two weeks than the previous few months. With the delay time and port congestion, options are becoming thinner for shippers, which is driving up the prices of materials from production all the way to final sale. Shipping container rates are anticipated to come in at 50-75% higher than they are currently, and that upward trend should last until at least early Spring 2022.
- Rail – average rating on rail is flipping and becoming level with truckload. Given port congestion and available rail space, this rating flip is expected to see a rapid increase in costs over the next three week and becoming much higher than the current average. Rates remain extremely elevated and are expected to climb in all of the high density areas (super cities) especially in port areas. Port shipments are expected to climb to 168% YOY rate averages by Memorial Day. Container and chassis imbalance is showing lack of inbound units back to the port for swop out, causing additional delays for unloading. Rail mergers for CAN to MX options are at a standstill as merger talks stall.
- Parcel – biggest concern right now is the upcoming movement of the USPS away from the UPU on 10/17. This transition puts in question the process and stable exchange of mail between countries. Prices on parcels are expected to see a significant upward rise along with capacity concerns and extended delays.
- Double brokering and use of rail lines versus truckload outside of dispatch agreements are becoming a bigger concern in the industry. Baseline rates are up for all modes of transportation, and no current forecast shows return to pre-COVID numbers. Surges on trucks/trailers/containers orders all show that the economy is attempting to rebalance, but we are looking for a long turnaround time with the delay in response close to a year for receipt of materials. Lumber, Steel, Automobile “chip” shortages all have impact in the seasonality and volume trends customers are familiar with seeing. The reaction currently is to push out and flatten the curves to try and regain some control, however that causes only temporary relief and unintended impact to other commodities later.
- Holidays/Observances – Produce markets are ramping up quickly and a lot of states should be looking for capacity in the next two weeks. Stores are bulking up in preparation for 5/31 Memorial Day, so be on the lookout for additional demand for retailers.
- Several laws and regulation changes impacting the industry. FMCSA new system to score carrier safety is a big topic right now, along with discussions on how it may negatively impact smaller carriers. Vehicle Miles Traveled Tax (VMT) is being looked at for the Truckload industry as an additional fee for total miles driven, which would be above the normal IFTA fees. AB5 with California emissions is moving forward and getting a lot of support. Expectation is within the next two months, vehicles will have additional compliance to contend with when driving in/out of the state. Biden Infrastructure plan is gaining momentum, and the increase in corporate taxation to help with its funding is putting smaller carrier groups on alert. 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.