Freight Insights for Week of May 3
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 4 call:
FREIGHT VOLUMES & CAPACITY
- International Road Check Week 5/4-5/6 HAPPENING NOW. We are seeing carrier shortages and capacity outage pockets. For carriers still hauling, rates have shifted up slightly to accommodate for the supply/demand shift. For those who have been able to adjust shipments to accommodate, we are expecting the end of week and next to be very heavy in volume.
- Diesel FSC average at $3.142 this week, slightly up week-over-week. Expected to continue on an upward trend for the next month before any additional flattening is anticipated.
- Reefer – rejection rates are extremely elevated, but did see a slight leveling last week. The Midwest is beginning to tighten again for this week, in relation to produce movements. GA/NC/TX/KS and S. California are struggling with capacity and should be looked at closely when submitting prices, as they are the heaviest for spiking rate concerns.
- Dry Van – rejection rates are extremely elevated, but had a small drop last week. GA is starting to loosen a bit and rates are appearing to start following the trend, suggesting a better balancing of capacity to availability. N. FL, OH and IL are behind the curve for surrounding state truckload rejections and rate drops. These states will continue to be a problem into next week. Ports still remain out of balance, with Port of Oakland showing as one of the worst in the U.S. for price impacts YOY tied to the issues and is gobbling up the capacity in all the surrounding cities. For the majority of the U.S., outside of large city hubs and the states listed above, spot rates are starting to decline and show some relief. There is no timeline on how long to expect this trend yet.
- Flatbed – Lumber hits record high prices along with heightened demand. Steel demand is high as well and is expected to have severe shortages in supply within the next two months. With the surge on these competing commodities, early purchasing to secure materials for projects, and lack of equipment to cover, it is driving the market rates up substantially. More construction projects are starting up later in season than normal, with state and local regulations lifted with COVID number changes, which will add to the ever growing issue with lack of equipment. Prices are expected to start rising fast from this point forward and over the next few weeks; preliminary figures show close to 161% cost rise by 6/1.
- Ports – container shortages are forecasted to continue until 2022, with manufacturing issues on containers potentially pushing that out further. Lack of ship space, usable containers, and a hike in consumer demand for goods is leaving international shippers looking for other alternatives to getting their product in the country. Cargo container rates are expected to go up with the demand boom, and conditions are already starting to trend towards the worst case scenario that many analysts were hoping not see for a few weeks. 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 still remains lower than the truckload options, however, capacity and space are very scarce to take advantage of the rate dip outside of anything currently contracted. Rates remain high and are expected to climb in all of the high density areas (super cities). Port congestion and the balance of containers is pushing this group to heavy movement volumes, but it is still not able to keep up with demand. Bookings on rail are over 2-3 weeks out on for any add on requests.
- LTL – companies are looking for cost savings in several new ways. New technology with a focus on fuel efficiency is being tested on cargo planes to help provide some pricing relief. There are also several acquisitions of smaller LTL carriers by large mega-groups, with the central aim at creating a more robust and self-reliant round trip structure; to help fill shipments on owned equipment and contracted space.
- Orders for trailers have gone up 252% YOY, putting additional pressure on manufacturing. Chip shortages are still driving power/machinery unit purchase delays, now forecasted to receive nine months past order date. Consumer purchasing is up, and is expected to spike further during summer as socialization is on the rise in line with COVID vaccinations. Shippers should be leaning towards cost-plus vs contract/spot in upcoming weeks.
- Weather Updates:
- Rain/hail/tornados/flooding for the week across the Midwest, making a path along and up the East coast. Expect harsh conditions and transport delays.
- Another large storm surge to hit the CA coast Thursday mid-morning.
- Several laws and regulation changes impacting the industry. 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.