December 30 2022

Freight Insights for December 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 December insights:

DOMESTIC

Capacity

  • American Trucking Association notes that recruitment trends in trucking have been returning to more normalized levels since November after a frenzied start to the year – which was greatly influenced by the shipping surge caused by the COVID-19 pandemic and the remnants of the equipment shortage in the first couple of quarters. We saw drivers shift to being owner-operators in the pursuit of high spot rates, but as rates fell and diesel prices rose, many returned to driving for carriers, easing the pressure on driver recruitment.
  • The current load-to-truck ratio on 12/25 is 3.74. Overall, December has shown a tightening in capacity since the steep drop off earlier this month due to the completion of Black Friday/Cyber Monday shopping.
  • The Biden administration announced stricter standards on emissions from trucks, buses, and vans starting with the 2027 model year. The rules are the first update to clean air standards for heavy-duty vehicles in over 20 years.  The success of this initiative depends on the willingness of carriers to replace their older, higher-emitting vehicles.
  • With truckload capacity more widely available nationwide and truckload rates falling faster than LTL pricing – this is the time we will see carriers cutting back on their available capacity, shifting employees, and making efforts to maintain their pricing.
  • Volvo Autonomous Solutions and Uber Freight have announced a long-term partnership to deploy Volvo’s autonomous transport network within Uber Freight’s marketplace in Texas, to be expanded as the network grows.  No estimated start time is listed.

Demand

  • There has been no noticeable peak season for trucking this year. Through November 29, rates fell month over month in the majority of states and rose in only five, according to the JOC Shipper Truckload Spot Rate Index.
  • The National Retail Federation (NRF) reported that a record 196.7 million Americans shopped in stores and online between Thanksgiving Day and Cyber Monday, up 17 million from 2021. That included a 17% YoY jump in shoppers visiting brick-and-mortar stores.  This caused a one week tightening in capacity at the end of November.
  • New tractor-trailer orders in October jumped 168% from the same time last year. The rise can be linked to trailer manufacturers being more comfortable accepting orders due to an easing of supply chain constraints.
  • Overall automobile sales are on pace to reach 20.3 million units in 2022, up 8% from 2021, and expected to grow further to 22.7 million units by 2024.  Electric vehicles and hybrids now account for about 25% of global volume. This can also be linked to an easing of supply chain constraints on the overall automobile manufacturing market.
  • Old Dominion Freight Line (ODFL) noted that while LTL shipments per day declined 7.3% YoY in November, revenue per day increased by the same 7.3% from November 2021.  The increase in revenue is likely due to general rate increases and fuel charges on a year over year basis.
  • SAIA reports their tonnage has dropped 7.7% YoY in November.  Fluctuations in shipment weight may indicate some realignment of freight among modes by shippers – shipping less items per load. 
  • The American Trucking Associations’ For-Hire Truck Tonnage Index decreased 2.5% in November, following a 1.2% decline in October, due to a soft fall freight season and a slowing goods economy.
  • The DAT Top 50 Lanes shows truckload spot rates are up 0.5% MoM.
  • The U.S. economy grew at an unexpectedly strong 3.2% annual pace from July through September, the government reported on December 22.  This is the first marked growth after consecutive drops in the January-March and April-June periods.
  • Colorado, North and South Dakota, Utah and Wyoming have declared temporary emergency exemptions of federal driving hours for deliveries of heating fuel.

Service/Cost

  • The Farmer’s Almanac is preparing 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.
  • The average cost of Diesel is $4.54 as of 12/26 – down $.06 from the week prior but still $.92 higher than last year.
  • European nations reached a deal to put a ceiling on gas prices. This could make Europe’s gas supply deficit worse by encouraging consumption.
  • For the first three weeks of November, parcel volume was around 85 million parcels per day.  During the Thanksgiving Holiday shipping week, volume increased to 90 million parcels daily.  On-time percentages for the entire month for FedEx, UPS, and USPS were above 95%.

Expectations

Sunset expects demand to reduce in January and capacity to remain generally available.  Challenges will arise on certain regional levels due to winter weather. 

INTERNATIONAL

Capacity

  • Rail strike has been averted!  The situation was taken to Congress and a new contract has been ratified for all rail unions.  Congress voted to push forward on Thursday, December 1, then signed into law by President Biden on Friday, December 2.
  • CMA CGM acquiring two terminals at the Port of NY and NJ. Their plan is to significantly accelerate investments in the development of these terminals to increase the combined capacity by up to 80%.
  • Starting in 2023, Norfolk Southern will put all ocean containers into stacks to address the long-term growth in port volumes. Putting containers into stacks will allow the railroad to increase terminal capacity, especially in locations that have no adjacent land to add more storage. 
  • Port expansions at the ports of New Orleans and Wilmington NC have been announced to allow both to handle larger cargo ships and have stronger intermodal connections.
  • The US Federal Maritime Commission (FMC) approved the formation of a chassis pool in the Southeast US covering three ports in Florida, Georgia, and North Carolina, a move port officials say will expand the fleet and improve the quality and reliability of the equipment necessary to move containerized cargo.
  • Intermodal volume leaving US West Coast ports was down 30% in November compared to a decade ago. In the same time period, intermodal volume originating on the US East Coast is up 48%.

Demand

  • Carriers are withdrawing significant amounts of capacity through a vigorous blank sailings program, but they have not been able to match the rapid drop in demand on the Asia-Europe and Asia-US trade lanes. Carriers have announced blank sailings on Asia-North Europe and both the Asia-US West & East Coast trade lanes in January, traditionally a peak shipping period, ahead of factory closures for the Chinese New Year.
  • World Trade Organization (WTO) economists predict global merchandise trade volumes will grow by only
    1% in 2023, down sharply from the previous estimate of 3.4%. 
  • US retailers are forecasting a decline in imports at least into next spring, saying the normal winter lull in the eastbound trans-Pacific will be pronounced in the coming months. This comes as demand slips, driven in part by an earlier-than-normal holiday shipping season.
  • Ocean freight demand is slowing and spot rates are declining across all transportation modes. However, port expansions continue, ocean freight demand for some remains strong, parcel rates are rising, and demand for warehousing continues.

Service/Cost

  • Chinese New Year starts on January 22, 2023 and ends on February 5, 2023.  This public holiday results in seven days public holidays off work for employees, though celebrations can last for more than two weeks. Factory shutdowns are expected for three weeks or so, and will disrupt shipping patterns during that time.
  • Asia – US West Coast rates are now an average of 4% lower than 2019. East Coast prices have decreased more than 80% since April, although rates are still 20% higher than 2019.
  • No air or ocean pickup in demand is occurring ahead of the Chinese New Year.  We can safely say that pre-Chinese New Year [CNY] orders have dropped by about 25% over the same time last year.
  • Some carriers have stopped accepting spot bookings on mainline trans-Pacific and Asia-Europe services from South China due to a capacity crunch caused by the Lunar New Year changes.

Expectations

Sunset expects ocean capacity to remain available and import demand to continue to slow into 2023. 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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