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2023-11-13 Economy
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Detailed Analysis of Current US Logistics Status for Peak
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| Detail-heavy analysis, for all you business/finance types who understand such things. A few selected paragraphs below the bullet points. |
[FreightWaves] - This week’s FreightWaves Supply Chain Pricing Power Index: 35 (Shippers)
- Last week’s FreightWaves Supply Chain Pricing Power Index: 30 (Shippers)
- Three-month FreightWaves Supply Chain Pricing Power Index Outlook: 35 (Shippers)
Contract Load Accepted Volume is an index that measures accepted load volumes moving under contracted agreements. In short, it is similar to OTVI but without the rejected tenders. Looking at accepted tender volumes, we see a rise of both 6.83% w/w and of 8.75% y/y. This narrowing y/y difference implies that actual freight flow is recovering from this cycle’s bottom.
The industry is indeed recovering, as can be seen from October’s incredible surge in containerized imports. Per data from Descartes Systems Group, imports were up 3.9% y/y in October and 4.7% over September, making for the third-best October on record (behind the obvious front-runners, 2020 and 2021). This surge — particularly the Port of Los Angeles’ 81% increase in imports from Oct. 26 to Nov. 2 — fed truckload markets like a goose bred for foie gras. Truckload volumes in Ontario, California, a heavyweight market that houses and distributes the lion’s share of Los Angeles’ and Long Beach’s imports, are up a staggering 26% w/w.
But as much as I would wish otherwise, the caveats must be restated. First, October’s growth was heavily driven by exports from China. As we have previously noted, China halted or curbed exports at the beginning of October during the national celebration of Golden Week. Taking into account the lead times, transit times and potential delays at either the port of discharge or lading, this disruption will not hit U.S. shores until next week. So by all means, smoke ’em while you’ve got ’em, but the winter is about to hit truckload markets sooner rather than later.
Second, ocean carriers are bracing for unfavorable trade winds that are forecast to persist well into 2024 if not beyond. After a brutal third-quarter earnings miss, Hapag-Lloyd — the world’s fifth-largest ocean carrier — tightened its guidance for the remainder of the year. Rolf Habben Jensen, CEO of Hapag-Lloyd, identified the problem not as volume weakness but as overcapacity driving down rates. “We do not expect a dramatic recovery of demand in the next couple of quarters,” Habben Jensen said. “The macro environment remains challenging, there are two wars going on, interest rates are still pretty high, inflation is higher than it should be, and investor sentiment is not great.”
This outlook is equally applicable to truckload markets, insofar as they are both fed by maritime imports and are also suffering from overcapacity driving down rates. As we will note below, even a 10% increase in actual volumes is not nearly enough to compensate for the lingering aftereffects of the past few years’ freight gold rush. In fact, this problem might be extended by struggling carriers being thrown a lifeline by an all-too-brief surge in volumes.
All of the good news concerning volumes is almost canceled out by the intractable stagnation of rejection rates. If anything, the current uptick in freight demand shows just how impossibly far volumes need to rise in order to keep everyone in the market. Unfortunately, the more likely scenario is that carriers continue to exit the industry during the upcoming quiet season of Q1. Bloodletting as the best solution is a sad reality, but it is reality nonetheless.
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Posted by Slenter Panda4300 2023-11-13 00:00||
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Posted by Procopius2k 2023-11-13 20:10||
2023-11-13 20:10||
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