By Fello Logistics
It’s good news for shippers, but maybe not as good for spot-market carriers as you might think. The price of diesel has hit a new two-year low, which is obviously relieving some of the pressure on freight carriers.
But whatever relief carriers may feel from that is being canceled out by falling spot rates, which reflect continued soft demand. Trucking Dive reports:
The price of diesel, decreasing 6.8 cents week over week, is one factor affecting certain fleets’ ability to operate, with inflation continuing to threaten consumer norms and persistently soft demand causing pain for fleets.
Spot rates dropped by about 7 cents per mile from a year ago as of Saturday, making operating margins drop to below breakeven, DAT iQ Principal Analyst Dean Croke told Trucking Dive in an email.
“For a long-haul spot market carrier, they are losing the equivalent of $0.04/mile ($4,000/year) with fuel at $3.73/gal and dry van rates at $2.01/mile,” he wrote. “This time last year they were breaking even.”
The last time diesel was this low was in 2022. But for now, spot-market carriers are losing more money per mile than they were a year ago because inflation persists, and it’s driving down demand. Even the exit of many trucking companies from the market isn’t doing enough to stabilize rates.
As a broker representing shippers, but also valuing our relationship with carriers, at Fello we make sure to negotiate the best rates that favor our clients. Right now the market dynamics are working in our favor.
The drop in diesel prices probably won’t result in further rate cuts, but it does help carriers to absorb the low rates without as much of a financial hit to their bottom line.
At some point we expect carrier rates to stabilize, since demand can’t remain this soft forever. But it’s remained soft longer than most people expected.
Port of Baltimore Returns to Normal Operations, Full Capacity
With the collapse of Baltimore’s Francis Scott Key Bridge back in March, the Port of Baltimore has been operating at less than full capacity. That’s created bottlenecks and price increases for shippers given that the port processes more cars and farm equipment than any other in the U.S.
After a $100 million cleanup of debris from the bridge, the Port has now returned to normal operations at full capacity, at its normal width and depth. The impact on the overall shipping market will be hard to quantify at a micro level, but there will certainly be some.
The Associated Press (picked up by Transport Topics) reports:
Crews were able to reopen portions of the deep-draft channel in phases, restoring some commercial traffic in recent weeks. Some cruise ships and large containerships have already passed through, officials said.
But thousands of longshoremen, truckers and small business owners have seen their jobs impacted by the collapse and its economic ripple effects, which extend well beyond the Baltimore region.
Officials estimated the salvage operations will cost up to $75 million, while the Coast Guard response has cost $24 million to date. Rebuilding the bridge could cost nearly $2 billion, officials have said. They hope it’s completed by 2028.
When we quote a carrier for a job in the Midwest or on the West Coast (to cite two examples), it’s not necessarily obvious that their rates or availability are directly impacted by what happened in Baltimore. But the capacity of the entire industry is impacted by major infrastructure snags, especially one that causes this many re-directs and delays.
Even if you don’t ship to or through Baltimore, this is good news for everyone who has freight to ship.
Good News: No Strike at the Canadian Border (We Think)
Border crossing is hard enough for freight carriers without a strike by border patrol workers. It was looking for awhile there like we might have to deal with such a strike by officers on the Canadian side of the border.
Fortunately, the strike has apparently been averted by a last-minute deal, although it still requires ratification by the union members, as FreightWaves reports:
The Treasury Board said in a statement it will not share details of the tentative agreement at present, “out of respect for the ratification process underway. Should this tentative agreement be ratified by members, the government will have reached agreement with 18 bargaining units covering more than 84% of the public service.”
Full details of the agreement will be announced Thursday. A ratification vote will be scheduled in the coming days after details of the agreement are released, union officials said. If the agreement is ratified, the renewed collective agreement will apply to approximately 11,000 employees, the Treasury Board said. Along with customs and immigration officers, CBSA personnel include intelligence officers, investigators and nonuniformed staff.
A strike would have affected more than 100 land border crossings, in addition to airports and marine ports. Trade between the U.S. and Canada totaled $773 billion in 2023, so a strike would have raised carrier rates, caused delays and probably caused some shippers to at least temporarily re-think exporting goods into Canada.
We’re glad to be able to report the strike is likely now averted.
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