By Fello Logistics
Transport Topics reported on May 16 that overcapacity in the trucking industry, compared with demand, continues to put downward pressure on rates for carriers. There is a lot of talk that this is about to change, but so far the numbers aren’t reflecting it:
“Obviously, the market is still overcapacity, rates are still under pressure,” said Daniel Imbro, a managing director at Stephens. “We’ve seen that continue here into 2Q. And so I’d say definitely a more muted demand backdrop is maybe the big takeaway, and we’re bouncing on the bottom here with the overcapacity market that people are hesitant to take trucks out of.”
Imbro noted that demand underperformed seasonality through March and into April. He believes the less optimistic outlooks from public carriers may have to do with the expected seasonal recovery this time of year not materializing as much as they would have hoped.
“The biggest issue in the market is the overcapacity relative to demand,” Imbro said. “We’re two years into this freight recession; historically you’ve seen capacity get pushed out faster than it has. And so the debate now has become how have small carriers kind of stayed in here, and then what does it take for that capacity to pick up.”
Is this going to change soon? A day earlier, Transport Topics ran a report that indicates analysts think so:
Owner-operators and small fleets polled by Bloomberg and Truckstop also are slightly more optimistic. The survey showed a majority of carriers believe better times are around the corner with Truckstop’s Market Demand Index up 9% in Q1 from last year, the first year-over-year gain after seven quarterly declines.
In addition, only 26% of respondents expect rates to decline over the next three to six months, 6 percentage points less than in the equivalent fourth quarter of 2023 survey, while 28% see rates rising, which is 6 percentage points more than in Q4.
Truckload spot rates are steadily rising and will be net positive year-on-year by the third quarter, according to Avery Vise, FTR Transportation Intelligence vice president for trucking.
Rates are set to rise 1% overall in 2024, Vise said May 9 during a webinar held by FTR on the state of the freight market. Contract rates have bottomed out and will be net positive year-on-year by the end of 2024 but are set to fall 2% overall this year, he said.
A survey from Bloomberg-Truckstop released on May 8 indicates that carriers in the spot market saw demand increase for them over the past three months, which would indicate they’ll be in a position to raise their rates. It will probably take longer for truckload rates to rise.
Shippers who have enjoyed the low rates of the past 12 to 18 months should be prepared for rates to rise. Thankfully, we here at Fello are able to negotiate favorable rates with our carriers because of the excellent relationships we have with them. But the market is the market, and if rates rise overall, it’s likely everyone will feel them to some degree.
We can guide you through all of this.
Two Million TEUs Per Month Predicted Through U.S. Ports During 2024 Peak Season
Consumer spending remains high, and the likely result of that is a very busy peak season at U.S. ports in 2024. According to the National Retail Association, we are likely to see at least 2 million Twenty-foot Equivalent Units (TEUs) of loaded imports through October.
May is expected to be the first month in this cycle to top the 2 million-TEU mark.
Supply Chain Dive reports:
The organizations forecasted that loaded import volumes at the top 12 container ports will remain above 2 million TEUs through October 2024, marking the highest sustained volumes in years. The groups credited continued consumer spending on goods as the cause of continued freight demand.
“We haven’t seen numbers this high for this many months in almost two years,” NRF Vice President for Supply Chain and Customs Policy Jonathan Gold said. “Regardless of what headlines about the economy might say, consumers are shopping and retailers are making sure they have merchandise on hand to meet demand.”
When ports are this busy, it’s critical to plan ahead and take advantage of every tool – whether human insight or technology – to ensure your shipments won’t get stalled trying to leave the port.
We want to make sure our clients don’t get saddled with demurrage fees or deal with late shipments.
This is a great time to contact us if you’d like to talk drayage needs. We have some good insight and would be happy to talk you through it – whether you’re an old or new client – let’s make sure you’re in a good place at the ports.
Middle East Unrest Notwithstanding, Diesel Prices Keep Falling
While unrest in the Middle East often sends the prices of gasoline and diesel soaring, that hasn’t been the case in recent months. A report on May 6 indicated that the benchmark retail price of diesel continues to fall.
FreightWaves reports:
The Department of Energy/Energy Information Administration average weekly retail price declined 5.3 cents a gallon Monday, falling to $3.894. It was the fourth consecutive decline and the biggest one-week drop since Dec. 18, and it puts the price at its lowest level since Jan. 29.
Retail prices are generally the last place to see the impact of other price moves up the supply chain, and this week’s price is no different. Oil overall and diesel in particular have been on a downward trend for several weeks coming off a recent peak near the start of April when the international crude benchmark crossed the $90-a-barrel mark and talk of $100 a barrel began once again.
But prices have fizzled since, as Middle East violence continues to have no impact on supplies of oil from the region. On Monday, that crude benchmark, Brent, closed at $83.33, a slight upturn from the $82.96-a-barrel price from Friday but a long way from a level that would raise fears about $100 prices.
Not getting hit with higher diesel prices is surely a relief for carriers, who are under enough pressure as it is from the continued low demand that is keeping their rates down.
As for shippers, we’d say it’s good news for the market in general that carriers aren’t getting subjected to even more pressure. Right now, it’s to shippers’ advantage that overcapacity in the carrier market is putting downward pressure on rates. But it’s hard for many carriers to hold on right now, and if higher fuel costs were to drive some of them out of the market entirely, that would hurt shippers not only by driving rates up but also by eliminating many of the options they have for getting their freight transported.
We’re watching this. If diesel prices start rising again, we’ll be sure to be in contact with carriers and work through strategies to mitigate impact on our clients. For now, though, this is good news for shippers and carriers alike.
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