Transfix Take: Midweek Market Update (March 16)
Transfix Take Podcast | Ep. 42 – Week of March 16
Fuel Spikes Pack a Punch: How Long Until Volumes Slow?
The surge in fuel prices and the invasion of Ukraine have engendered widespread concern across headlines and inside homes, and while both events have their respective financial and humanitarian stresses, the global supply chain will also inevitably feel the impact.
In the truckload market, the current environment continues to inch towards the shipper’s favor, with fuel top of mind for both shippers and carriers. The surge in diesel prices has been jaw-dropping, especially over the previous two weeks as fuel surges set two new records.
Not only did we witness a new record in the weekly national average at $4.85 per gallon, but we also saw the highest single weekly increase in the national truckstop retail fuel prices, as it jumped off the chart with a .75 cent per gallon increase – almost double the previous record. Changes in oil prices at this level usually occur when natural disasters hit, like Hurricane Katrina in 2005 and Hurricane Harvey in 2017, leading to some of the previous most considerable weekly fuel price changes.
While no natural disaster is the cause of this fuel spike, one driving factor is the removal of Russia’s 10 million daily barrels from the global market. We will continue to track the conflict in Ukraine’s impact on the supply chain, but from studying historical demands for disaster relief, these types of events can lead to capacity constraints.
Shippers will pay higher surcharges for contracted freight – an additional $.01 per $.06 – while drivers pay more at the pump. But a more significant potential impact looms: lower overall volumes. As fuel remains high, the cost of just about everything increases, and consumers may think twice about buying goods.
Contract’s Comeback Persists
In the SONAR chart below, it’s clear that contract freight is on an upward trajectory. The average all-in spot rate per mile (orange line) continues to decline, while the average line haul contract rate per mile (blue line) has steadily increased and finally hit the level to flip the script. The green line is the average diesel price per gallon, reflecting a fuel surcharge for contract shipments.
Produce Season Rears Its Head in the South
Produce season begins, as dry van rates are seeing a nascent upward trend towards the carrier’s favor throughout the Southeast. Over the last two weeks, the average rate out of the Miami, Florida market saw a 5% increase, but Miami is not alone. There is evidence of tightened capacity throughout the South and Southeast markets, as we started rolling into produce season.
In the remainder of the country, loosened capacity and declining rates persist. The tug of war on pricing power in the Northeast and Midwest seems to have finally ended with shippers coming out victorious, meaning rates declined in nearly all markets. The West Coast, previously a gold rush for carriers, also continues to see capacity loosen and rates fall. However, we are starting to see some leveling off on heavier volume lanes. Carriers can still find high-paying loads throughout the country, but unfortunately they will need to head to the West Coast. For those carriers that have yet to travel to the West Coast in 2022, don’t be sticker-shocked by the cost. Rates are no longer hyper-inflated due to port congestion like they were in 2021.
COVID-19 Surge in China Restricts Container Movement
A COVID-19 surge in port-city Shenzhen, China has locked down eleven districts and halted production in manufacturing, tech and logistics. Located in southern China, the Shenzhen port handled 26.55 million TEUs of cargo in 2020 alone.
“The port saw an 8% drop in average container price in the past two weeks, but the lockdowns are expected to heavily restrict container movement, according to Container xChange,” SupplyChain Dive Reporter Colin Campbell said. “Shenzhen, in southern China, reported 86 new locally transmitted cases of COVID-19 on Monday, as a wave of infections spreads throughout the country.”
Stay tuned for how these lockdowns will impact imports and domestic truckload freight. As for ports in the U.S., the East Coast continues to bring in high volumes, while congestion eases on the West Coast. The JOC reported an easing of imports, but the industry expects a measurable increase that will put columns at the highest point year to date. However, shippers shouldn’t panic, as we shouldn’t see this rattle the truckload markets just yet. Let’s keep our eye on it, though, since it could turn the tide on the west.
The movement of freight is changing in every mode, as shippers do their best to keep up with record demand while fighting congestion at multiple points throughout the supply chain. Shippers who think forward, use data and think outside the proverbial box on solutions, while partnering with companies such as Transfix, will come out of this ongoing freight rally in a better position and well ahead of competitors. The one huge win through this pandemic has been speeding up the digital transformation of the transportation industry.
With the uncertainty and volatility surrounding the U.S. economic recovery, shippers need a partner that can help them adapt and excel — no matter the circumstance. Shippers turn to Transfix for our leading technology and reliable carrier network. As volumes drive higher, we are here to help: Learn more about our Core Carrier program and Dynamic Lane Rates. As part of our ongoing market coverage, we’ll continue to provide breaking news, resources and insight into emerging trends and the pandemic’s impact on the transportation industry.
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