Transfix Take: Midweek Market Update (August 11)

Transfix Take Podcast | Ep. 63 – Week of August 11

Deja Vu Sets In as Northeast Port Congestion Worsens 

Those who have been keeping a pulse on port bottlenecks might be feeling some deja vu. The West Coast still has its congestion issues, but today the congestion at the Ports of New York and New Jersey has some industry leaders reliving last year’s West Coast problems. Neighborhoods there were seeing shipping containers in the street, as the Ports of Los Angeles and Long Beach navigated a tidal wave of empty containers. For any organization trying to interact with the ports, it was a mess. Empty containers could not be returned, and as a result, carriers struggled to pick up loaded containers, creating some of the primary issues in pandemic port congestion.

Today, empty containers are plaguing the Northeast ports. Bi-State Motor Carriers Chairman Tom Heimgartner said in a statement to the Journal of Commerce that the high number of empty containers swamping the port is creating a vicious cycle. The major driver of this congestion is that there are simply not enough chassis to serve the needs of importers, which adds to delays in moving containers off the port. 

Over the past couple of years, some shippers may have strategically avoided congestion by routing to East Coast Ports — therefore shifting the problem without quite solving it. Also, according to FreightWaves’ Greg Miller, the East and Gulf Coast congestion ramped up in June – the very month before the West Coast labor contract with the ILWU longshoreman union expired. 

The largest port on the east coast – Port of NY/NJ – has benefited from the various issues out West and has seen an increase in imports from a record 2021. As volumes continue to climb, the congestion caused by empty containers and tied-up chassis is starting to impact the regional supply chain. Like the Ports in Southern California, the port of NY/NJ has stated that they may start to penalize ocean carriers and charge them for storage as empty containers accumulate.

Market-by-Market Update

Sweltering temperatures have been sweeping across the country, but in terms of truckload freight markets, conditions couldn’t get cooler in the South and Southeast. Rates in these two regions continue to move further into shippers’ control, and tender rejections have declined. 

Carriers are not faring much better on the West Coast. Volumes continue to decline, pulling rejections down as well. Carriers have been able to keep rates flat throughout California markets, but with tender rejections below 2% in some of the larger Pacific Northwest markets like Seattle, carriers are grasping for freight and are not left with much of a choice when taking loads leaving the market. 

Everyone should continue to monitor the activity in Southern California as we head further into Q3. Currently, we are seeing volumes fall, which could drive rates even further downward in the coming weeks. Freight heading into these markets is seeing the opposite effect, and rates are slightly climbing as carriers have some leverage going into these unfavorable areas. 

Markets in the Northeast and Midwest haven’t seen much movement. As the Port of NY/NJ continues to face congestion, many shippers are taking advantage of low spot rates and moving their freight via truck, bypassing the rail. The Northeast has seen rates increase slightly over the past four weeks, putting the average rate back where it was 60 days ago. Rates shouldn’t move much higher unless congestion at the Northeast ports worsens and more acutely impacts regional truckload markets. 

What a Softening Market Means for Shippers

Truckload markets continue to see a softening spot market. Freight demand is simply not as high as what carriers and shippers had grown accustomed to seeing. Of course, this is great news for shippers, who can start reducing transportation costs in multiple stages of their supply chain just in time to ease inflationary pressures for consumers. 

What a Softening Market Means for Carriers – Small and Large 

A softening market is not good news for carriers, especially for smaller carriers who struggle to work directly with shippers. On the other hand, many large carriers have been able to make 2022 a year of success, but will this last? Often, the large carriers easily converted back to operating contract freight – locking down high contract rates just before the spot market took a nose dive in March. How long will contract rates hold strong? Well, it looks as if contract rates are starting to weaken as shippers push carriers to re-negotiate. 

Metrics to Monitor Ahead of Peak Season

This is a 180 degree power reversal from the pandemic days when carriers had forced shippers to renegotiate. For the first time in two years, the Logistics Manager Index for transportation costs has moved into a contraction state, as shippers continue to experience lower costs across several sectors of the supply chain. With port congestion throughout the U.S. at all time highs and no steep drop off in imports, the coming weeks will give us insight on how this year’s peak season will land. 

Here are some metrics we’ve been monitoring that help us help shippers stay ahead of market shifts: 

 

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.

Disclaimer: All views and opinions expressed in this blogpost are those of the author and do not necessarily reflect the views or positions of Transfix, Inc. or any parent companies or affiliates or the companies with which the participants are affiliated, and may have been previously disseminated by them. The views and opinions expressed in this blogpost are based upon information considered reliable, but neither Transfix, Inc. nor its affiliates, nor the companies with which such participants are affiliated, warrant its completeness or accuracy, and it should not be relied upon as such. In addition, the blogpost may contain forward-looking statements that are not statements of historical fact. All such statements are based on current expectations, as well as estimates and assumptions, that although believed to be reasonable, are inherently uncertain, and actual results may differ from those expressed or implied. All views,  opinions, and statements are subject to change, but there is no obligation to update or revise these statements whether as a result of new information, future events, or otherwise.

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