Pipeline Shutdown Pushes Freight to Spot Market
The trucking freight market is navigating roadblock after roadblock. Following early May’s International Roadcheck, aka Blitz Week, rates have been gaining momentum and are nearing record highs. A fuel shortage and panic buying, caused by the Colonial Pipeline shutdown, have been displacing capacity and planning, creating a domino effect across markets and supply chains.
“Carriers are pushing their capacity into the spot markets, and we are not yet at the peak of the spot rally,” says Justin Maze, Transfix’s senior manager of carrier account management. “Load-to-truck (LTR) ratios continue to rise, as more freight is shifted onto the spot load boards. Supply is still well below demand with no end in sight, and imports continue to set records, with the Port of Los Angeles shattering its previous April record by 29%.”
“As we drive through the second half of May, we likely won’t experience the mid-month looseness we were hoping for,” Maze says. “Instead, we’ll see markets continue to get tighter as we head into the peak-volume month of June.”
“The Colonial Pipeline, which delivers about 45% of the fuel consumed on the East Coast, runs from the Gulf Coast to the New York metropolitan region, but states in the Southeast are more reliant on it,” Elinor Aspegren and Michael James write for USA Today. “The pipeline transports 2.5 million barrels of petroleum a day, including gasoline, diesel fuel, jet fuel, home heating oil and fuel for the U.S. military. It’s the largest oil products pipeline in the United States.”
The lack of fuel in the Southeast did not help with capacity or rates; it is still unknown what and how much impact this will have on markets going forward. “We started to feel the operational effects last Wednesday — 5 days after the pipeline was shut down,” Maze says. “We are seeing markets react in untraditional ways. It’s May, and carriers typically would head to southeastern states for higher rates due to produce season. But during the past few days, it has been extremely difficult and more costly to send carriers into states experiencing gas shortages. At the same time, it has been difficult finding capacity in those states for pickups.”
“Drivers are telling us their biggest pain points are finding gas stations that have fuel and waiting on long lines,” Maze says. “This is affecting service levels and supply in the market. In some cases, drivers cannot get to their pickup or delivery, because they are playing whack-a-mole with gas stations. We continue to monitor the impact this will have, but things do seem to be normalizing quickly, unlike what we saw with the February deep freeze.”
Indeed, the pipeline returned service to all markets on Thursday. U.S. Energy Secretary Jennifer Granholm said in a tweet the same day, “That should mean things will return to normal by the end of the weekend.”
Bridge Crack Further Moves Supply Chain from River to Road, Creating Infrastructure Issues
As if the pipeline closure weren’t enough, a crack on the Interstate 40 bridge in Memphis, Tennessee, put another spotlight on supply-chain and infrastructure vulnerabilities in the U.S.
The Hernando de Soto Bridge over the Mississippi River connects Arkansas and Tennessee. “The Mississippi River provides a vital downstream route for farmers who need to transport crops and a pathway from the gulf for oil and gas companies,” NBC News’ Doha Madani writes. There are more than 700 barges now backed up and waiting to pass through. No timeline has been given for fixing the bridge.
Every river barge taken out of the supply chain adds about 70 tractor-trailers to roadways, estimates Thomas Goldsby, chair of logistics and co-faculty director of the Global Supply Chain Institute at the University of Tennessee, Knoxville.
“Sure, we can move things by truck, but if you’ve been paying attention to what’s been going on with trucking capacity, it’s a very tight supply right now,” Goldsby says. “And here we’re talking about, you know, tankers and flatbeds and … subclasses of transportation by truck that are even more constrained.”
According to Madani: “Truck and car traffic in Memphis has been diverted to the nearby Interstate 55 bridge, which will help keep roadway shipping at normal levels, though increased congestion may cause delays. If shipping is delayed on the river too long or repairs lead to long-term disruptions, companies may have to consider alternative means for moving their products.”
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