Transfix Take: Midweek Market Update (March 2)

Transfix Take Podcast | Ep. 40 – Week of March 2

March Market Comes in Like a Lamb — With Potential Disruptions Looming

Building on weeks of relative calm, February ended with plenty of headline-making implications for the U.S. supply chain.

The truckload market did not see a lot of additional disruption last week, and national tender volume has started a slow decline, though at relatively high levels. The same week in 2021, however, saw volume, rejections, and rates jump, after the February polar vortex wreaked havoc on supply chains and set the stage for 2021 freight markets. 

Parts of Texas experienced déjà vu last week; another winter storm brought freezing temperatures that caused capacity issues, trucks to stall, and facilities to close. Thankfully, this was short-lived, but it still increased tender rejections in the South, pushing rates higher toward the end of the week. 

The West and Midwest marked volume declines of 4.3% and 7.7%, respectively, during the past month, according to FreightWaves’ SONAR. Capacity continues to move in shippers’ favor in the West, but the Midwest has become a battlefield for pricing power between shippers and carriers. Even as capacity loosens in the region, tender rejections have risen, and rates have stayed flat. Again, weather is the culprit, with winter storms disrupting capacity.

In coastal and Northeast states, truckload capacity is moving in carriers’ favor with imports bringing more demand to these markets (see more on this below). With the imminent produce season, it’s likely the same capacity tightness will spread through the Southeast. For now, shippers continue to see capacity in a better position than it was in during January. 

This week, markets likely will continue to remain calm. Shippers should start having more pricing power — as long as weather doesn’t rain on their parade. Coastal and southern regions probably will not see much easing before going into produce season. 

Port Roundup: Effects on Truckload Markets

As ports on the West Coast fall out of the mainstream news, congestion there is not done disrupting supply chains. U.S. imports declined through February, but inbound TEUs and shipments are on the rise as March arrives. Many ships are diverting to the East Coast, and the influx of imports there has brought truck capacity crunches for the coastal and Northeast truckload markets. 

On Feb. 23 in Charleston, 31 container ships were anchored offshore, and average container dwell time was up 37% year-over-year. Greg Miller reports for FreightWaves: “Hapag-Lloyd reported that ships are waiting between five and nine days for berths in Charleston and ‘berth windows are not being honored,’ with the port ‘metering in import-heavy ships, with priority given to ships with more exports than imports and that are loading 1,000 TEUs or more of empties.’ 

“Other East and Gulf Coast ports are seeing ship queues lengthen, as well. On [Feb. 23], there were 13 container ships anchored or loitering off New York/New Jersey … There were another 13 container ships off Virginia, 12 off Houston, and one off Mobile, Alabama, according to MarineTraffic data. 

“Add it all up, and there are 70 ships waiting to get into East/Gulf Coast ports, four more than there are waiting to get into Los Angeles/Long Beach. Over on the West Coast, add in another 10 ships waiting for berths in Oakland and one more off Seattle/Tacoma, and the grand total for the country’s ports rises to 147 — the same countrywide level as in early January, when the LA/LB queue was at its historic peak.”

As ships jockey for position at the ports, domestic shippers are preparing for produce season to begin. The market is likely to continue to soften, and carriers may find that moving toward contracted freight may pay off in the long term.

Disruptions From Convoy and Conflict

Two potential disruptors hover over the U.S. supply chain. The first threat is fully domestic, as we watch a trucker convoy on its way to Washington, D.C., to protest COVID mandates. The convoy has gained steam and is planning to arrive at its destination on March 5. We expect the impacts of this convoy will be limited in terms of displaced capacity, but it could have a greater effect if major arteries for freight close.

The second threat comes from abroad. The full impact of the Russian invasion of Ukraine on the U.S. supply chain is unfolding in real time. 

As Colin Campbell reports in Supply Chain Dive: “The attack on Ukraine and Western sanctions on Russia could prompt key materials shortages, material cost increases, demand volatility, logistics and capacity constraints, and cybersecurity breaches, according to Gartner analysts.”

During the past week, Russian import bookings dropped 40%. According to the Census Bureau, this follows a 64% increase in 2021 from the year prior. While Russian imports only account for 1% of total U.S. imports, more prominent U.S. trading partners such as  Germany and China have economies that are largely dependent on Russia. FreightWaves’ Zach Strickland reports, “Many companies have realized that geopolitical risk has become one of the biggest threats to supply chain management over the past four years.” 

Internationally, we are seeing the possibility of major supply-chain disruptions, as rail traffic from China to Europe moves through areas that are being affected by the Russian invasion. Additionally, the Ukrainian port of Odessa has closed, and shippers are avoiding other ports in the area.

“More than 30 container lines call at the port of Odessa, according to the port authority, while the Black Sea port is a key destination and trans-shipment hub for oil and gas, liquid, and dry bulk cargo,” Greg Knowler writes for JOC.com.

We could see downstream issues here if Europe/Asia trade is significantly disrupted. We continue to be on watch for related cyber-attacks, drawing on the experience we gained from the Colonial Pipeline cyberattack last May. We are also keeping a close eye on rising oil prices — oil surged above $105 a barrel for the first time since 2014 — which likely will affect rates here in the U.S.

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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