The Logisticians’ Freight News Market Updates for July 2021 Part 2

Freight News Market Updates Part 2
In part one of our freight news updates, we covered the latest in trucking, including what’s happening with parcel and final mile. In today’s article, we address what’s going on in other modes.

Flying Freight News: Air Cargo Continues to Recover at a Slow Pace

While e-commerce has put added demand on air cargo, there is only so much capacity available. And today, air capacity is recovering and has only achieved 50% capacity compared to pre-pandemic levels. However, air volumes have increased slightly to 4.4% above the volume of March 2019, but current levels are 78% over April 2020, says Logistics Management. And recent statistics show that air cargo revenues hit a near-record of $117.7 billion in 2020, while passenger service lost $84 billion. But it’s crucial to recognize how this change is affecting overall market flows and business strategy.

When the air cargo capacity bottomed out in both cargo and passenger transport, it created a massive diversion of freight through other modes last year. And now, major carriers, such as DHL Express, are working to change their approach to international air with the creation of a cargo airline in Austria, reports FreightWaves. Again, such moves will inherently mean more opportunity for supply chain optimization from procurement through the final mile of each transaction.

Interestingly as the cost of ocean containers continues to rise more and more folks with lighter cargo are turning to air transport to gain capacity with little cost impact.

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Intermodal Freight News Experiences Record-Setting Volumes and Revenue

Ocean has further experienced its share of capacity constraints in 2021. U.S. import rates are at historic highs, and the trans-Pacific shipping system has hit its max-capacity ceiling. As a result, carriers are anticipating a slight slowdown in growth rates among imports. Maersk reported that U.S. import declines should not be attributed to a softening of demand but rather the increased congestion in the trans-Pacific network, especially with dry bulk levels at 300% revenue than January 2021.
At the same time, container capacity is tightening down and creating record-setting daily leases. A 15-year container ship with 5,060 TEUs costs $135,000 per day for a 45-90 day lease, says FreightWaves, and that’s nearly double what was considered an incredulous rate in June 2021. That’s a clear sign of volatility that will only grow worse as peak approaches.

Parcel and Final Mile Carriers Join Forces to Create a Stellar Customer Experience

Rail transportation is also climbing, rising 28% in May. Through 2026, the global freight transportation market will grow at a 2% CAGR. However, the impact of COVID-19 has pushed the limits of prior forecasts and will generally create a financial freight run on rail. Why?
Rail is somewhat independent and isolated from the pandemic. While truckers have grown scarce in the past year, rail operators continue growing strong. The irony is that rail was built to work with a minimal crew during transport, and its very nature allows it to move much more freight at lower total costs than any other form of transportation. Additionally, rail providers have managed to increase tonnage by up to 80% over the last decade, and while reports are still out over the full impact of COVID-19 on rail, there is much hope on the horizon.
Unfortunately, an antagonist will be at play as rail evolves and grows to accommodate more freight from other modes. The influence of politics will stimulate a more significant uncertainty facing rail companies and ocean liners.

On July 8, 2021, President Biden signed an Executive Order for transportation agencies to increase scrutiny of anti-competitive conduct and unjust fees, noted Reuters. The goal of the executive order was to increase competition and lower rates. However, the uncertainty in the market and this latest move will likely have the opposite effect, creating instability that adds to costs, especially in the spot market.

And as early as the afternoon of July 8, 2021, reports, MarketWatch railroad stocks had fallen slightly. CSX stock was down 5.7%, Union Pacific fell 4.2%, Kansas City Southern declined 7.7%, and Norfolk Southern fell 6.9%. Despite that uncertainty, stocks appear on their way to recovery as of Friday, July 9, 2021. It will be interesting to see how the fruits of the executive order play out in the real world and whether they do indeed result in a decline in ocean rates, which will result in a subsequent lessening of rail rates. Again, supply and demand remain in control, and the informed shipper or LSP is the winner of the game. And like any game, the rules can and do change with time.

The Freight News Endgame: Evolution in the Market Is Coming

While the industry transforms the unprecedented demands of the past year, the remainder of 2021 is uncertain. However, a few other measures find their way into the freight news highlights to help companies realize a more significant future potential. For instance, Blume Global announced being carbon neutral, noted PR Newswire, and Walmart is planning an all-electric final mile fleet launch that’s powered by renewable energy, says Supermarket News. These stories hint that even in the face of uncertainty, the industry is on track and moving in a forward, positive direction. For the modern shipper, evolution and adaptation are everything. More and more companies need visibility to options that not only save cost but also reduce carbon footprint. And MercuryGate’s Smart TMS will be there to help logisticians of all sizes stay apprised of the market, consider its impact on their transportation networks and help by continuously optimizing everything at all times.

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Steve Blough
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