MercuryGate Logistics Landscape

Freight Industry News Determines Q2 Transportation Strategy Adjustments

Just as freight industry news hinted at a market rebound and an uptick in global supply chain performance, the Baltimore bridge catastrophe sent ripples across transportation networks. As a result, maintaining end-to-end shipment visibility and quickly adapting your transportation strategy is integral to controlling costs in Q2.

Economic impacts are still emerging following the closure of the Port of Baltimore, the nation’s top destination for roll-on/roll-off cargo. Locally, the closure will likely affect freight transportation costs and service as 4,900 trucks using the Francis Scott Key Bridge daily will face diversions, congestion, and longer travel distances. The U.S. Department of Transportation on April 19 reaffirmed that the port is slated to re-open by the end of May.

Until then, annual import arrivals of $23 billion in autos & light trucks and $5 billion in construction machinery, as well as agricultural implements, iron & steel, and other material handling equipment will divert to other East Coast ports. Expect cost and travel times to increase and demand to shift into new markets and modes. 

At the same time, additional supply chain pressures loom due to ongoing conditions in the Panama and Suez canals, labor negotiations at U.S. South Atlantic and Gulf Coast ports, and drought threats for Mississippi River bottlenecks.

Top 25 Ports by Total Tonnage (2021)

Source: U.S. Department of Transportation Bureau of Transportation Statistics, based on 2021 data (latest available) provided by U.S. Army Corps of Engineers, Waterborne Commerce Statistics Center. Special tabulation as of November 2023.

These shipping disruptions occur as the nation’s 10 largest ports recorded a 25.3% increase in inbound freight volumes during February, the fifth consecutive increase after months of decreases. Likewise, ocean shipping lines expected an early peak season with more goods moving in June and August following ongoing global inventory depletion.

U.S. total business end-of-month inventories for February 2024 were $2.567 trillion, up 0.4% from January. U.S. total business sales were up 1.6% to $1.866 trillion from the prior month.

The nation’s international trade deficit in goods and services increased to $68.9 billion in February, as imports increased $7.1 billion from January, according to the U.S. Bureau of Economic Analysis. Year-over-year, the global trade deficit decreased $3.9 billion – or 2.8% from February 2023, as exports increased $9.3 billion and imports increased $5.4 billion.

Further complicating the international import environment, nearly half of supply chain professionals cited shipment delays at U.S. Customs as the leading challenge for cross-border e-commerce, especially as nearly 80% of those shipments occurred by air. That leaves many customs brokers and freight forwarders increasingly reliant on import compliance technology to automate and consolidate high volumes of transactions in a single filing.

Some of those technologies feature in Gartner’s 8 prominent supply chain technology trends for 2024, where artificial intelligence plays a significant role, alongside supply chain data governance, end-to-end sustainable supply chains, and cyber extortion. After reports of freight fraud quadrupled to at least $500 million in 2023 and new threats from ELD worms emerged, cybersecurity, supplier oversight, and efforts to combat double-brokering are becoming increasingly important focal points for many companies.

Signs of a rebounding economy offer more incentives to shore up supply chain practices to protect profit. The Logistics Managers Index expanded for the seventh time in eight months during March – and at the highest rate of expansion since September 2022. Meanwhile, trucking exits from the market continue, creating opportunity for over-the-road demand and pricing to climb. Freight market forecasters expect a bull market pricing cycle to occur later in the year, especially if dry van capacity becomes tighter.

The Freight Transportation Services Index (TSI), which is based on the amount of freight carriers by the for-hire transportation industry, rose 3.1% in February from January. The increase comes after a one-month decline, according to the U.S. Department of Transportation’s Bureau of Transportation Statistics. From February 2023 to February 2024, the index fell 1.1%.

Total Transborder freight between the U.S. and North American countries Canada and Mexico in January 2024 compared to January 2023, according to the Bureau of Transportation Statistics.

Preliminary Class 8 truck orders decreased 11% year-over-year in March, falling to 18,200 units. Orders for the past 12 months totaled 264,800 units. The March figure is in line with seasonal expectations, according to FTR, and consistent with recent demand trends.

Net trailer orders increased 37% to 21,331 from January to February, however the total is 18% below last year’s level. According to FTR, the backlog-to-build ratio is 5.7 months which is line with the average level for the second half of 2023 and below the historical average before 2020.

Although the less-than-truckload market remains balanced, increasing truckload demand and pricing will incentivize many shippers to capitalize on long-time contracts before rates escalate alongside the spot market, where digital freight marketplace options offer flexible capacity at the best costs.

Reflecting freight movements through contracts as opposed to spot moves, the American Trucking Association Truck Tonnage Index increased 4.3% during February compared to the seasonally adjusted prior month. That index level is the highest since before January 2023.

In this complex transportation environment, make sure you protect your profit by using transportation management solutions that offer adaptable planning, multi-modal management, comprehensive visibility and actionable intelligence.

Contact our team today for help and keep an eye on the MercuryGate Logistics Landscape to track evolving freight industry news.

Additional Freight Industry News & Transportation Trends to Monitor in Q2

The second quarter release of the TD Cowan/AFS Logistics Freight Index expects LTL and Truckload rates to remain steady, “consistent with trends established since Q2 of last year.” In parcel, the index reflects the effect of fuel surcharge increases and other accessorial changes that are driving net rate growth in Q1 and Q2 despite limited overall demand, according to the press release.

Also in the parcel environment, UPS Q1 earnings reflected declines in revenue, profits across all divisions.

In DAT Trendlines weekly brief for April 8-14, truckload capacity tightened, pushing load-to-truck ratios higher for vans and reefers, though the national average rates haven’t followed suit yet. Comparing the week of April 15-21 to the week of April 8-14, spot load posts declined 6.4%, spot rates declined for van 1% and reefer 1.2% and increased 0.2% for flatbed.

Manufacturing Environment

New orders for manufactured goods in February increased $8.2 billion – or 1.4% – after two consecutive months of declines. Shipments increased $8 billion or 1.4% – also up after two consecutive monthly decreases. Inventories, up following two consecutive monthly decreases, climbed $2.3 billion or 0.3%.

New Residential Construction Declines

Privately-owned housing starts in March 2024 decreased 14.7% to a seasonally adjusted annual rate of 1,458,000.

E-Commerce Sales Continue Climbing

U.S. retail e-commerce sales for Q4 2023 increased 0.8% to $285.2 billion (adjusted for seasonal variation but not price changes) from Q3. Year-over-year Q4 e-commerce sales increased 7.5% from 2022 to 2023, while total retail sales increased 2.8% during the same period. Q4 e-commerce sales accounted for 15.6% of total sales, according to the U.S. Department of Commerce Census Bureau. For the year, total e-commerce sales during 2023 increased 7.6% to $1.118 trillion. At the same time, total retail sales for the year increased 2.1%.

E-commerce sales in 2023 accounted for 15.4% of total sales, up from 2022 when e-commerce sales accounted for 14.7% of total sales. During Q4 2023, e-commerce sales accounted for 15.6% of total sales.

Corporate Profits Rise and Fall in Q4

Seasonally adjusted after-tax profits for retail corporations with assets of $50 million+ were $48.3 billion for the Q4 2023 (the 3 months ending Jan. 31, 2024). That total is up $4.4 billion from Q3 2023 (the 3 months ending Oct. 31, 2023). Seasonally adjusted sales during Q4 totaled 1.027 trillion, not statistically different from the 1.041 billion in the Q3, but up 3.27% compared to Q4 2022.

Seasonally adjusted, year-over-year Q4 retail profits climbed 18.5 billion or about 62% from 2022 to 2023, according to the U.S. Census Bureau.

Conversely, manufacturing corporations’ seasonally adjusted after-tax profits declined $30.2 billion or 15.5% from Q3 and Q4 2023 to $194.8 billion. Seasonally adjusted sales for Q4 2023 totaled $1.96 trillion, not statistically different from the 2.0 billion in Q3 2024. Sales during Q4 2023 were down 100 billion compared to 2022.

Seasonally adjusted, year-over-year Q4 manufacturing profits declined $35.8 billion or 15.5% from 2022 to 2023 according to the U.S. Census Bureau.

Fuel Prices Fluctuating

After back-to-back weeks of declines, the U.S. average for on-highway diesel fuel dipped below $4 for the first time since April 1, according to the U.S. Energy Information Administration’s April 22 report. The national average dropped 2.3 cents to $3.992, which is down 8.5 cents compared to last year. Average diesel prices declined in eight of 10 EIA regions, with the largest decrease of 7.3 cents in the Rock Mountain region. The largest increase occurred in New England (+1.5 cents).

The national average for regular gasoline prices is $3.668 in the April 22 report, up 4 cents compared to the previous week and 1.2 cents from the prior year. Regular gasoline prices have increased 4 straight weeks since the April 1 average of $3.517. The current average is 61 cents above the year’s lowest point of $3.058 on Jan. 15.

Gasoline prices are the lowest in the Gulf Coast region ($3.232), where they declined 5.5 cents from prior week. Prices are highest in California ($5.237) where they declined 3.4 cents compared to the prior week, and are up 54.3 cents compared to last year. The average price for regular gasoline went up in seven of the nine regions in the EIA’s weekly survey.

Average prices for on-highway diesel continued into a third straight week of declines, according to the April 22 report from the U.S. Energy Information Administration. In the same report, the national average is down 8.5 cents from the same period last year. Prices are lowest in the Gulf Coast region at $3.707 (down 0.3 cents since April 15), and the highest in California at $5.244 per gallon (down 1.2 cents since April 15).

According to the April 22 EIA report, the U.S. average for regular gasoline is $3.668, up 4 cents compared to the prior week and up 1.2 compared to prior year.

Freight Industry News Affecting Your Q1 2024 Supply Chain Performance

After an estimated 3.1% increase in year-over-year holiday sales, optimistic freight industry trends analysts anticipate transportation markets to normalize toward mid-year thanks to various factors.

Among them, inventory levels returning to pre-pandemic status, increasing cross-border domestic commerce, improving durable goods orders, and declining fuel costs all give cause for hope.

At the same time, the ongoing environment of sudden disruptions, supply chain shifts, and trade route adjustments pose logistics management challenges in 2024. Those risks mean freight transportation’s “new normal” may be marked by slower growth and a rebalancing of markets instead of a complete rebound for ocean shipping, air freight, trucking, intermodal rail, and parcel.

Let’s examine transportation trends and economic conditions affecting your supply chain cost and service during the year ahead.

Retail Industry Environment

MasterCard Spending Pulse reveals 2023 holiday sales grew thanks to a 2.2% in-store sales increase and a 6.3% y/y increase in online sales. The e-commerce increase between Nov. 1 and Dec. 24 is down slightly from the 7.8% Q3 y/y increase that brought quarterly online sales to $284.1 billion – 14.9% of total retail sales, according to the U.S. Department of Commerce.

Now, the returns season intensifies. Last year, shoppers returned 16.5% of items worth $817 billion purchased online and in stores. Merchants are estimated to spend $27 to handle a return for a $100 order, and Gartner reports that companies lose 50% of their margin on returns. Organizations’ ability to manage returns and reverse logistics significantly affects bottom-line performance during 1H.

Wholesale inventories for November were estimated at $895.7 billion – down 0.2% from October and 3.1% from November 2022.
Retail inventories for November were estimated at an end-of-month level of $794.9 billion, down 0.1% from October, but up 5.1% from November 2022.

Manufacturing Environment

Up two of the past three months, new orders for manufactured durable goods in November increased $15.1 billion or 5.4% to $295.4 billion. Also up two of the past three months, transportation equipment led the increase, climbing 15.3% or $14.3 billion to $107.8 billion.

At the same time, shipments of manufactured durable goods in November increased 1% or $2.9 billion to $283.2 billion. Again, transportation equipment led the increase, rising 2.3% or $2 billion to $90.3 billion.

Within this environment, the international trade deficit grew to $90.3 billion in November, up $0.7 billion from $89.6 billion in October. Exports of goods for November were $165.1 billion – $6.2 billion less than October exports. Imports in November were $255.4 billion, $5.5 billion less than in October.

Freight Transportation Industry News

November’s Logistics Manager’s Index reveals transportation capacity increasing at a faster pace, while prices are declining at higher rate. While November’s LMI reflects mild contraction due largely to inventory shifts, it says, “the North American economy continues to chug along.”

Record profits and diesel price declines allowed many carriers to remain in operation, allowing excess capacity to linger, but DAT Freight & Analytics’ outlook for 2024 predicts the truckload market could normalize by mid-year.

Anticipated interest rate cuts in 2024 could spur housing starts and flatbed demand, especially in the Southeast, where about 60% of the nation’s family homes are built. Nearly one-third of Americans expect mortgage rates to fall, while home-buying sentiments continue to improve.

Expect domestic, cross-border commerce to drive ongoing demand after Mexico surpassed China as the U.S.’s largest trading partner. However, U.S. Customs and Border Protection on Dec. 19 wrote that it violates U.S. Customs laws to use an offshore and unlicensed third-party company to review shipping documents such as bills of lading and commercial invoices. As a result, U.S. brokers can’t use inexpensive offshore labor to reduce costs for import entry preparation.

Meanwhile, geopolitical conflict continues to jeopardize international costs and service times, affecting supply chain performance in the process. Air freight demand is rising, shipping rates are increasing, and transit times are growing. Reliable shipment and order visibility is an asset that helps protect priorities while shippers navigate tumultuous waters.

The Cass Truckload Linehaul Index declined 0.3% in November and it is down 7.5% year-over-year.

Freight Industry Mergers & Acquisitions

Global mergers and acquisitions declined 17% to a value of $2.87 trillion during 2023, the lowest level in over a decade, according to London Stock Exchange data. U.S. M&A outperformed international activity, falling 6% to $1.36 trillion.

Still, in the freight logistics sector Q4 M&A moved the value needle, including Hub Group’s acquisition of Forward Air’s Final Mile unit and the TFI International acquisition of flatbed truckload carrier Daseke. Already in 2024, Denmark’s Maersk Tankers acquired Penfield Marine, a U.S. pool operator.

Economic Volatility Sways Q4 Transportation Trends & Logistics Industry News

Economic indicators point to a strong start for Q4 – with inflation cooling to 3.2% in October due to lower gas prices. Likewise, the services and manufacturing sectors experiences modest expansion. At the same time, a 17% year-over-year gain in single-family home sales and increases in new residential construction offer more signs for optimism. Year-over-year construction spending is up 4.6% through the first 9 months of 2024, after inching up 0.4% from August to September.

Signs of an economic rebound appear in a 4.6% increase in new orders for manufactured durable goods – the first uptick following 2 months of decline. New orders for manufactured goods during September increased 2.8% – the sixth increase in the past 7 months. More positive momentum comes with National Retail Federation’s expectations for holiday spending to exceed last year: $875 per household, with $620 going to goods and $255 toward consumable items.

Freight volumes for less-than-truckload carriers continue growing in the wake of the Yellow exit from the market. XPO, ABF Freight and Old Dominion Freight line all report strong growth in shipment volumes and pricing power. However, the Journal of Commerce reports that pricing surges are abating.

Transportation headwinds Persist in Q4

In addition to moderating LTL pricing, that same NRF forecast reminds us that the normalized, pre-pandemic inventory-to-sales ratios won’t help a depressed freight marketplace. A pair of purchasing managers indices released Nov. 1 reflect manufacturing industry contraction and staffing reductions – in spite of a recent uptick in new orders for durable goods.

More evidence tempers Q4 expectations:
  • U.S. Business inventories barely changed in September and August (up 0.4% both months).
  • End-of-month wholesale inventories in September were up 0.2% from August.
  • Advance monthly retail sales for October are down 0.1% from previous month, while total sales from August through October are up 3.1% compared to last year.
  • Total cargo volume dipped in August at 11 of the top 12 U.S. container ports.
  • Loaded container imports at the Port of New York and New Jersey in September declined 19.9% from the prior year, reaching the lowest import level since June.

Global outlook for container trade in 2024 forecasts sagging demand and falling rates – down 48%-67% from a year ago. Shipping and logistics company Maersk plans to cut 10,000 jobs as ocean demand dips. The company reported a third-quarter profit decline of $521 billion, with the Ocean division posting a quarterly loss.

French-based shipping company CMA CGM reported third-quarter profit declined to $388 million – down from $7.04 billion in the prior year. South Korean shipping link HMM saw a 96% decline in profits during 3Q 2023.

The U.S. deficit in goods and services increased 4.9% between August and September. September exports were $261.1 billion, $5.7 billion more than August exports. September imports were $322.7 billion, $8.6 billion more than August imports. The total deficit, $61.5 billion in September is up $2.9 billion from August’s revised total.

Following the pattern, American Trucking Association’s seasonally adjusted for-hire truck tonnage index for September declined 4.1% from prior year – the steepest decline since November 2020. Muted trucking demand will likely push more carriers out of business – despite a significant jump in preliminary Class 8 truck orders.

During Q3, total trucking capacity declined by 4,312 carriers.

  • 19,837 carriers saw their operating authorities revoked by the Federal Motor Safety Carrier Safety Administration.
  •  15,525 were authorized by the Federal Motor Carrier Safety Administration in Q3 – a decline of 34.1% compared to last year.

Growing risks – including volatile diesel fuel costs and increases in cyberthreats – exacerbate challenges in the trucking industry and jeopardize profitability across supply chains. Shippers face more cost pressure with matching 5.9% General Rate Increases (GRI) and additional charge increases announced by UPS and FedEx.

Meanwhile, the U.S. Postal Service plans 2024 rate hikes effective Jan. 21. Price increases will affect Ground Advantage, Parcel Select, Priority Mail, and Priority Mail Express according to a filing with the Postal Regulatory Commission. 

Despite consistent annual parcel GRI, ground parcel rates in 3Q declined year-over-year for the first time since 2019. The decrease in the TDS Cowen/AFS Freight Index was fueled by larger pricing discounts and reductions in added fees and fuel surcharges.

In this logistics landscape, supply chain players are finding solutions in technology. Logistics Management’s 32nd Annual Study of Logistics and Transportation Trends surveyed supply chain leaders about the role of technology – like freight forecasting, route optimization, and back-office automation.

  • 82% say modern technology is “a strategic necessity to compete in the marketplace.”
  • 75% believe that without technology they would lose customers to competitors.
  • 74% believe adopting modern technology is essential to increasing profitability.

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