Logistically Speaking - HOT SHEET - Week 34

News

Logistically Speaking - HOT SHEET - Week 34

Recession Indicator?

West Coast ports are dropping signals about a slowdown in U.S. demand, with the number of inbound containers falling in July.

  • Loaded inbound containers arriving at the Port of Oakland plunged to 69,463 TEUs. That is 27% less than the prior month and the same month a year earlier, and the least busy July for imports since 2009.
  • At Long Beach, laden inbound shipments fell to 376,175 TEUs, the smallest amount this year and the quietest July since 2019.
  • U.S. ports will see less retail cargo entering the country in the second half of the year as economic growth slows amid aggressive interest-rate increases and persistent inflation, the National Retail Federation said last week.
  • Containerized imports through Savannah rose 6.5% year-over-year in the first seven months of 2022, including a 14% spike in July, according to PIERS.
  • However, the tide is changing; according to the Global Port Tracker Report, imports will decline 1.5% year-over-year in the second half of 2022 and decelerate further in 2023.

Northeast’s Critical Fuel Shortage

The region’s oil and fuel stockpile are low, and the White House believes this could lead to disruptions if New England experiences an exceptionally cold winter.

  • The Department of Energy sent letters to each of the six New England governors urging them to begin shoring up their oil supplies in advance of the coming winter and the peak of hurricane season.
  • Stockpiling now, the Department of Energy says, will prevent strain on the system during extreme weather.
  • On the East Coast, gasoline inventories are at their lowest point in nearly a decade, Secretary of Energy Jennifer Granholm wrote in the letter, and in New England, the diesel supply is roughly 63% below the five-year average, she added.
  • So should an extended winter storm pummel the East Coast, New England, which relies on home heating oil more than any other part of the country, could find its energy supply chain disrupted?

Shipping Slowdown

The container shipping market is in the process of reverting to normality. Depending on how the data are viewed, this process may have begun as early as September 2021 but will likely not reach its endpoint until mid-2023.

  • As spot rates began to come down in the fourth quarter of 2021, carriers adjusted contract rates upward, a trend that continued into the second quarter of 2022.
  • The substantial demand growth seen in 2020–21 has also waned, replaced with much lower growth rates but maintained for now at levels that far exceed those prior to the COVID-19 pandemic.
  • As a result, the two parts of the market appear “out of sync,” with spot pricing indicating that the extreme tightness of capacity is disappearing while contract rates also signal that the market is clearly not yet back to normal.
  • Citi cut its outlook for Maersk, Hapag-Lloyd, and Zim on expectations of a deeper slowdown in global demand, citing reasons including a reduction in global consumption, flagging U.S. home sales, and rising inflation.
  • They’re all negative omens for an industry that moves about 80% of global trade.
  • Meanwhile, Drewry said the spot rate for the benchmark route from Asia to the U.S. fell to $4,949 per 40-foot container, marking the first time the index has slipped below $5,000 since December 2020.

Solution: Using our access to multiple data points, we at Dunavant are monitoring the ocean market and updating our prices every two weeks to take advantage of any drops.

 

Ad Hoc Warehousing

Companies flush with inventories and straining for warehouse space are increasingly turning to ad hoc arrangements that include storing goods in parking lots and truck trailers as they cope with an ongoing disconnect between supply and demand.

  • The overflow strategy is the latest sign of how retailers and manufacturers continue resetting their distribution operations on the fly to keep supply chains running.
  • Companies are looking for space in a highly squeezed warehouse market, with vacancy rates in major distribution markets dropping into the low single digits and rising leasing costs.
  • Average rental rates across the U.S. for industrial properties in the second quarter surpassed $8 a square foot, 21% ahead of the same quarter last year.
  • While it can be a quick fix, the practice of keeping goods on transport equipment adds to broader strains in already-stressed supply chains because it ties up shipping containers, truck trailers, and the truck frames needed to keep goods moving, making it more challenging for trucking companies and ocean carriers to get the equipment they need at the right place and the right time.

Solution: Contact Dunavant Distribution about warehouse space or storage at our container yard and allow us to provide a solution to a surplus of inventory.

 

Trucking Update

Dry van loadings are forecast to rise 3.5% y/y in 2022, up from 2.7% previously. The most significant change was more robust growth in automotive-related loadings.

  • Spot loads have eased slightly, but volume remains above the five-year average.
  • Spot rates in the Truckstop.com system are about 10% lower y/y.
  • Total dry van truckload rates excluding fuel are forecast at -2.3% y/y this year, down from +0.5% previously.
  • For-hire trucking added 4,300 payroll jobs in June, seasonally adjusted, according to initial Bureau of Labor Statistics data.
  • Employment is now at a record level and is 74,100 jobs, or 4.9%, above February 2020.
  • Although the June gain was far smaller than those in April and May, BLS revised those months higher.
  • The two-month gain of 31,200 jobs is the second largest such surge on record.

Solution: Dunavant has brought on new resources to increase the number of drivers in our fleet in anticipation of the hot driver market and a rise in van loadings.

 

Dwell Times

DIRECT CONTACT

Mark Genereaux
Senior Vice President, Customer Experience 
901.369.1522

Posted by Andrea Wiley at 15:58