September 16, 2021
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Some retail shippers are highlighting the following regarding truck capacity and pricing trends. They continue to see very tight T.L. capacity and are being forced into the spot market for roughly 10% of his loads right now vs. their typical target of around 1%. As a result of the tight T.L. market, they continue to expand Dedicated capacity significantly and are adding several more Dedicated lanes in the next 2-3 months. They also have been pleased with the pace with which their asset-based carriers have been able to add dedicated capacity, but it is coming at a premium price. They are also becoming increasingly concerned that the trailers needed for these new dedicated lanes won't be delivered on time, which is crucial for drop & hook services which are much more efficient. After adding this dedicated capacity, they hope to see their spot exposure drop below 3% at the end of the year.
Meanwhile, they continue their pace of quarterly mini-bids to deal with capacity issues in other parts of his network, and they've seen rates stay flattish over the last two quarters while also bidding out fewer lanes this quarter. Lastly, LTL capacity continues to be challenging to find with networks operating at maximum capacity, while demand for home deliveries is up 10x from last year.
Total expenditures on freight in August was +42% year over year, with volumes up +12% and implied price/mix +30% year over year. August was the twelfth consecutive month of year-over-year increase (after 14 straight months of declines). Price inflation vs. prior year appears to be led by T.L., but supply chains are experiencing price inflation in every mode (parcel, LTL, rail, airfreight/ocean).
Also, the Cass Transportation Index shows trucking picking up slack as costs continue to rise. The shipments component of the Cass Freight Index® grew 12% year over year in August and should slow to mid-single-digit growth into year-end on tougher comps. On a seasonally adjusted (SA) basis, the Cass Shipments Index rose by 5.0% month over month in August, after a 7.2% month over month drop in June and July. The two-year stack reaccelerated to 3.7% growth from 0.5% in July. The recovery after a skid in June and July amid further slowdowns in rail volume.
The Transportation Intermediaries Association's (TIA) Second Quarter 2021 TIA 3PL Market Report, which was recently released, showed significant annual gains for key brokered freight transportation metrics. TIA officials said that this report represents more than 1.6 million shipments and more than $3.8 billion in total revenue for the second quarter. Total quarterly shipments increased 11.3% from the first quarter to the second quarter and were up 21.7% annually, and total revenue rose 21% from the first quarter to the second quarter and was up 59.1% annually. The gross margin percentage was off 110 basis points from the first quarter to the second quarter and was off 460 basis points annually. For almost every market segment, volumes increased; truckload saw substantial gains, as well as LTL. The intermodal segment has been challenged by some rail service and congestion issues, and as a result, those volumes remained sluggish over the quarter. Every revenue classification experienced an increase in volumes and gross revenues, albeit recognizing that transportation costs and the driver shortage affect their net profitability.
As of September, XPO Logistics Inc. will no longer accept inbound LTL shipments on one of its lanes in Albany, N.Y., and destined for Amazon.com Inc. warehouses in New York's capital city, a source close to XPO said Saturday. A memo obtained on August 28th did not specify a particular market where the ban would be imposed, only instructing employees to stop directing "Amazon-routed freight" through the carrier's LTL network. The memo came from Mario A. Garza, XPO's LTL national 3PL account executive, a sign that XPO's action was directed at third-party logistics providers that consolidate shipper traffic and tender it to XPO for delivery to Amazon's warehouses. The source said the company will send a note to 3PLs clarifying the extent of the ban. XPO had not responded to an e-mail query to comment on the memo. LTL carriers like XPO move a large amount of freight to Amazon's distribution centers. However, according to an industry executive who requested anonymity, the process sucks up a lot of LTL trailer capacity, and equipment can sit for days at Amazon's locations before its unloaded. The general issue is not foreign to shippers and carriers hauling inbound freight to Amazon locations.
Class 8, medium-duty, and trailer backlogs are "essentially" filled into 2022, with inventories below traditional levels, as the semiconductor situation is not expected to be fixed this year, although there are reports of supply improvements. Still, that has not led to higher build rates. The supply chain problem for makers of trucks and trailers is a multi-headed serpent, as steel supplies remain tight and OEMS struggle on their own to provide tires, foams, and plastics. The supply chain problems are a greater driver of capacity constraints than consumer demands.
The Port of Long Beach currently has 13 container vessels at berth and 34 container vessels at anchor destined for POLB's marine terminals. The average at anchor is 7.3 days.
Container lines this month began upping their deployment of trans-Pacific capacity, with approximately 22 percent more capacity available to the West Coast through December than was available in March through July, according to eeSea, a platform that maps carrier schedules. Carriers are also adding approximately 14.4 percent more capacity to the East Coast through year-end, eeSea said. Carriers in recent months have announced dozens of extra-loader vessel deployments and several new weekly services to meet surging demand by US consumers that is projected to remain strong through the end of the year. US imports from Asia increased 32.4 percent in the first seven months of the year over the same period last year, and 21.7 percent from pre-COVID-19 2019, according to PIERS, a JOC.com sister product within IHS Markit. However, the double-digit increase in capacity is likely to further stress ports that are already contending with vessel bunching in the early days of peak shipping season. For example, there are 40-plus vessels at anchorage in Los Angeles-Long Beach awaiting space, while terminals each day are working about 30 container ships at berth, with more vessels scheduled to arrive daily.
Weekly Spot Market Pricing (DAT)