Business & Investment

Cargo continues to flow, but capacity does not

Expectations for future cargo flow Continue to grow Every week. The new record is posted without any signs of decline on the horizon.

Exciting payments are already accelerating in line with strong consumer spending, while the need to replenish inventories prolongs. This combination is likely to get the cargo cycle up and running, even if the year-over-year rate becomes more formidable later in the year.

Inbound container forecasts have been raised again

The National Retail Federation has once again raised its prospects for importing retail containers into major US ports. The Group expects 20-foot equivalent units (TEUs) to grow 33.9% year-on-year to 12.7 million units in the first half of 2021. The group’s previous forecast required an increase of 26.9%. Prior to that, the forecast was 23.3%.

Year-over-year comparisons reflect a COVID-related outage in 2020, which has taken China’s manufacturing sector offline in one fell swoop, widened domestic blockades and reduced freight demand.

The TEU set a new monthly record in March, rising 64.9% year-on-year to 2.27 million TEU. The last monthly record was 2.21 million TEU set in October. Volume in March increased by 21.2% from February. This was the strongest in February recorded since the NRF began tracking data in 2002.

April figures are not yet available, but the NRF expects the TEU to increase by 34.5% year-on-year. May (+ 44.9%) and June (+ 29.7%) conclude the group’s first half forecasts.

Jonathan Gold, vice president of supply chain and customs policy at NRF, said in a statement announcing an improved outlook: “Most consumers are in good financial position despite the ongoing pandemic. I’m not hesitant to spend. ” “As retailers continue to meet growing demand, higher spending will result in more goods arriving at the port. The cargo surge that began last fall hasn’t seemed to stop. Unfortunately. , The problem of confusion and congestion continues. “

Inbound bookings have risen for nearly a year, and have risen even more in recent weeks, according to FreightWaves data. Sea bookings to the United States are measured as a 10-day moving average of the amount bids on sea and freight carriers, indicating a record pace of inbound traffic. The data is positive and provides insight into the volume before leaving the original port.

Chart: (Sonar: IOTI.USA) For more information on FreightWaves SONAR, click here..

Outbound container bookings from China to the United States also support this trend.

Chart: (Sonar: OOTI.CHNUSA) For more information on FreightWaves SONAR, click here..

NRF forecasts require retail container imports to increase 12.2% year-on-year in July, but Comp will begin to normalize in August (+ 6%) and September (+ 1.3%). These one-year-old periods represent the economy, which has largely resumed following the blockade order, and the retailers who are positioning themselves for the holiday buying season.

Keep an eye out for late summer and early autumn

The outlook for year-over-year growth in shipments looks good until late summer. However, September and October may have a say in the growth trajectory for the rest of this freight cycle.

The peak season of 2020 overcame the COVID-related weaknesses of imports recorded earlier this year. Full-year domestic container shipments increased 1.9% year-on-year to 22 million TEU, surpassing the historical record set in 2018.

September will be an interesting marker for the current cycle. The comps are significantly stiffer and in some cases reflect record highs.Also, the enhanced federal unemployment benefits Scheduled to end on September 6th, Presents another hurdle.

Pressure on cargo volume could be felt earlier than in the fall As many states continue to lift COVID restrictions When the summer travel window opens. Some economists say a broader economic resumption favors spending on events and services, lowers spending on durable goods, and thus negatively impacts freight demand.

However, a growing group of analysts and economists believe that the benefits of a full resumption will push employment and spending to a level that overcomes the shift in spending to support services.Some believe that the stimulating flow of dollars has taken the economy to the next level. Consumers are strong enough to spend on both goods and services..

“Consumers are willing to spend money when they feel safe and are moving the economy forward. The latest guidance from the CDC for fully vaccinated individuals is It will help open up the economy even further and bring more people back to work, “said Matthew Shay, President and CEO of the NRF. Comments were made in a Friday press release to discuss retail sales in April. Higher than the steps recorded in March It increased by 51.2% from the previous year.

Another attractive catalyst for a sustainable freight environment is inventory levels. Still depleted.. According to Census Bureau data, the retailer’s inventory-to-sales ratio fell from 1.23 times in February to 1.1 times in March. The latest measurements are the lowest ever, well below the pre-pandemic level of about 1.45 times.

Capacity seems to be structurally constrained

It probably doesn’t matter what happens with the year-over-year Comp in the fall. Flat or modest declines in shipments will continue to operate the industry at near record levels. In addition, the current environment has capacity issues, even when compared to the strong cargo markets of the past.

There is a shortage of drivers Other sources of income (stimulation and unemployment benefits enhancement) are available, and comparable labor markets such as construction and warehousing remain strong. Strengthening compliance with the drug and alcohol clearinghouse also curtailed the driver pool.

Chart: (Sonar: OTRI.USA) Nearly one in four carriers reject packages under contract. For more information on FreightWaves SONAR, click here..

The surge in Class 8 orders in the fourth quarter could provide the truck capacity that the industry urgently needed. However, according to comments from analysts and publicly traded companies, it is associated with buyers who purchase a limited number of production slots available for partner brand supplies that are dealing with production delays due to shortages of raw materials, parts and semiconductors. You can see that there is.

A consensus has been formed suggesting that new construction in 2021 will only meet or barely exceed the industry’s normal replacement levels.

“The strong carrier orders earlier this year continue to be a result of trying to stay ahead of uncertain manufacturing schedules due to supply chain disruptions affecting build numbers, as evidenced by April results. I believe. “Morgan Stanley analyst Ravi Shanker (NYSE: MS) Report to the client.

North American Class 8 orders in April were 33,500 (up 689% compared to the depressed orders a year ago), down 16% from March, unable to keep up with normal seasonality. April orders are the lowest since September, indicating that the OEM production schedule is almost full.

Chart: (Sonar: ORDERS.CL8) For more information on FreightWaves SONAR, click here..

Equipment shortage expands In most modes, Truck availability is not the only issue.

Containers are still seeing a slow turnaround at the west coast port, and another cargo surge is underway. Already poor rail services have experienced the trickle-down effect of port problems, and distribution center and warehousing equipment has been detained longer as shippers struggle with their labor problems.

Some transportation Announced plans to undertake more containers and trailers In 2021, but fleet additions will be staggered throughout the year, and needles are unlikely to move, at least in the short term. Also, container buyers must conflict with the manufacturer’s build schedule. Risking favorable new construction rates due to potential overbuilding..

Even if the year-over-year compressions tightened in the second half, the current fundamentals are as the minimum capacity goes online, the dynamics of driver employment have changed structurally, and inventories still need to be replenished. It may not change that much.

“A large influx of supply is expected due to continued closures of driving schools, coupled with production line delays, driver capacity limitations exacerbated by additional stimulus payments, and strong demand. No. The environment will continue to raise prices and drive the trucking cycle over the next few quarters, “Shanker added.

Click here for more Freight Waves articles by Todd Maiden.



Cargo continues to flow, but capacity does not

https://s29755.pcdn.co/news/freight-continues-to-flow-in-capacity-does-not Cargo continues to flow, but capacity does not

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