Business & Investment

Future outlook: The industry has the potential to make steady progress in 2022

It is a well-known fact that the logistics industry has faced significant pandemic-related changes over the last two years. Due to the 2021 price increase and reduced capacity, many shippers have high hopes for a significant New Year’s rebalancing. However, experts suggest that current market conditions may continue until 2022, so you may have to wait a bit longer.

David Spencer, Arrive at Logistics The director of business intelligence predicts that most of the 2021 challenges will bleed in 2022. As carriers continue to tackle driver shortages and parts shortages push delivery of new truck orders in 2021 to mid-2022, supply-side bailouts are unlikely to come soon.

Instead, there may be a grace from the demand side as consumers reassess their spending habits in the light of rising prices and the decline in financial support from pandemics, including the resumption of suspended student loan payments in January. The sex will be higher.

“Demand is affected by consumer sentiment throughout the year. Despite the recent news that the costs of both goods and housing are rising and the Byden Cabinet will extend student loan debt relief, consumer spending. The impact on is pushed even further, “Spencer said. “These impacts on consumer spending should lead to lower demand for trucks.”

The impact on demand will be pushed further. Assuming the relief does not expand again, the impact on consumer sentiment should be the same. The Biden Cabinet has recently expanded its student loan debt relief.

However, at this point, demand is stronger than ever and there are no signs of a crash shortly after the holidays. Demand changes are likely to be slow and steady, with market changes over the next few months.

The current peak season is a strong season, with demand well above the already rising pre-peak levels. Nationwide cargo volume continued to increase in November. Imports continued to flow into the country at record levels as consumers checked the holiday shopping list and stores worked to keep shelves in stock.

The FreightWaves SONAR Outbound Bid Volume Index (OTVI) fell 5% year-over-year in early December. However, this index contains both rejected and accepted load bids and must be evaluated against the FreightWaves SONAR Outbound Bid Rejection Index (OTRI) to measure the volume accepted. I have.

(Image: Freight Waves SONAR)

Combining the OTVI and OTRI data, we can see that the acceptance volume in early December actually increased by 3% year-on-year. Bid refusals are currently down about 25% year-on-year. In fact, the rejection rate is currently at its lowest level since July 2020.

A decrease in bid refusals indicates that the cargo is moving at the contract rate, which is a sign of hope for the shipper. Still, with rejection rates in excess of 19%, it is clear that strong demand and constrained capacity continue to stress the market.

(Image: Freight Waves SONAR)

Unfortunately for shippers, both spot rates and contract rates continue to rise as demand surges, shortages prolong and the retail season peaks. In early December, the dry van spot rate rose to $ 3 per mile for the first time. At the same time, Dryburn’s contract rate reached an all-time high of $ 2.96 per mile, according to the company. December market updates on arrival..

It’s worth noting that even with strong demand and port bottlenecks, stores seem to have no problem keeping their products on the shelves. In mid-November, shelving inventory was 90%, down only 1% from pre-pandemic levels, according to information from the White House’s Transportation Supply Chain Dashboard. These figures indicate that strong demand is unlikely to bring more volatility to the market in the short term, as current import levels appear to support consumer demand.

Ultimately, Spencer doesn’t anticipate major changes as the calendar ticks through 2022. If a change occurs, it is unlikely that it will be rapid or serious. This means that the shipper needs to be prepared to continue to wrestle with the current headwinds.

“We are tackling a major challenge, but we are now at a new water level,” Spencer said. “Apart from the weather and other unprecedented events, we probably won’t see any more surprises in 2022. We hope that the situation will gradually improve from where we are.”

Spencer recommends that shippers continue the course next year. They need to continue to adopt price-saving technologies, expand their networks, and perhaps most importantly, foster strong relationships with carriers. Combining all these efforts, shippers will be able to successfully overcome the ongoing high rate and capacity constraints until 2022.

“From the shipper’s point of view, if the market begins to improve, it’s an opportunity to start earning savings on their contracted cargo,” Spencer said. “This is especially true for shippers who are away from the RFP each year.”

Shippers who can increase the flexibility of their transportation strategy will be most successful as the situation will gradually improve next year. Shortening the contract period away from the annual RFP is one way shippers can take full advantage of future rate reductions. These shippers are also at slightly more risk in the event of an unexpected rate hike, but seizing the opportunity may be rewarded in 2022.

Future outlook: The industry has the potential to make steady progress in 2022 Future outlook: The industry has the potential to make steady progress in 2022

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