- The inspections are over. On Friday, Governor Abbott of Texas repealed his order requiring stepped up inspections of all commercial truck from Mexico. The resultant backlash from the border congestion caused by the increased inspections gave way to the last of the bordering Mexican states, Tamaualipias, signing new commitments to border security.
- Negotiations are expected to begin soon between The International Longshore and Warehouse Union and the Pacific Maritime Association. The negotiations between the ILWU and PMA will determine the direction of our supply chains as the West Coast ports enter the last leg of talks to avoid a labor shutdown this summer.
- In other port news, Japanese port workers are shutting down all ports for one day to begin “Shunto,” a series of negotiations between employees via unions and the employers. In addition to Japanese ports, Shanghai has been under a COVID-19 lockdown that is having significant impact on shipping operations. The lockdown includes Shanghai’s 25 million people, and dried up available truck capacity as government agencies redirect assets due to the lockdown.
- According to the U.S. Census Bureau, business inventory levels rose 1.5% in February. The seasonally adjusted ratio was 1.26 down from February’s 2021 ratio of 1.33.
- Oil prices remain above $100 a barrel this week. U.S. Permian oil rig count reached its highest level since April 2020. Production overall is projected to reach 12.4 million barrels of oil per day (bpd) in 2022, up 800,000 bpd from 2021.
- Though the number of vessels within 40 nautical miles, or awaiting a berth at the LAX/LGB port is down from the summer peak in 2021, the terminal itself is seeing an increase wait time to load at the on-dock rail. The terminal and off-dock depots have over 64,000 empty containers. The number of containers on terminal is hovering near 60,000 with 20,000 of those containers on dock over 9 days.
ROCKFARM One View
Could it be that we have seen the peak on truckload rates and are now headed to the downturn while fuel begins to level out? The cost of fuel notwithstanding, we are seeing a major downturn in the cost of line haul for truckload shipments. As reflected in our average market rate index seen below, the line haul cost per mile has fallen from a high of $3.26 average cost per mile in January to $2.59 per mile in April.
The real instigator holding up rates at this time is the cost of fuel, which for the past month is averaging over $.60 cents per mile. It does appear from our Rockfarm measurements that March was the peak with fuel costs and, coupled with the lower rate per mile for line haul, we are now seeing the average truck rate move south to $3.56 to start the first half of April.
In a recent client call, it was suggested that the perspective in which we view our supply chains shouldn’t be linear, but a circular perspective that essentially illustrates what goes around comes around. Inventory levels are still fighting to get back to pre-pandemic levels and, with inflation on the rise, suppliers and manufacturers alike may push to add additional stock to the inventory to offset rising costs in raw materials and components. Add the issue of congestion to the mix, and the best we might see is regional spikes in freight costs throughout the remainder of the second quarter. The worst is a repeat of last summer.
Work With the Experts
For more information please reach out to our Supply Chain Coach team.
FOR MORE INFORMATION, PLEASE REACH OUT TO INFO@ROCKFARM.COM.
Weber, Paul J. (2022 April). Texas Halts Inspections That Led to Border Gridlock
Ronan, Dan. (2022 April). Labor Leaders Optimistic Over Port Contract Talks
U.S. Census Bureau. (2022 April). MANUFACTURING AND TRADE INVENTORIES AND SALES, FEBRUARY 2022
Container News. (2022 April). On-day lockdown for all Japanese ports on 17 April
Maritime-Executive. (2022 April). Strict COVID-19 Lockdown Impacts Port Operations at Shanghai
Kennedy, Charles. (2022 April). U.S. Oil Drillers Ramp Up Output Amid Higher Prices
Port of L.A. Operations Report. (2022 April). Friday April 15, 2022 Report