- The mid-October announcement by the White House to begin sorting out the port congestion at LAX and Long Beach ports has proven the challenge carries a great deal of complexity and will not be solved overnight. The results so far from the efforts are not encouraging with 78 containers waiting offshore compared to the 58 in October.
- Financial reporting for the steamship lines is showing considerable growth and profitably through Q3 of 2021. Hapag-Lloyd reports $8.2 billion in EBITDA through the first nine months of 2021; Maersk is reporting $6.9 billion in EBITDA for Q3; ONE, the Singapore-based container line, reported $4.5 billion in EBITDA through the first half of 2021;
- Importers are seeing container spot rates fall considerably in the China-US trade lane in October as compared to September with lanes dropping from 30% to 50% in costs. The average 40’ container rate from China to the Port of LAX was averaging $17,500 in September compared to October’s $8,500 average cost per container.
- Hub Group has acquired Choptank Transport, a Maryland-based cold chain management company and brokerage for $153 million.
- The BNSF and Union Pacific Railroads will no longer limit the number of containers they move inland from the US West Coast. This move, a result of clearing out their congested intermodal networks, will provide forwarders relief as the need to trainload ocean containers onto full truckload carriers will begin to subside. This could be seen as a positive sign for the port congestion and lack of space for container imports.
ROCKFARM One View
Just when we thought we had hit the peak with truckload rates we begin November with an average rate per mile of $3.41, the highest rate per mile in the last six years. One of the drivers of the higher rate per mile is the cost of diesel. The month of October hit a new high at $3.63 per gallon. Couple the momentum of increasing diesel costs seen in the first half of November at $3.73 per gallon and we have not hit the high watermark in rising fuel costs. Will the continued increase in diesel be sustained into next year? That is the question the experts are attempting to answer.
Looking back at the last decade, we know the recovery from the 2008-2009 financial crisis spurred a great deal of economic activity and, in doing so, the 44 month period between February 2011 to September 2014 saw an average cost per gallon of $3.92. There were fluctuations over $4.00 a gallon throughout the three and half year period with the cost per gallon sustained between $3.70 and $4.12 a gallon. A notable period when we look ahead and see where the cost of fuel may be going.
As we review our Rockfarm market indexes, we have seen the rates per mile flatten within all four indexes, reflecting consistency in market and the actual cost of the truck rate dropping when factoring in the rising cost of diesel. The challenge in truck rates will come from two forces: rising fuel costs and inflation. The 12 month period ending in October is the highest inflation rate seen since November 1990. Manufacturers, distributors and retailers have begun raising sale prices to keep up with rising expenses in raw materials, components and supply chain costs. As a result, inflation increased in April and is on the rise with October posting at a 6.2% inflation rate.
“Where are inflationary expenses found in trucking expense?” The most common are insurance, equipment, fuel and drivers. Each of those expenses are on the way up with the driver pool becoming a key acquisition strategy as large fleets attempt to add to their company driver base through acquisition of smaller fleets. The coming months will prove challenging. What we do know is that what rises, also falls. The fall in this case may be more challenging than what we have seen in many decades.
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Dean, S. (2021 November). Cargo jam at L.A. and the Long Beach ports begins to ease as hefty fines https://www.latimes.com/business/story/2021-11-10/cargo-jam-in-la-ports-begins-to-ease-as-
US Inflation Calculator. (2021 November). Current US Inflation Rates: 2000-2021 https://www.usinflationcalculator.com/inflation/current-inflation-rates/
Lockridge, D. (2021 September). FTR’s Trucking Outlook: What the Numbers Say About Freight, Rates and Drivershttps://www.truckinginfo.com/10150820/ftrs-trucking-outlook-what-the-numbers-say-about-freight-rates-and-drivers
Container News. (2021 November). Transpacific box rates have fallen 50% since September https://container-news.com/transpacific-box-rates-have-fallen-50-since-september/
Cassidy, W. B. (2021 October). Hub Group grows cold transport business with Choptank buyhttps://www.joc.com/trucking-logistics/trucking-freight-brokers/hub-group-grows-cold-transport-business-choptank-buy_20211019.html
Ashe, A. (2021 November). UP, BNSF end metering from ports as inland congestion eases https:// www.joc.com/rail-intermodal/class-i-railroads/bnsf-railway/bnsf-end-metering-ports-inland-congestion-eases_20211111.html