JBF Transportation Bulletin – March 2019

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March 2019 | Commentary By Mike Mulqueen, JBF Consulting

North American Freight Overview

By all accounts, the annual spring surge that we have come to expect in freight transport is slow to arrive this year and the spot market certainly looks nothing like 2018 (Thank God!).  This is due to increased carrier capacity combined with a slowing US and global economy.

Essentially, we have balanced supply and demand. Certainly, a refreshing change from last year at this time.

FTR’s Shipper Condition Index released this week remains in neutral territory, implying a relative balance in supply and demand for TL freight.  Also, on the positive side, diesel prices remain relatively flat, increasing a very modest 1% month over month.

On the ocean container front, container prices fell steeply month over month for US bound containers from Asia. FEU rates are now 10-15% lower (inclusive of BAF) than they were in late February for Asian containers destined for both east coast and west coast ports according to Freightos, a leading provider of ocean container rate information.

The big unknown is the impact of the IMO 2020 regulations. Steamship lines will need to address IMO 2020, which goes into effect January 1, by either installing scrubbers or moving to alternative low-sulfur alternatives such as MGO or LNG.  

Interestingly, the price delta between IFO 380 and MGO remains relatively unchanged. One would expect that gap to widen as more steamship lines wean themselves off the high sulfur IMO 380 distillate and move to MGO.

In summary, we are at a period of relatively stable fuel prices and relatively balanced supply / demand.  Enjoy it while it lasts.

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Table of Contents:

Spring Surge Delayed Again

Source:  DAT, March 26, 2019

It looks like we’ll have to wait a little longer for a spring surge. The spot market appeared heading for a rebound early in March, but a number of unexpected events have kept rates in check.

Flooding in the Midwest closed roads and rail lines, which will impact freight markets for weeks to come.

There was also a major tank fire in Houston last week, which added further disruption.

The reefer segment is showing signs of life in California and in the border area of Nogales, AZ. The flatbed segment is the strongest of the three, with solid demand and load-to-truck ratios that have climbed over the past few weeks. The van load-to-truck ratio declined last week to 1.4 loads per truck.

Source: https://utilities.dat.com/blog/post/spring-surge-delayed-again

 

 

 

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Diesel Price Comparison

Date:  March 26, 2019

National retail diesel prices remained flat month over month, edging only slightly higher during last month.  Since August, 2017, diesel prices have stayed between $2.50 and $3.50 / gallon. This lack of volatility is unusual, but we won’t look a gift horse in the mouth.  

Source: https://www.eia.gov/petroleum/gasdiesel/

 

Year over year chart

 

month-over-month

 

Source: https://www.eia.gov/petroleum/gasdiesel/

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China/East Asia to USA West Coast

Date: March 28, 2019

Asia to US FEU rates have fallen significantly over the past 6 months in the trade lanes originating in Asia and terminating in the US.  The cost to move a FEU from Asia to the US west coast was over $2500 in September of last year, but as of this week, has been cut in nearly in half. 

Similarly, east coast bound costs from Asia are have fallen from approximately $3700 / FEU to about $2500. 

Source: https://fbx.freightos.com/freight-index

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The Conference Board Economic Forecast for the U.S. Economy

Date: March 13, 2019

Fading domestic headwinds will keep growth above trend

New GDP data show that after growing at a nearly four percent pace during the middle of 2018, growth slowed in the final quarter of the year to 2.6 percent. Still this figure is well above the US economy’s long-term two-percent trend. During 2019, expect growth to slow further, as effects from fiscal stimulus measures wane, but to remain above its trend through the end of the year.

Consumer spending is buoyed by a tight labor market which is driving more rapid wage gains. Businesses face a shrinking pool of available workers that could slow growth further during the year unless past investments have raised labor productivity, which recent data provide modest signals to support. A shift in Federal Reserve policy towards looser monetary policy should keep business confidence and investment sufficiently solid throughout 2019.

Much depends on inflation though. If prices rise more rapidly than anticipated, the Federal Reserve may still raise interest rates later in 2019 to prevent the economy from overheating. This may become a greater risk if businesses pass rising labor costs onto their customers.

From a global perspective, 2019 sets up as a more challenging year for business than 2018. Growth in the Euro Area and China is slowing which will constrain opportunities for exports. A more favorable domestic monetary policy environment can keep growth above two percent into 2020 but cannot release the US economy from limits imposed by slow demographic growth.

More promising is a rise in productivity growth during 2018. Spending on software and research and development accelerated rapidly last year and seems to have helped fuel productivity growth. Should this trend continue in 2019, businesses will have a chance to deploy new technologies and increase the efficiency of their workers. This represents the clearest path for keeping revenue and profit growth robust in 2019 and beyond.

Source: https://www.conference-board.org/data/usforecast.cfm

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Shippers Conditions Point to Market Balance, says FTR

Source: https://www.ccjdigital.com/shippers-conditions-point-to-market-balance-says-ftr/

CCJ‘s Indicators rounds up the latest reports on trucking business indicators on rates, freight, equipment, the economy and more.

Market conditions for shippers, as measured by FTR’s monthly Shippers Conditions Index, reflected a balanced freight market in January between shippers and carriers, FTR says.

Though the Shippers Conditions Index was slightly weaker in January than December, the index reading remained in positive territory.

FTR forecasts shippers conditions to remain mostly neutral through the first quarter and then to climb into more positive territory through the rest of the year.

Generally, a positive reading of the Shippers Conditions Index reflects poorer market conditions for carriers in terms of rates and capacity. However, FTR expects the market to remain balanced in 2019. “While conditions for shippers are forecast to remain neutral to positive over the coming months, it is possible that the duration and extent of flooding in the U.S. Midwest could be a headwind to those improvements, depending on where your freight is moving,” says Todd Tranausky, vice president of rail and intermodal at FTR.

Overall stable fuel prices and more available capacity than was experienced in 2018 will create a relatively calm environment.”

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Upcoming Industry Events

April 3-5 Home Delivery World 2019 Philadelphia, PA
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April 28-May 1 Warehousing Education & Research Council (WERC) Conference Columbus, OH
May 5-7 Velocity 2019 MercuryGate user Conference Las Vegas, NV
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May 6-8 4th Annual D3 Retail Supply Chain Summit: New York New York, NY
May 6-8 Transplace 17th Annual Shipper Symposium Dallas, TX
May 6-8 Transparency19 Atlanta, GA
May 7-10 JDA Software: Focus 2019 Dallas, TX
May 7-9 SAP Sapphire Now + ASUG Annual Conference Orlando, FL
May 8-10 Customized Logistics & Delivery Assoc CLDA Annual Phoenix, AZ
May 13-16 Gartner Supply Chain Executive Conference 2019 Phoenix, AZ
May 20-23 Manhattan Associates: Momentum 2019 Phoenix, AZ
May 29-31 SCMA National Conference Montreal, CANADA

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JBF Consulting specializes in helping large shippers select, implement and manage their Transportation & Fleet Management systems so they can get more out of their investment. To contact JBF Consulting call 203-807-5231 or email: JBFInfo@jbf-consulting.com

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Disclaimer:  This newsletter is being provided to the reader as a general overview of current market conditions and contains information compiled by JBF Consulting from a variety of sources. 

This newsletter is provided solely for general informational purposes and is not intended to be, nor should it be construed by the reader as, specific advice or a solution tailored to a particular company or client. 

Before acting on any information, you should consider the appropriateness of the information provided to your company’s circumstances and it is recommended that you seek independent advice if you have questions specific to your own objectives.

JBF Consulting makes no representation or warranty as to the accuracy or completeness of the information contained herein and shall have no liability for any representations (expressed or implied) regarding information contained in, or omitted from, this newsletter.

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