Transport-Centric Macroeconomic Metrics: June 25, 2021 Update

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DAT DRY VAN

Contract Van Rates and Spot Van Rate Trends

Source: DAT

Dry van spot (excluding broker mark-up) and contract rates continue to hover around $2.70 / mile while reefer spot rates are averaging $3.10 nationwide. 

Freight volumes are very close to where they were during the peak of the 2018 “Shipper Armageddon.” 

However, while freight volumes are comparable, rates are up 16% when compared to 2018.  This is due to reduced TL capacity driven by the pandemic and 2019 purges.  Additionally, higher operating costs driven by ever-increasing asset and labor costs are also driving rates higher.   

TL Carriers continue to list driver recruitment as one of their top concerns, but you’d have to be a pretty good salesperson to lure new someone into long-haul trucking.  Consider these “benefits”:

• You get to be away from your spouse, family and friends for 250 nights / year
• You get to work 65 – 70 hours a week to earn your $55,000 annual salary (About $14 / hr).  As a comparison, UPS Package car drivers make about $36 / hr, not including overtime.
• You won’t be paid for activities outside of driving, like waiting to get loaded or unloaded.
• You will have cameras watching your every move and electronic devices monitoring each time you speed, swerve or sub-optimally shift gears.
• You will have speed restrictors on your vehicle, making you drive 10-20 MPH slower than the flow of traffic.
• We will begin testing automated vehicles in order to eliminate your job.

And people wonder why there is 100% annual attrition and a shortage of long-haul, irregular route TL drivers.

DIESEL

Diesel Price Trends

On June 21, the national US diesel price averaged $3.287 / gallon, according to the U.S. Energy Information Administration. Diesel has now increased 29 of the last 33 weeks, up .91 / gallon since November 2.

On a positive note, the rate of increase has flattened out over the last few weeks, rising just 4 cents in the last month, but the ominous trend continues.

Driving the increase is the price of oil. West Texas Intermediate (WTI) crude was has doubled since October 30th, when WTI futures were selling at around $36 / barrel.

The closing price on June 24th was $73.08, which is just off a 3 year high.

Forecasting the price of oil is a fool’s errand, but analysts are thinking that crude, and therefore diesel, are headed higher.

To understand the impact on TL budgets, the fuel surcharge (FSC) applied to a typical 1000-mile TL load is now about $150 more than in November, given typical FSC agreements.

Sources: OilPrice.com
U.S. Energy Information Administration

OCEAN CONTAINER RATES (Asia to US)

Spot Rates - FEU Container Rates: Asia to US East & West Coast Trends

One can only say “WOW!”

Freightos spot rate index shows Asia to US west coast trade lanes closing in on $7000 / FEU while east coast spot rates are just a tad south of $10,000. To be clear, this is just the spot rate and does not include the “premium” surcharges that carriers are applying on top of the spot.

Stories of BCOs offering in excess of $15k / FEU are prevalent, and even that is not guaranteeing a coveted spot on N. American bound container ships.

The recent COVID outbreak at the Yantian port, while not as “Meme-Worthy” as the Suez Canal blockage, has caused a bad situation to become significantly worse.

As of June 24, governmental restrictions at the port have finally been lifted, but the congestion and backlog will continue to have an impact on global trade for weeks to come.

According to Freightos data, since June 4, spot rates for Asia to the US west coast are up 24% while east coast rates are up a staggering 32%.

As import costs rise and service levels tank from an already dismal baseline, are we nearing a tipping point where the benefits of sourcing from low-cost manufacturing countries is outweighed by the risks inherent in extended supply chains?

Source: Freightos

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Sources referenced in this post: Freightos, US Energy Information Administration, DAT, Freightwaves, WTI

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