Shifts in Freight Market Raises Concerns

Shifts in Freight Market Raises Concerns

August 05th 2019

“Following last year’s red-hot United States shipping market, demands and price falls are growing concerns amongst goods shippers. The movement of production from China to Latin America or Southeast Asia are factors to consider.”

The wilting prices and mixed economic signals are looming concerns for the United States freight marketplace. These growing concerns are down to the bad weather and trade fears overwhelming the spring shipping period. Slow demand for moving consumer goods, industrial goods, and other regular orders are experiencing a pullback, according to transport experts.

This drop follows some industry-related freight measures, and transport experts note it is coming in a period when freight operators are preparing for the periodic shipping surge. The shipping surge usually experiences its peaks surge around July and September. The softer market in 2019 is quite the opposite of 2018’s freight boom, where manufacturers and retailers were noted to struggle to secure space on cargos and trucks as well. Also, shipping rates enjoyed double-digit growth, hammering transport budgets for several businesses.

Cargo volumes in 2019 remain moderate with truck capacity readily accessible, giving goods shippers more price leverage than last year. On the spot trucking marketplace, where booking last-minute transport services are available for businesses, prices were down 16% in April compared to 2018. These figures are provided by DAT Solutions LLC, an online freight market. The Cass Freight Index for cargos, a monthly index from Cass Information Systems Inc., fell by 3.2% in April, following the negative trend for the fifth straight month. Also, a top handler of freight payments for firms, Cass Information Systems Inc. added the fading numbers could indicate a likely more considerable economic shrinkage.

Other measures indicate a sharp swing with shipping request amidst the rising uncertainty in the United States trade. The change also combines with the 2019’s adverse weather conditions that have most disturbed the supply chain process. A jump of 7.4% from March to April was recorded by the American Trucking Associations’ for-hire truck tonnage index, after an initial decline the past two months.
Inventory levels are slowly creeping back up as businesses push goods through their logistics networks. The decline experienced in April by the U.S. retail sales has slowed factory activities.

A transportation analyst with Credit Suisse AG, Allison Landry said: “Shippers continue to stay cautious, with several firms holding back on spending as no clarity is coming from U.S. negotiations with China alongside other key trading associates.”
Ms. Landry is an interview, also noted: “The environment is uncertain.”

2019 got off to a rough start with freight volumes declining. Furthermore, trucking capacity relaxed with fleets who invested their gains from 2018 into record equipment orders of new big rigs received the delivery. Massive flooding all through the Midwest flooded logistics networks at a critical period for agricultural consignments. In California, the cold, wet weather placed a damper on the beginning of the produce season.

In a recent rail shipper conference, Ms. Landry added, “the common phrases I heard over and over were, ‘We’re going to wait and see what happens’ and ‘I hope we don’t talk ourselves into a recession.’”

Early in March, Covenant Transportation Group Inc., a Chattanooga, Tenn.-based trucker, with large clients including renown Inc., reduced the outlook of its first-quarterly profit. Covenant Transportation Group Inc., made citations to the bad weather and weaker demand after cargo haulers dragged freight forward in late 2018 to sidestep likely increase in tariffs. Shippers including U.S. Xpress Enterprises Inc.Schneider National Inc., and J.B. Hunt Transport Services Inc., all made citations to lousy weather as amongst the factors affecting the first-quarter outcomes.

The largest truckload transporter in North America, Knight-Swift Transportation Holdings Inc., recorded a 15% jump in its first-quarter adjusted operating income as compared to that of 2018. But experienced a fall in tractor productivity, and the firm is looking to cut its total profit outlook for the second and third quarters.

Starting from February to April, declining volumes recorded in the Railroad volumes for each full month. The record from the Association of American Railroads shows the declining volumes. Until now, only petroleum and petroleum products amongst other railroads’ major cargos have experience increase in 2019. The stats are correct compared to what is obtainable a year ago.

Analysts remain cautious of 2018’s freight market which established an unusually high standard for growth in 2019. In comparison to cargo volumes and prices obtained in 2017, data from 2019 is considered fair. “The 2019 data is not nearly as bad as people are making it out to be,” analyst Jason Seidl from Cowen & Co. said in a May 22 research note.

The shift in supply chains follows as businesses are moving some production away from China to Latin America or Southeast Asia. These businesses have also “contributed to the instability in transportations,” and the effect will well spread “all over the first half of 2019, at a minimum,” Mr. Seidl added.

Nevertheless, truckload rates are still predicted to drop 5% by the end of 2019, following statistics from ACT Research.

“With several businesses awash in capacity, trucker viability is likely to roll over in earnest by the second half of 2019,” Kenny Vieth, the ACT President added, “There are some strong headwinds.”