Peak Season Industry Updates – Issue #10
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Air Cargo off to a Robust Start in 2018
•  “The International Air Transport Association (IATA) released data for global air freight markets showing that demand, measured in freight tonne kilometers (FTKs), rose 8.0% in January 2018 compared to the year-earlier period. This was up from the 5.8% annual growth recorded in December 2017.”
•  “ ‘With 8% growth in January, it’s been a solid start to 2018 for air cargo. That follows an exceptional year in which demand grew by 9%. We expect demand for air cargo to taper to a more normal 4.5% growth rate for 2018.’ ”
•  “All regions reported an increase in demand in January 2018.”
Source: International Air Transport Association; March 7, 2018
No end in sight for air cargo rate pressure
•  “Aligning capacity with fluctuating demand and sticker-shock pricing is always a tough dance in the air cargo spot market, but sharply rising volumes and lift constraints today are buffeting shippers and forwarders, with no swift solution in sight.”
•  “To add stability to the volatile air cargo market, Manders of Flexport called for consistent volume shippers of goods such as high-value electronics and perishables ‘to lock in your pricing and capacity as soon as possible. The regular shippers who buy long-term contracts will still be subject to the [market’s] stronger volatility and a little bit higher rates but they will be somewhat cushioned.’ The shipper who needs air capacity for, say, a certain month or a short period of time, cannot lock in and will be subject to extreme volatility.”
Source: Journal of Commerce, March 12, 2018; by Chris Barnett, Special Correspondent
Choose space over price in 2018, air cargo shippers warned
•  “Book air freight cargo early and prioritize space over price is the advice from forwarders as the robust demand experienced for much of last year continues into 2018.”
•  “Alexandre de Juniac, IATA’s director general and CEO, said demand drivers for air cargo were positive and global demand for manufacturing exports was buoyant. Meeting this strong demand was leading to longer supply chain delivery times, and de Juniac said companies seeking faster delivery times to make up for these longer production times could push demand even higher.”
•  “Unlike container shipping, there is a limited supply of air cargo space, which is keeping upward pressure on freight rates. ‘That means shippers are facing high prices again next peak season. Big shippers can agree on allotments well in advance, but smaller shippers don’t have much leeway in booking ahead,’ Galindo said.”
Source: Journal of Commerce, March 7, 2018; Greg Knowler, Europe Editor
Ocean carriers levy emergency surface fees, restrict door delivery
•  “US beneficial cargo owners (BCOs) scrambling to manage their supply chains amid intermodal rail delays and rising truck prices are paying an extra $200 per container under existing contracts with some ocean carriers seeking to recoup their higher costs in the tight surface transport market.”
•  “The truck capacity pressure, exacerbated by the federal electronic logging device (ELD) mandate is trickling down to all modes of inland cargo transportation: railroad, drayage, and transloading and long-haul truckload. Ocean carriers are responding with a mixture of actions consisting of emergency surcharges, raising tariffs, and suspending or restricting store-door deliveries in the United States.”
•  “Trucking costs are expected to rise after April 1 when law enforcement will place drivers out of service for failure to operate a working ELD or violating hours-of-service regulations. Daily truck productivity is also expected to drop with ELDs, and when coupled with rail ramp delays, ocean carriers are worried the speed in turning around chassis will slow down, increasing rental charges.”
•  “Such additional surcharges are historically uncommon during the slower freight season of February and March.”
Source: Journal of Commerce, March 20, 2018; by Ari Ashe, Associate Editor
World Container Index: Detailed Assessment
•  “The composite index is down by 4.4% this week and down by 7.9% from the same period of 2017.”
Source: Drewry: World Container Index; March 22, 2018
North America Motor Carriers:
How to cope with US trucking's short-haul sticker shock
•  “Life three months into electronic logging devices (ELDs) has been thrilling, to say the least. Full enforcement is just a week away, and when that happens, we’re likely to see a bigger effect in many areas.”
•  “One of the most significant impacts of the ELD mandate has been the sticker shock of short hauls.”
•  “Shippers looking for flexibility in the supply chain have found that the demands of today’s market have made it more restrictive than ever, with compliance fees putting another significant hit on their bottom line. They’re also pushing LTL to partly empty truckloads, to ensure higher on-time percentages.”
•  “We are still in uncharted waters as we wait to see what will happen once ELDs are enforced, but we think it’s safe to say that capacity challenges will continue for the rest of the year and well into 2019, as driver productivity is reduced and the market struggles to normalize.”
Source: Journal of Commerce, March 26, 2018; by Jeff Tucker, chief executive officer, Tucker Company Worldwide
US shipper spending on surface transport hits historic high
•  “US surface freight volumes and spending on trucking and intermodal rail remained higher in February than year-ago levels, resembling the 2014 marketplace in which the balance strongly tipped in favor of the carriers...”
•  “Ocean carriers are also adjusting prices as containers stack up in rail yards and draymen experience multihour delays while facing a stiff hours-of-service limit and heightened enforcement of an electronic logging device (ELD) mandate starting April 1.”
•  “ ‘Getting tighter, spot market rates in particular are way up. Concern is that produce season, spring peak, and the ELD deadline date are all hitting over the next few weeks,’ another said.”
Source: Journal of Commerce, March 22, 2018; by Ari Ashe, Associate Editor
Capacity-hungry US shippers get closer to truckers
•  “Shippers that want to lock in access to tractor-trainers are looking for new ways to operate more efficiently and to benefit rather than burden truck drivers…”
•  “In the electronic logging device era, treating the driver well involves more than providing a clean bathroom or break room, although that is a good start. Shippers need to think about how to keep that driver on the road, making money, rather than delayed at a dock…”
•  “…a severe truck capacity crunch that began last autumn continues to snarl US supply chains at the beginning of spring, while pushing US transportation costs to post-recession heights.”
•  “Capacity is tight not just in the truckload market, but in the drayage, less-than-truckload (LTL), intermodal rail, and warehousing markets. Most sources say this current tight market is more like what the industry saw in 2004 to 2005 rather than 2014. Sustained economic growth is leading to sustained capacity problems.”
Source: Journal of Commerce, March 21, 2018; by William B. Cassidy, Senior Editor
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All information above reflects the opinions and reporting of the various trade publications and industry analyst firms. FedEx Trade Networks has been granted permission by the above publications to excerpt articles pertaining to current market conditions. The opinions expressed here are not reflective of FedEx Trade Networks nor any FedEx company. The information here is informational as to current perspectives on the international transport market as it relates to air and ocean forwarding and related areas.
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