We Won't Get Fooled Again

Reporter's Notebook: July 21, 2022

Welcome Please Haul My Freight: Edition 27. Here are items in my notebook this week:

SPOT TRUCKLOAD: I’ve never been shy about saying something is happening in the spot truckload market. The data is not nothing.

There is a good chance the DAT Daily Top 50 will fall below 2020 levels at some point soon, and is at roughly +7% compared with 2020:

The JOC Shipper Truckload Spot Rate Index preliminary July data shows rates down $0.025 from June rates.

CONTRACT TRUCKLOAD: The American Trucking Associations Truck Tonnage was up 2.7% year over year in June. It’s one of many sources that indicate there is no freight recession, but rather a rebalancing from spot to contract markets.

Here is what ATA Chief Economist Bob Costello said:

"ATA's tonnage index is dominated by contract freight, so while the spot market has slowed as freight softens, contract carriers are backfilling those losses with loads from shippers reducing spot market exposure. Essentially, the market is transitioning back to pre-pandemic shares of contract versus spot market.”

Here is what Nick Hobbs of J.B. Hunt said this week:

“Demand for our professional outsourced private fleet solutions remained strong as evidenced by our continued growth in our fleet during the quarter…We continue to see strong demand for our service with new customer opportunities in the pipeline, but we also have seen some softening demand in some end markets, mainly in the value furniture category.”

And Shelley Simpson of J.B. Hunt:

“We have had concern from customers on inventory, having the wrong inventory, and where it is located, but I've not heard any customers tell us that there's a downturn coming or anything to plan from a large percentage.”

From Adam Miller of Knight Swift Transportation:

“Freight demand followed normal seasonal trends, but was generally strong throughout the quarter. As we make more commitments, we are seeing higher tender acceptance levels and fewer non-contract opportunities... We are seeing strong demand from our customers to secure trailer pool capacity through our truckload and logistics segments.”

Also this write up from DAT citing work from Professors Jason Miller and Yemisi Bolumole of Michigan State University:

“We didn’t see a freight recession for trucking occur in the second quarter…The year-over-year ton-mile gains align well with the year-over-year tonnage gains reported by Old Dominion, ArcBest, and Saia, so these estimates seem reasonable.”

And U.S. Bank Freight Payment Index for Q2:

“The economy contracted in the first quarter of 2022, which allowed shippers to pull freight out of the spot market. This resulted in significant drops in spot market prices and volumes. More freight was moved back to their contract carriers.”

AMAZON INTERMODAL: Is Amazon becoming an intermodal marketing company? Watch this Amazon Intermodal video — you be the judge. It seems that way to me. Amazon seems to now competing against Hub Group, J.B. Hunt, Schneider National, STG Logistics, and Swift Intermodal. I estimate Amazon owns between 5,000 and 6,000 containers as of today, based on PIERS records.

SPOT INTERMODAL: Falling spot truck rates provide opportunities for shippers to convert intermodal loads to trucking, especially as trip-plan compliance from the two western US Class I railroads are below par. This is happening more on spot or seasonal loads because intermodal contracts still deliver a strong savings:

Here are some preliminary July numbers on competitive lanes:

Lanes into Atlanta, Dallas, and Denver are getting very competitive between spot intermodal and spot truckload. UP may also lose share on the Northern California-Texas corridor in September when UP shifts loads to Oakland, an additional $300-$350 in dray costs for some shippers.

We will dive into intermodal rates in our JOC Intermodal Savings Index Q2 report out in less than two weeks, and also the JOC Inland Distribution Conference on Sept. 27 in Chicago. Click the graphic for a special Please Haul My Freight discount:

PORT OF OAKLAND: Reporter Paul Berger from the Wall Street Journal is knocking it out of the park with his coverage of AB5 protests outside the Port of Oakland.

Truckers say they are prepared to block the West Coast’s third-busiest container port until California Gov. Gavin Newsom listens to concerns about a new state law that will make it harder for them to operate, ratcheting up the potential for new disruptions to already-strained U.S. supply chains.

But Governor Newsom won’t budge, according to Berger’s latest story:

“Although it has been the subject of litigation, AB 5 was enacted in 2019, so no one should be caught by surprise by the law’s requirements at this time,” a spokesman for the Governor’s office said.

Vessels are building up outside Oakland, according to JOC’s Bill Mongelluzzo. Local ILWU longshoremen support the protestors — perhaps just so they can get into the port — but the national ILWU is backing AB5:

PORT OF SAVANNAH: I spoke with Griff Lynch this week about the “on the water” number — a preview of import volume for Savannah in August. Others might push a doom-and-gloom narrative, but Lynch has a different opinion:

“We are hovering at 260,000-265,000 containers, which has not changed and seems to have peaked but not yet dropping. We are now working at a 6.3 million TEU pace if we annualize our last 4 weeks, with last week being an all-time record weekly lift count. I believe July and August will be big. As we’ve discussed, if Berth 1 was already completed our numbers would be off the charts.”

Sorry, no cliff here. No bloodbath. No doom.

Will volume decline? Probably. Canceled purchase orders are going to reduce import volume. But Lynch said it may not happen until November or December, implying October in Los Angeles and Long Beach — not July.

Could it happen in September? Maybe. But not July.

UP STORAGE FEES: Union Pacific Railroad is capping storage fees on international intermodal — rail demurrage — for the second consecutive year.

UP instituted a cap a year ago after shippers were assessed $10,000+ in demurrage on inaccessible boxes during the meltdown in Chicago last summer.

Here are the new caps:

• Storage fees for international containers that are placed in a stack will be capped at $2,450 for Group 1 terminals and $1,900 for Group 2 terminals

• Group 1 terminals: Dupo [St. Louis], Global 4 [Chicago]

• Group 2 terminals: Denver, DIT [Dallas], Kansas City, Marion [Memphis], Santa Teresa [New Mexico].

BNSF Railway does not charge rail demurrage on an inaccessible container. UP does.

UP also announced the Kansas City terminal will now be open 24 hours. It had been open 6 a.m. to midnight until now.

ALSO: Sources are telling me congestion is reaching a critical stage on BNSF and UP in Memphis. Watch for more on my social media channels…

BNSF ALLIANCE: BNSF is stacking ocean containers in Haslet, Texas (Dallas) because of a chassis shortage, as we’ve written about. One month later, our sources say conditions are no better, no worse.

Here is an update from BNSF:

Effective Monday, August 1, BNSF will make 1,000 additional units available for immediate customer pick-up at its Alliance Intermodal Facility. BNSF will reposition Cantilever Rubber Tire Gantry Cranes (CRTGs) to the stacking area to allow immediate access to containers that were previously unavailable due to their position in the container yard.

GET A DEAL: President Joe Biden appointed a Presidential Emergency Board to stave off a July 18 strike that would have crippled the railroads. So what comes next?

• PEB negotiators (Railway Age wrote an article about the board members) will meet with both sides on Friday. It’s anticipated the PEB will issue non-binding recommendations after talking with both sides on or about August 17.

• Management and the union have 30 days to review the general recommendations and strike a deal or remain at an impasse.

• On or about Sept. 17, if no deal is reached and a strike is on the table, Congress can pass legislation to prevent “self-help”: a legal term that includes but is not limited to strikes and lockouts. The last time a PEB was unsuccessful was 1992.

Management from CSX and Union Pacific on earnings calls this week seemed confident the issues can be worked out without a strike or lock out. Both railroads acknowledged that union workers deserve to be paid more than their current salaries.

JOC INLAND: If you enjoy Please Haul My Freight, please attend the JOC Inland Distribution Conference from Sept. 26 to Sept. 28 at The Westin Chicago River North. Click the image for a special discount:

Any opinions in this blog represent the author’s views, not the Journal of Commerce, IHS Markit, or S&P Global. Any rumors in this notebook are just that: rumors. Unconfirmed. Not news stories.

Do you have an opinion or a subject you’d like me to cover? Email me ari.ashe@spglobal.com to send your thoughts.

You may also request the data behind JOC’s Intermodal Savings Index and JOC’s Shipper Truckload Spot Rate Index, available to paying JOC subscribers. Not a subscriber? Click here to become one.