Container imports continue to slow domestic freight market

Diagram of the week: National Trucking Index – United States, TFE Ocean Index – China – United States SANAR: NTI.USA, IOTI.CHNUSA

Even at the beginning of the pandemic, companies began to import goods at an incredible pace, which led to an unprecedented increase in rates in the spot market for trucks. The link between imports and trucking is not always so consistent, but the pandemic has strengthened their relationship by accelerating the growth of e-commerce and shifting society.

The TEUs Inbound Ocean Index (IOTI) measures bookings based on their estimated time of departure from the ports of departure. This particular detail measures bookings from China to the US, which rose sharply in May last year when shopping began.

On June 1, 2020, bookings from China to the United States increased by 16% compared to the same period in 2020. National Freight Index (NTI) decreased by 10% over the same period.

Transit time from China to the ports of Los Angeles and Long Beach – which makes up the bulk of US imports – averaged about 15 days, as reported by ocean carriers in May 2020. Atlas of containers SONAR (SCA). This means that at least two weeks remained before the domestic railways and road transport felt the pressure from demand.

By the end of July 2020, the number of bookings from China to the US had grown by 72% compared to last year, and rates in national dry vans had risen by 15%, suggesting that there is still plenty of room for rate growth.

Most recently, last February saw a 33% decrease in bookings compared to 2021, while spot rates were 16% higher than in 2021. As of Wednesday, both IOTI from China to the US and NTI were down 9% from a year earlier.

It should be noted that some decline in annual booking activity in February occurred around Chinese New Year, but negative growth continued until March.

There are two major conclusions from this analysis. First, the demand for goods and then the volume of land freight in the US is strongly related to shipping, which at the moment should not be particularly new to those who control freight schemes.

Second, we need to see a reduction in domestic freight traffic over the next few months and a potentially downward pressure on spot rates.

Spot rates are not built solely on demand, but they are a critical component. Because carriers will lose money if they don’t move (aka low utilization), they will take some loads that they consider below their break-even costs to significantly lose less.

This is important to know because their operating costs have increased significantly over the last year, especially in as for fuel. As soon as carriers decide to fall below the price threshold on high-demand lanes, the watch begins to track how long they can last.

Looking at spot rates from Los Angeles to Dallas Lane, rates (including fuel) have fallen 35% since the beginning of the year, which is faster than the overall market rate (~ 29%). This indicates a drop in demand as capacity cannot grow at this rate, and other demand metrics, such as the Outbound Volume Index (OTVI), also show a significant drop from Southern California – by 15% from 1 February. Rail erosion is also a factor here.
China is not the only source of imports, but it is the most important in terms of demand for goods and the volume of domestic traffic. To be continued blockade in Shanghai also point to availability of goods in the future challenges that can add another layer of complexity to precipitated supply chains. The only question is how long this trend will last and how deep it will go.

About the schedule of the week

The FreightWaves chart of the week is a selection of charts SANAR which provides interesting data to describe the state of freight markets. The chart is selected from thousands of potential charts SANAR to help participants visualize the freight market in real time. Each week a market expert will post a chart along with live comments on the first page. The Chart of the Week will then be archived on for further use.

SONAR combines data from hundreds of sources, presenting data in charts and maps and commenting on what freight market experts want to know about the industry in real time.

Data research teams and FreightWaves products release new datasets every week and improve customer usage.

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