A 40% increase in volume at the ports will make it harder to secure over the road capacity between now and the end of October. But will that be the end of disruption?
Port congestion is once again the story of the year (It’s not like it ever stopped being the story of the year). It seems like every week ports set new records. Congestion on the West Coast remains a constant struggle, with records being broken on an almost daily basis. And now congestion is occurring on the East Coast in higher numbers than it has been. The Port of Savannah saw a 52% increase in vessels at anchor (which means they can’t get to port and unload, further preventing items from reaching the shelves). Maritime orders increased by 40% as businesses rush to get goods in ahead of the Winter Holiday season. This major surge in orders will only add to the challenge of finding over the road and intermodal capacity. The question that remains is when will the import surge cease? Will the supply side of the equation be able to keep up with the demand side of the equation as we head into 2022? Up until this point, much focus has been placed on the retail side of the equation that other aspects of the supply chain have fallen out of focus.
The Postal Service is making efforts to hire 40,000 seasonal workers in order to keep up with looming Holiday demand. A statement from the Postmaster General confirms that they’re not quite ready for peak season. In addition to hiring new personnel, they’ve secured millions of square footage of sortation and package storage facilities and upgraded equipment that can keep up with the seemingly endless supply of mail. The latest parcel carrier to issue new peak surcharge is DHL eCommerce. Beginning October 3rd, the surcharges range anywhere from $.25 per package to $5 per package. They break down like this.
- $.20 per package on all shipments under 1 pound (within the contiguous US).
- $.30 per package on all shipments under 1 pound (outside the contiguous US).
- $.29 per package on all shipments between 1-25 pounds (within the contiguous US).
- $.29 per package on 2-3 or 2-5 day shipments between 1-25 pounds (within the contiguous US).
- $.30-$5.00 per package on 2-3 or 2-5 day shipments (contingent upon weight break, outside the contiguous US).
Freight markets are still experiencing high demand for capacity, despite an adjustment period at the beginning of a new month. Rejection rates are holding steady at 22% (1 in 5 loads being rejected). Capacity is still tight as no new capacity has flooded the market. And since demand is only going to increase the best advice we have right now is take whatever capacity you can find. If you can, think about expanding your capacity options. There’s always somebody out there who can take your freight, it’s just a matter of having the tools to match the load with the right carrier.
The spot market continues to reflect high demand for capacity as well as high demand for over the road transportation (as opposed to intermodal services). With continued bottlenecks at the ports, spot rates are averaging $3.60 a mile inclusive of fuel. While this is a high price for the spot market, it will likely increase. Businesses are laser focused on getting items from the ports to their distribution centers as quickly a possible. With intermodal capacity being cost-prohibitive or congested, businesses are moving their goods over the road (relying on the spot market). And with an increase in volume coming to the ports, prices will likely continue to rise.
Generally speaking, growing truck orders are an indicator of a growing economy. Manufacturers are selectively opening their 2022 order books, resulting in over 39,000 orders for Class 8 trucks being placed in August. This is 51% higher than the amount of orders placed in July (and July 2021 was already astronomically higher than July 2022). However, the demand side of the equation is only as good as the supply side of the equation. Demand for more capacity shows that the economy is growing and that industries are expanding. But if the supply side can’t keep up then service levels will remain tight. And due to continued supply side shortages, we’re going to continue to deal with extremely tight and extremely elevated freight markets for at least the next year.