Sometimes the best way to predict the future is to study the past. So what can a look at the shipping apocalypse of 2020 tell us about what’s coming?
Dwell time fines at the Ports of Los Angeles and Long Beach seem to be working. Executive director Gene Seroka stated that there’s already some movement and that the fines should be a significant motivator to help curb congestion at the ports. On the East Coast the Ports of Charleston and Virginia reported record numbers for the month of October. The Port of Charleston saw a 9% increase in volume compared to this time last year. And the Port of Virginia moved a massive 16% increase over this time last year. The Port of Savannah is trying a new strategy to keep congestion at a minimum by using a small airport as a temporary storage yard for containers.
As far as general capacity is concerned, it is helpful to look at the past in order to understand what could happen in the future. Last year, which was one of the craziest years that anybody has ever seen, demand started to climb before the Thanksgiving Holiday. Then after Thanksgiving there was a short breather before demand started to climb again on the way to the end of the year. At that time 25% of all loads were being rejected, a trend that carried into Q1 2021. This year rejections are already much lower than they were last year, staying just below 20%. Based on what happened in Q4 2020, it could be possible to see rejections below 19% in Q1 2022.
USPS announced some pretty significant rate increases for 2022. Beginning January 9, Priority Express Next Day and Priority Express 2-3 Day will see a 3.1% increase. Additionally, all flat rate boxes will see increases between $0.60-$1. As is usually the case there’s some variance with how these rate increases will play out. For example, some service levels will see as much as a 7% increase while others will only see a 5.5% increase. On average, USPS’s increases are much lower than the 7.5% general rate increase that both UPS and FedEx have already announced.
Over the road demand remains sluggish with loads per day requests running 2% lower than they were last week (around 15,100-15,200 loads per day). This is slow growth by 2020 standards as current volumes are about 4.6% lower than they were this time last year. Perhaps it’s the result of bottlenecks at ports. Perhaps it’s the result of intermodal congestion sorting itself out. Either way demand is not spiking in the same way it did this time last year. Rejected loads are still below 20% but just barely at 19.6%, which is a huge improvement over last year’s 26% rejection rate.
Spot rates have fallen back into their usual pattern of following rejection rates. Current spot rates are down 2% from last week at $3.44 a mile an average. But while a return to normal patterns is certainly helpful in predicting spot rates more reliably, spot rates are still up 20% higher than they were this time last year and only about 5% lower than the all time high they reached back in September.