Let’s take a quick look back to the past few years’ disruptions. Rates were spiraling out of control, albeit a switch between high rates and record-setting lows depending on the day, drivers are stuck at home, and others are struggling to overcome the challenges of a COVID-induced peak. Demand is unrelenting, and inflation appears on track to break records. These are all statements that we’d grown accustomed to in 2020 and in the immediate years after as rates hit all-time records. But now, four years since lockdowns ended, we’re entering a different supply chain cycle. Where experts thought we’d be back into a normal rhythm now rests another period of turmoil as the peak season for 2024 seems to be hitting earlier than normal. And both the LTL and TL markets are experiencing some unique shifts in response.
Consider this; according to Reuters, “U.S. manufacturing production has barely increased since before the pandemic, which explains why diesel consumption remains anemic and has not rebounded in line with expectations at the start of the year.
Production increased by a faster-than-expected 0.9% in May after seasonal adjustments, but that followed back-to-back declines of 0.4% in April and 0.1% in March, according to estimates compiled by the Federal Reserve.” Limited change since the pandemic implies the supply chain isn’t as future-ready as we’d like to believe. What’s worse is that not recognizing the very real similarities betwixt then and now will doom the industry to repeat the mistakes of 2020.
Shippers need to know what’s happening across the core shipping modes and its implications in managed transportation for the coming months.
Global supply chains experience new issues with the 2024 peak season
The first bit of any conversation around peak season 2024 needs to zoom out and consider the global supply chain. Even those that only operate in domestic circles have been aware of the challenges arising out of the Red Sea, and that risk is leading to extended container turn times across the landscape. Meanwhile, the US election is putting additional pressure on all industries, and major freight data trackers, from Drewry through Freightos and beyond, all point to a massive change.
In fact, "Drewry’s World Composite Index increased 10% to $5,868 per 40ft container [in the first week of July] and has increased 298% when compared with the same week last year.
The latest Drewry WCI composite index of $5,868 per 40ft container is 43% below the previous pandemic peak of $10,377 in September 2021, but it is 313% more than average 2019 (pre-pandemic) rates of $1,420.”
Meanwhile, the data does suggest a slight decrease in container rates is coming, but it won’t be enough to trigger any real impact to supply chain planning for at least four weeks, or near the end of August. Even with all this in mind, the decreases are still well above last year’s values:
“The composite index decreased 2% [in the final week of July] to $5,806 per 40ft container following a period of continuous increases since week 18 and has increased 268% when compared with the same week last year. “
Such facts point to a future in which rates are expected to continue climbing. Furthermore, the higher costs of ocean trade will inevitably trickle down into the other parts of the supply chain, even those that seem insurmountably removed from the global trade influencers.
Similarly, there is evidence that tightening capacity is already putting the industry on the path to an earlier-than-average peak season, especially if you consider air cargo needs.
As shared by the American Journal of Transportation, “Global air cargo tonnages were up by +12% in the first half of 2024 compared with the equivalent period last year, according to preliminary figures and analysis from WorldACD Market Data, with +11% year-on-year (YoY) growth in the second quarter (Q2) following on from the +12% recorded in Q1.” More air freight by tonnage also means that shippers are producing a larger carbon footprint than in prior years. At the same time, the ability to think objectively and find an alternative option can be overwhelming at best. After all, if air and ocean are both going up, where else can shippers look to lower supply chain costs?
OTR transportation and peak season
So, what’s happening with rates a bit closer to home—on the literal roads of America?
To answer that question, let’s take a look at another data source—DAT Trendlines. Specifically, the Load-to-Truck ratio hit 5.68 for the end of June, up from 4.23 at the end of May. The increase implies continued growth in the full truckload market and ongoing recovery from the trucking recession. Yet, the industry does appear to have some tightening in overall capacity as the number of drivers changes.
Ironically, rates did rebalance and hit 3.40 as of July 7, 2024, but they seem to be back on the incline since mid-month, reaching 4.02 by July 28, 2024. And that could be due to changing driver availability.
As shared by FreightWaves, “The subcategory of long-distance truckload drivers, which reports on a one-month lag, fell to 539,000 jobs in May from 541,900 jobs a month earlier. It is down almost 10,000 jobs in the last year. “
With fewer drivers available, cargo has to wait longer to move. In other cases, the delays in one area amount to shifting resources between local markets, which may put a given truck on a route with an empty backhaul. Of course, that’s only part of the picture, and as air cargo is also experiencing an earlier than expected peak season, reports another FreightWaves article.
Recent data surveys show, the “General Freight Trucking (Truckload) industry revenue has been surging at a CAGR of 6.0% over the past five years and is expected to total $253.5 billion in 2024, when revenue will jump by an estimated 1.2%. Despite favorable revenue growth, higher purchase costs have eaten into industry profit.”
Another facet influencing the story revolves around the volumes of cargo moving through the ports and into the true circulatory system of logistics. “Loaded import volumes at the top 12 container ports will remain above 2 million TEUs through October 2024, marking the highest sustained volumes in years. The groups credited continued consumer spending on goods as the cause of continued freight demand,” reports Supply Chain Dive.
According to the US Census Bureau, “May exports were $261.7 billion, $1.8 billion less than April exports. May imports were $336.7 billion, $1.2 billion less than April imports.
The May increase in the goods and services deficit reflected an increase in the goods deficit of $0.9 billion to $100.2 billion and an increase in the services surplus of $0.3 billion to $25.1 billion.
Year-to-date, the goods and services deficit increased $14.4 billion, or 4.2 percent, from the same period in 2023. Exports increased $42.8 billion or 3.4 percent. Imports increased $57.2 billion or 3.6 percent.
The average goods and services deficit increased $2.0 billion to $72.7 billion for the three months ending in May.”
All that increased activity has had a unique impact on the LTL market as demand around core ports has risen and fallen repeatedly in the past year.
In January, JOC.com predicted, “LTL rates [would] rise 4.1% on average in 2024 following a 2.4% increase last year.” And the growth appears to be on track according to the Producer’s Price Index for LTL (shown above) for the second quarter. Yet, the end of June showed a slight blip, making it just under 1% difference compared to Q2 in last year. However, rates remain well below the peak index values in June 2022.
Create a peak-ready supply chain with IL2000 by your side
Everything points to rising rates and more disruption. Now, there is an armada of articles pointing to the best ways to improve optimization and beyond, but sometimes, it’s letting someone else worry about all the facts above and focusing on what you do best. That’s the special place where IL2000 rests—at the intersection of worried about supply chain issues and taking steps to avoid disruption-induced impact wherever possible.
Let’s lighten your load a bit: connect with an IL2000 team member to sort through the noise and get the help you need despite market fluctuations.