North American ports are expected to see strong volumes in 2021 as the economy continues to rebound from the Covid-19 pandemic, according to an April report from commercial real estate firm Cushman & Wakefield.
The firm’s North American Ports Outlook points to an expected 6.5% increase in GDP growth and an anticipated 21% rise in U.S. imports, factors that will help fuel strong performance, especially as congestion begins to ease at U.S. ports. Among the trends identified, the report points to a continued increase in larger vessels calling on major ports and a resuming shift in volume toward Atlantic and Gulf Coast ports.
“The trend toward larger vessels continues. Along with consolidation of the major ocean lines into three powerful alliances, this translated to fewer port calls [in 2020], and a further concentration of volume to the largest ports,” the authors wrote, referring to the carrier alliances 2M Alliance, Ocean Alliance, and The Alliance, which represent nearly 80% of global container trade.
Addressing the coastal split of traffic, they noted: “There was no shift in 2020 of East-West port coastal shares, marking a pause in a decade-long trend that favored the Atlantic and Gulf Coasts. We expect the longer-term trend to resume in 2021.”
Looking ahead, the report says the story in the coming months is all about Covid-19 vaccinations and a “return to some kind of normalcy. This should drive demand for goods as well as services. Further out, the threat of tariffs or other trade disruptions, notably with China, still looms. Ports also face the need to restore shippers’ confidence in the aftermath of congestion and severely delayed cargo,” the authors said.
In related news, officials at the South Carolina Ports Authority said Thursday they will expand the rail-served Inland Port Greer, thanks in part to a $25 million BUILD (Better Utilizing Investments to Leverage Development) grant from the U.S. Department of Transportation. The expansion includes building additional rail processing and storage tracks within the terminal, expanding the container yard, enlarging the chassis yard, and building new facilities for heavy lift maintenance and terminal operations.
Inland Port Greer extends the Port of Charleston’s reach 212 miles inland via Norfolk Southern rail service; it offers a direct connection to the Port of Charleston and allows companies throughout the Southeast and Midwest to quickly receive imported goods and move exports to overseas markets.
The added capacity will support economic growth throughout the region, officials said.
The trucking industry has long been sensitive to economic fluctuations, and the past couple of years have seen a great deal of pain in the industry, with the recent folding of many fleets. Following 27 months of consistent rate declines, 2024 has finally seen a slight year-on-year increase of 0.2% in trucking rates. This modest rise has led some to speculate that the worst may be over, but this small uptick signals just a potential turning point. It is not yet an indication of full recovery. The industry won’t start to feel any true relief until it experiences one full quarter of positive gains, albeit accompanied by some turbulence.
The root cause of the industry’s ongoing struggles lie within the pandemic-driven imbalance between supply and demand. When demand surged during COVID-19, over 100,000 new trucking companies entered the market to capitalize on what was seen as a “hot” market. These new entrants purchased trucks at record-high prices, believing the pandemic-driven boom would last into the foreseeable future. But all good things end, and as demand tapered off in 2022, many were left with costly assets and loans they could no longer afford to maintain against a backdrop of rapidly falling rates. As a result, the trucking industry found itself awash in excess capacity, with rates plummeting accordingly.
Freight volumes are a key indicator of the industry’s health. After a steep decline in truck tonnage during spring 2023, there was a brief period of fragile stability, only for 2024 to kick off with another sharp downward spiral. The first half of 2024 was marked by volatile swings: a 4.3% rise from January to February, almost erased by a 3.2% drop through April. Then, a 3.6% rise in May was followed by a 1.6% drop in June. Despite the volatility, each dip has become seemingly less severe. If this pattern of incrementally higher lows continues, broader stabilization seems more likely, according to the data.
Spot rates for dry van shipping have fluctuated between $2.01 and $2.20 per mile, a stark contrast to the $3.28 peak of June 2022. Contract rates, which traditionally offer more stability, have similarly declined, hovering around $2.48 to $2.73 per mile. Today, anecdotal evidence suggests that contract rates have bottomed out and are on the rise, as more carriers voice concerns to shippers that low rates will no longer be tolerated or subsidized.
This persistent softness in rates has forced thousands of carriers out of the market. From December 2022 to March 2024, the Federal Motor Carrier Safety Administration reported a 7.6% reduction in carriers and a 10.7% reduction in brokers. The bankruptcy of Yellow, a major less-than-truckload (LTL) operator, sent shockwaves through the sector in August 2023. These ripples are still being felt today, as 10,000 carriers have ceased operation in the first half of 2024 alone.
However, there are more encouraging signs of life beyond the slight 0.2% year-on-year increase in shipping costs and the higher lows in month-to-month freight volume swings. For the first time since the pandemic, the number of revoked registrations has surpassed new ones, indicating that capacity is beginning to tighten up. In addition, the expiration or default of COVID-related loans could further bring about capacity reduction, serving as a market-clearing mechanism. While this is far from a full recovery, it does suggest that the industry is starting to balance out.
Looking ahead
The Cass Truckload Linehaul Index is a measure of the movement in linehaul rates. This index includes both spot and contract freight.
Cass Information Systems Inc.
The remainder of 2024 is expected to continue to be a transitional year for the trucking sector. The general sentiment in the market is that while we may have hit rock bottom, recovery will be gradual, uneven, and nonlinear. Many analysts are eyeing fall 2024 as the earliest sign of true improvement, though more cautious predictions push meaningful recovery into spring 2025.
The Cass Truckload Linehaul Index (see chart above) indicates that we’ve reached a floor in rates, but carriers are still struggling to find their footing. Frustrated by unsustainably low rates, many carriers are still turning down low-margin freight due to rising operational costs like fuel, labor, and maintenance, which has left them unable to maintain profitability or support operations at such thin margins. Inflation, fluctuating inventory levels, and construction activity will all influence how quickly demand recovers and whether carriers can emerge from this precarious situation.
While inflation is cooling and consumer demand is slowly picking up, the sector remains highly sensitive to external factors such as geopolitical tensions and broader economic health. Until demand recovers more robustly, trucking will remain in a state of flux.
Leveraging tech to fast-track recovery
The challenges facing the trucking industry also present an opportunity to innovate and transform. Digital transformation is increasingly being seen as a lifeline for carriers looking to weather the storm, while gaining a competitive advantage. The adoption of technology across various aspects of trucking—from logistics to operations—will play a critical role in reshaping the industry’s future.
One area where technology is making a significant impact is in route optimization and digital freight matching. With excess capacity still a significant issue, digital freight platforms are helping carriers fill trucks by matching them with third-party shippers, thus minimizing deadhead miles and improving asset utilization. This technology helps level the playing field, enabling operators to compete more effectively, while keeping drivers happy and improving the bottom line.
Artificial intelligence (AI)-powered route planning and dispatch tools are also gaining significant traction. These tools leverage existing data sets and systems to analyze and suggest, in real-time, the most optimal plan in the context of a driver’s trip. These optimal plans limit judgment (and, therefore, offer less room for error, bias, and waste), miscalculations, unnecessary mileage, and fuel consumption. Through optimization and real-time dispatch, carriers can reduce empty miles and lower operating costs to achieve higher levels of performance.
Finally, transportation management systems (TMS) are essential for fleet managers, and modernization of these systems is underway. These systems provide end-to-end visibility over operations, allowing companies to monitor shipments, improve communication with shippers, and respond more dynamically to market changes. AI-driven analytics allow carriers to forecast demand more accurately and adjust their operations more proactively. These tech-driven improvements could be game changers, especially for operators struggling to compete in a turbulent market.
Shippers’ role in recovery
Shippers, too, have a role to play in the industry’s recovery. By diversifying their carrier networks and embracing technology, they can build more resilient supply chains. The pandemic exposed vulnerabilities in relying too heavily on a small pool of carriers. Now, by leveraging digital freight matching and analytics, shippers can not only find the best-fit carrier(s) but also build a robust network of backup options—safeguarding against supply chain disruptions caused by the next geopolitical or global health crisis. Savvy shippers will continue to look to carriers for improved efficiency and the reduction of cost and complexity, and technology will continue to be the enabler.
Buoyed by a return to consistent decreases in fuel prices, business conditions in the trucking sector improved slightly in August but remain negative overall, according to a measure from transportation analysis group FTR.
FTR’s Trucking Conditions Index improved in August to -1.39 from the reading of -5.59 in July. The Bloomington, Indiana-based firm forecasts that its TCI readings will remain mostly negative-to-neutral through the beginning of 2025.
“Trucking is en route to more favorable conditions next year, but the road remains bumpy as both freight volume and capacity utilization are still soft, keeping rates weak. Our forecasts continue to show the truck freight market starting to favor carriers modestly before the second quarter of next year,” Avery Vise, FTR’s vice president of trucking, said in a release.
The TCI tracks the changes representing five major conditions in the U.S. truck market: freight volumes, freight rates, fleet capacity, fuel prices, and financing costs. Combined into a single index, a positive score represents good, optimistic conditions, and a negative score shows the opposite.
“ExxonMobil is uniquely placed to understand the biggest opportunities in improving energy supply chains, from more accurate sales and operations planning, increased agility in field operations, effective management of enormous transportation networks and adapting quickly to complex regulatory environments,” John Sicard, Kinaxis CEO, said in a release.
Specifically, Kinaxis and ExxonMobil said they will focus on a supply and demand planning solution for the complicated fuel commodities market which has no industry-wide standard and which relies heavily on spreadsheets and other manual methods. The solution will enable integrated refinery-to-customer planning with timely data for the most accurate supply/demand planning, balancing and signaling.
The benefits of that approach could include automated data visibility, improved inventory management and terminal replenishment, and enhanced supply scenario planning that are expected to enable arbitrage opportunities and decrease supply costs.
And in the chemicals and lubricants space, the companies are developing an advanced planning solution that provides manufacturing and logistics constraints management coupled with scenario modeling and evaluation.
“Last year, we brought together all ExxonMobil supply chain activities and expertise into one centralized organization, creating one of the largest supply chain operations in the world, and through this identified critical solution gaps to enable our businesses to capture additional value,” said Staale Gjervik, supply chain president, ExxonMobil Global Services Company. “Collaborating with Kinaxis, a leading supply chain technology provider, is instrumental in providing solutions for a large and complex business like ours.”
However, that trend is counterbalanced by economic uncertainty driven by geopolitics, which is prompting many companies to diversity their supply chains, Dun & Bradstreet said in its “Q4 2024 Global Business Optimism Insights” report, which was based on research conducted during the third quarter.
“While overall global business optimism has increased and inflation has abated, it’s important to recognize that geopolitics contribute to economic uncertainty,” Neeraj Sahai, president of Dun & Bradstreet International, said in a release. “Industry-specific regulatory risks and more stringent data requirements have emerged as the top concerns among a third of respondents. To mitigate these risks, businesses are considering diversifying their supply chains and markets to manage regulatory risk.”
According to the report, nearly four in five businesses are expressing increased optimism in domestic and export orders, capital expenditures, and financial risk due to a combination of easing financial pressures, shifts in monetary policies, robust regulatory frameworks, and higher participation in sustainability initiatives.
U.S. businesses recorded a nearly 9% rise in optimism, aided by falling inflation and expectations of further rate cuts. Similarly, business optimism in the U.K. and Spain showed notable recoveries as their respective central banks initiated monetary easing, rising by 13% and 9%, respectively. Emerging economies, such as Argentina and India, saw jumps in optimism levels due to declining inflation and increased domestic demand respectively.
"Businesses are increasingly confident as borrowing costs decline, boosting optimism for higher sales, stronger exports, and reduced financial risks," Arun Singh, Global Chief Economist at Dun & Bradstreet, said. "This confidence is driving capital investments, with easing supply chain pressures supporting growth in the year's final quarter."
The firms’ “GEP Global Supply Chain Volatility Index” tracks demand conditions, shortages, transportation costs, inventories, and backlogs based on a monthly survey of 27,000 businesses.
The rise in underutilized vendor capacity was driven by a deterioration in global demand. Factory purchasing activity was at its weakest in the year-to-date, with procurement trends in all major continents worsening in September and signaling gloomier prospects for economies heading into Q4, the report said.
According to the report, the slowing economy was seen across the major regions:
North America factory purchasing activity deteriorates more quickly in September, with demand at its weakest year-to-date, signaling a quickly slowing U.S. economy
Factory procurement activity in China fell for a third straight month, and devastation from Typhoon Yagi hit vendors feeding Southeast Asian markets like Vietnam
Europe's industrial recession deepens, leading to an even larger increase in supplier spare capacity
"September is the fourth straight month of declining demand and the third month running that the world's supply chains have spare capacity, as manufacturing becomes an increasing drag on the major economies," Jagadish Turimella, president of GEP, said in a release. "With the potential of a widening war in the Middle East impacting oil, and the possibility of more tariffs and trade barriers in the new year, manufacturers should prioritize agility and resilience in their procurement and supply chains."