At the end of July, the Downstream respondents, as well as the respondents, reported a slightly volatile development of the market. Compared to the last 2 years, this reduction in price reduction appears obvious and causes some quite negative changes for the logistics community in general. The main reason behind this drop in price is the transportation capacity, as it continues to increase (+7.4) from 61.7 to 69.1. This is an unprecedented growth rate even during the peak of the epidemic and the highest expansion rate since April 2019 – a time when the previous freight recession began.
Knight-Swift CEO Dave Jackson has issued some warnings that this price drop will be different from past declines because of high fuel costs. Even so, Paccar, the world’s largest maker of medium and heavy-duty trucks, delivered 46,900 units in the second quarter, reporting the number of trucks on the road will continue to grow. Analysts received assurances from chief executive Preston Feight that they will remain busy despite the downturn with the rest of their production capacity booked through 2022.
The price of diesel in the U.S. was $5.27 in the last week of July, down 16 cents from the previous week, which was the biggest drop since February of 2009. (cre: International Source)
The second consecutive quarter-on-quarter GDP decline is at the heart of the biggest US economic story, with seasonally adjusted GDP down 0.9%. Despite two consecutive quarters of decline, the National Research Service is unlikely to declare an official recession due to strong job growth, and consumer and business spending.
Compared to earlier this year, the number of ships idling outside the ports of LA and Long Beach is down nearly 75%. However, it’s not because of fewer inbound goods, what we are actually seeing is that imports are being dispersed. In the last week of July, 153 vessels were idling near U.S. ports, most of them less-used Gulf and East Coast ports, and some shippers considered increasing Seasonal use of the Great Lakes ports.
Congestion is increasing at East Coast ports and delays are evident in places like New York/New Jersey, some added benefits to clearing congestion. In 2020 and 2021, many truck fleets are out of position, disproportionately between tractors and trailers traveling between Southern California and destination cities, leading to truck shortages in places like the Midwest or Western mountains, reducing available capacity in some regions.
The table below shows each of the eight components in the Logistics Manager’s Index (LMI). Seven of the eight indexes are up, although it is falling at a slower rate than we saw in June. Inventory levels and costs continue to grow above average at a faster rate. Transport, on the other hand, continued to decline, with pricing costs officially entering the contract.
(cre: LMI – Logistics Manager’s Index)
Despite the US inflation, the US dollar is currently quite strong, increasing significantly during June and July against other denominations. This makes imports cheaper but increases the cost of exporting to other countries. The power of the Dollar has been further boosted by interest rate hikes, it will indeed be interesting to watch the impact of interest rates on imports and exports when it comes to Logistics Peak Season.
2022-08-29 by Lucy
