There was a very slight downtrend in September in certain regions, but for shippers and freight brokers, it continues to be a very difficult market.
We did not believe there was going to be a downtrend; we thought there was going to be a small pause in the increase of rates.
Capacity is tightening across the country especially in Los Angeles which is a very difficult market for shippers and Freight Brokers. Los Angeles looks to be the nation’s largest freight market currently. There are different equipment types, and specializations, and with this, the Over The Road capacity trend is showing us clearly that carriers are not able to satisfy the overall demand.
Within the freight market everyone knows Los Angeles has been one of the tightest markets over the last few months, many carriers were starting to take lower rates to get back to Los Angeles, but now we have a situation where carriers are back on the other side of the country, leaving many other regions short on capacity and so the rates continue to increase in all areas of the country.
West Coast Ports
A large amount of sea freight is coming into the ports on the West Coast and there is only so much the ports can process on a daily basis, meaning there will be a backlog of port congestion of containers waiting to come out of the ports.
Intermodal is being cautious of their rates, with a lot of intermodal being focused on 1000 miles plus where they can control their capacity. This is causing an intermodal bottleneck that is putting some loads into the market that is also making it difficult for the carrier to manage their capacity as their trucks are being sent all over the country.
Therefore, a lot of the freight coming out of Los Angeles is being put on trucks, and once the truck leaves, it is gone, and it is difficult to control and replenish that capacity.
Shipper costs are going up
With many shippers working to bring in their containers into the country, they have to pay higher rates while trying to stay ahead of whatever will be next in 2020, and peak season is around the corner. With inventory dropping to very low levels, it is very difficult for shippers to forecast, as this year the American consumer’s spending has been extremely different from previous years, and of course, we will most probably, see very different buying behavior in Q1 2021.
Van and Reefer capacity continue in different directions from their normal points of freight rate fluctuations. Traditionally Reefers outperform Van trailers. However Van and Reefer rates traditionally move in a pattern, they normally move together most of the time, with high and low rates, but right now there is no continuous pattern. Right now that is not the case.
Flatbed rates are pretty flat, with little movement, indicating the industrial economy has not gotten going. Even though flatbed rates are still slightly higher they continue to underperform in rates compared to Reefers and Vans.
Looking at the regional breakdown we are seeing some interesting patterns, west coast and northwest regions are showing extremely strong uptakes, northeast also continues to show very high rates. Southwest and southeast are much calmer but capacity continues to be tight across the country.
The disruption to supply chains will be more apparent as we enter peak retail season in the U.S. once the annual spending on consumer goods around Thanksgiving and Christmas begins. As companies have been preparing for this by importing their goods, expectations are to have the most sales in the months leading to October. This will mostly end up on intermodal in October and then trucks in November and December.
With rates already exceeding high levels in Over The Road and Intermodal, it is difficult to see what the strong end of year retail season will do to rates. We may have an extension to the already tight market with a slight rise, or we may hit the highest rates we have ever seen.
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