Welcome to our July Market Insights. In an industry that constantly evolves, staying informed and adapting to shifting market conditions is crucial. Our blog provides valuable updates and analysis to help you navigate the complexities of the transportation and logistics sector. Join us as we dive into the emerging trends impacting your business!
Dry Van
The dry van market has followed a seasonal trend. During the week of the Fourth, we saw a quick spike in shipping volumes and cost, with a sharp pullback immediately following. Average seasonal trends see a 39% decrease in spot market volumes after the Fourth; this year, we saw a 38% decrease. This is a good sign that the market is stabilizing and returning to a mean not impacted by Covid.
Most spot rates in the US now mirror what they were in 2019 but average $0.27/mile lower than this time last year. Historically, we will see rates stay around their current levels until Q4, and we expect this year to continue following seasonal norms.
Reefer
Reefer volumes are still seeing small increases due to the late produce season. This year, produce volumes are now almost equal to what we saw the previous year, according to the USDA. Last month's volumes were within 3% of 2022 numbers. Despite the strong push, rates remain depressed. California has seen a slight $0.10/mile increase in outbound rates, primarily due to stronger produce volumes. South Carolina is currently in the middle of its watermelon season and has seen one of the more significant increases in outbound rates, with an average of over $0.40/mile. Nationally, reefer spot rates remain flat, dropping around $0.03/mile over the last month and $0.25/mile lower than this time last year.
Like dry van, reefer rates are pulling back off the Fourth of July peak, which is seasonally normal. We expect rates to bottom out towards the end of July and remain relatively flat until Q4.
Flatbed
Flatbed volumes are still at their lowest level in the last seven years for this time of year. Load posts on DAT are down 77% year-over-year, and current volumes are around 39% lower than pre-pandemic levels in 2019. The flatbed market remains relatively loose except for a few markets like Oregon, Indiana, and the Southeast. On average, rates have dropped $0.07/mile over the past month and $0.39/mile lower than this time last year.
The forecast is struggling slightly as the flatbed market has remained weak despite seasonal pressures. Barring any unexpected events, we expect the downward pressure to continue until the end of the year.
US imports decreased nationally by 1% month-over-month. It is seasonally normal to see a drop after May. Currently, levels are 2% higher than they were year-to-date compared to this time in 2019. Historically we see imports increase through July and then level out in August before dropping through the rest of the year. We expect to follow that seasonal trend, though the drop after August could be more severe than usual. This is due to the higher-than-normal cost of holding product due to inflated interest rates.
The Association of American Railroads (AAR) reported a decline of 7% for June 2023 compared to 2022. This is the 16th straight month of decreases. US intermodal was down 10.3% in Q2 2023 from Q2 2022 and 10.3% year-to-date. Volume was recorded at 6.11 million units in the first six months of 2023, the fewest for the first six months of a year since 2013.
United Parcel Service (UPS) and the International Brotherhood of Teamsters had a significant setback in their contract negotiations last week, upping the possibility that the union could strike in a walkout when the current contract expires at the end of July. The union, representing 340,000 members working for UPS, voted last month to authorize a strike should a deal not be reached before July 31, 2023.
UPS and the union are negotiating wages, benefits, and compensation for workers. The Teamsters are pushing for the end of the dual-wage system for delivery drivers and to forced overtime on driver's days off.
Initially, the union pushed for a July 5th deadline to have time to ratify the new contract. On July 5th, according to the Teamster, UPS walked away from the table after presenting an unacceptable offer that did not address members' needs. UPS then urged the Teamsters to return to the table for negotiations, saying they had not walked away.
If a strike were to occur, the impact could be as significant as what happened during the beginning of the pandemic. USP states that it transports roughly 6% of the GDP of the US alone. This would have a significant impact on most businesses in the US and greatly impact the current balance of the supply chain.
Diesel prices have increased slightly over the last month at around $0.01/gallon. This is down an average of $1.762/gallon compared to 2022. Forecasts predict prices will remain flat through the rest of the year.
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