So far this year, freight market trends are nowhere near where they were just a year ago. Not that we were expecting the freight market to emulate what it did in 2018, however, we anticipated that the market would not still be yielding this kind of slowness.
According to an article written by Mark Montague (Industry Analyst) for DAT Blog, there has been news surfacing about a 2nd Quarter rebound in the freight market. Such news has been highly anticipated by all links of the supply chain, with indicators beginning to take shape that the time for the freight market correction has finally come.
Natural Disaster Delay
Prior to this market correction, there was a slight delay due to an instance of misfortune when a combination of flooding and poor weather hit the Midwest and it’s surrounding areas. This extreme weathering hit these Middle-America states for weeks on end which resulted in flooded rivers, ruthless tornadoes, and dangerous storms that endangered surrounding residents and those in transit through these locations.
In total, the heavy rains and snow melts put more than 200 million people at risk (including the lives of truck drivers passing through), according to a warning from the National Oceanic and Atmospheric Administration. These natural disasters reduced the amount of freight that could safely be transported through these territories, resulting in a pretty substantial decrease in freight volume in the market.
Chinese Import Tariffs
Chinese import tariffs were announced mid-May, which greatly impacted the amount of goods being transported throughout the country. Reduction in foreign trade affairs does not usually look kindly on the market, especially when dealing with a massive trade partner in China. The charts below display the United States/China trade volume as a part of their strategic partnership of 2018.
U.S. and China Trade War: Implications
Source: U.S. Consensus
U.S. and China Trade War: Implications
Now, if we look into the past, tariffs similar to this have had a dramatic impact on not just the freight market but the stock market as well. As a matter of fact, the stock market has been faced with resistance in response to the installment of the China tariffs.
What was originally 10% tax on $200 billion imported Chinese goods has now become 25% which will also be applied to another $325 billion in imports that have otherwise been left untouched. These tax hikes on China have resulted in an increase the price of goods passed onto both businesses and consumers. Since the United States is such a big importer of common household electronics, consumers have really felt the hit from their increase in price.
In the interim, China has been taking larger hits to their economy than America due to the massive amount of imports to the U.S. However, a long and drawn out trade standoff between the two countries does not result in a positive outcome for the global economy.
Freight Market Remains Intact
With all of the obstacles the market has had to endure this year, the freight market has been able to remain intact. We’re just now beginning to see the freight volumes we expected materialize. This likely in response to the recent changes in weather and ability for West Coast freight to begin navigating eastbound again. Count on freight volume to maintain its course as the market begins to correct.
Be extra cautious now when navigating West Coast highways, you’ll probably see a lot more trucks.
While the increase in eastbound trucks is great, the long haul time could, in turn, tighten West Coast truck capacity.
Where’s my produce?
Summer is officially here which means produce, produce, produce. We’ve begun to see the market reflect a higher freight volume consisting of produce. Although, date extrapolated for DAT and USDA suggest that it will be yet another rough year for the tasty commodity. With a reduction in demand, expect reefer capacity to open up and compete for dry freight.