This week:

• Eastbound Trans-Pacific Recovery Might Not Happen Until 2024
• Less-Than-Truckload Prices Remain High as Volume Softens
• Free Time and Long Dwelling Containers Now Under Scrutiny After Pandemic Port Congestion
• ILA Is Confident that Next Year’s East and Gulf Contract Talks Will Go Smoothly
• Trailer and Commercial Vehicle Production Booms as Demand and Orders Increase

Trans-Pacific Imports likely to Drop Further in 2023 after More Declines in US Imports from Asia 

Many factories in China could close earlier than usual before the Lunar New Year, removing hopes for a pre-holiday increase in imports from China after November became the third sequential month of Asia import declines. 

Imports from Asia dropped 12.6% year-over-year in November, right after October saw 11.8% fewer imports than in October 2021. According to the executive director for the Port of Los Angeles, instead of Chinese and Vietnamese factories taking just two weeks off in January, many are now looking at closing for more than four weeks. The extended closures would mean trans-Pacific import deficits going into Q1 of 2023. 

According to Global Port Tracker, February 2023’s trans-Pacific imports will see a year-over-year drop of 20.9%, with further declines of 18.6% and 13.8%, respectively, in March and April. Waning demand is also responsible for the dropping figures, combined with employee retention problems for factories in China caused by disruptions from Chinese COVID-19 policies.

Disruptions to factories from China’s COVID policies are also driving US importers away from China to counties such as India, Vietnam, and more in Southeast Asia. The move away from China is, in turn, generating additional supply chain strain due to longer transit times and transshipments from smaller ports.

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Air Freight Rates Continue to Plunge as Shippers Switch to Ocean 

US less-than-truckload (LTL) carriers are experiencing softening demand in the fourth quarter, with a 7.3% year-over-year decline in day-time shipments for November. At the same time, however, LTL carriers such as Old Dominion Freight Line (ODFL) are reporting revenue increases of 7.3% caused by a total 17.3% increase in LTL revenue yield (including fuel surcharges) in October and November year-over-year. Excluding fuel surcharges, the October and November revenue yield increase is approximately 8.6%.  

One reason LTL revenue remains high amid dropping demand is falling costs for LTL carriers. According to the US LTL producer price index (PPI) from the US Bureau of Labor Statistics, average LTL carrier selling prices were still up 9.2% year-over-year in October 2022, even after dropping 10% from May through to October.  

Additionally, the LTL PPI rose an astonishing 65% from May 2020 until May 2022, an elevation that is still generating higher profits regardless of recent drops in LTL demand.   

Shippers and Other Industry Professionals Push FMC to Streamline Free-Time Billing   

The Federal Maritime Commission (FMC) received 198 comments from shippers and logistics intermediaries after two rounds of soliciting feedback to form new rules regulating container lines and marine terminal operators. 

Many comments from shippers stated that the FMC needs to focus on reducing the time between the issuing of container detention penalties and when a carrier or terminal sends the invoice. In some cases, this time difference can be as much as 90 days, making it difficult for shippers and intermediaries to verify the charge. 

Other comments as part of the FMC’s industry feedback solicitation came from beneficial cargo owners (BCOs) who asked to only receive invoices from carriers instead of from terminals. These comments were based on the fact that BCOs almost never have commercial relationships with terminals. They should, therefore, only receive invoices from carriers to streamline the process and avoid adding additional parties to the billing process. 

Trucking Companies Warn Against Coming EPA Emissions Standard 

The new US Environment Protection Agency (EPA) emissions standards designed to limit nitrous oxide (NOx) emissions from heavy-duty trucks could cause harm to the trucking industry and the American economy, according to numerous trucking companies. 

The Biden administration predicts that out of the two proposed options for the new EPA emissions standard, the more aggressive option could lead to 90% reductions in truck emissions compared with the current norms. Because NOx is a major air pollutant contributing to degraded air quality, the administration also predicts emission reductions could lead to $250 billion in benefits from improved public health. 

Trucking companies and organizations argue that the costs outweigh the benefits. The president of the National Association of Small Trucking Companies (NASTC), David Owen, said that small carriers and truckers would likely keep older vehicles for longer than before if the EPA emissions standard is enacted due to the higher price of new, compliant engines. Other industry professionals have said that affordability needs to be considered to ensure that truckers are not seriously hampered by rising costs to comply with new standards. 

Low US Truckload Costs not Likely to Rise until End of 2023

Leaders throughout the US trucking industry predict low US trucking rates and costs will not rise until after Q3 2023. And while spot rates will probably hit their bottom and begin to rise again in or just after Q1, contract rates may take an additional six months, bottoming and then beginning to rise in Q3. During those six months, shippers can expect a bumpy market with fluctuations between spot and contract prices as shipper demand and carrier supply adjust.

Broker and third-party logistics (3PL) provider Arrive Logistics forecasts national contract rates to drop to around $2.22/mile by Q3 2023. According to Coyote Logistics, the first half of 2023 comes with a soft forecast, picking up later in the year if there are no unforeseen disruptions.