It goes without saying that 2020 has not been the best year for the United States and countries worldwide. As hospitalizations and Covid-19 cases soar, a second wave of the coronavirus threatens shipping demand. Across the U.S, business restrictions are growing by the day. Many States are prohibiting indoor dining, adding even more capacity limitations to retailers, and demanding temporary closures of gyms and theaters. So, what does this mean? And how will it affect the trucking industry?
The U.S. saw a significant surge in imports and record-breaking activity as warehouses and stores restock eight-plus months into the COVID-19 pandemic. With the holidays approaching quickly, container numbers remain stable.
Reports of port container numbers are reaching a new high and nearing maximum capacity. According to American Shipper, the Port of Long Beach managed 806,603 twenty-foot equivalent units (TEUs) in October. While Los Angeles handled 980,729 TEUs in October, up 27% from this time last year, hitting a new record.
Meanwhile, the CDC forecast indicates an upward trend in new COVID-19 cases that have been reported over the last four weeks. The number of cases is predicted to range from 810,000 to 2,300,000 throughout November into mid-December. In the next four weeks, the CDC forecasts 7,300 to 16,000 new deaths likely to be reported in the week ending December 12, 2020.
There are concerns about tanker shipping due to a decline in diesel demand, gasoline, and jet fuel.
Another fear is that container shipping of U.S. goods consumption will plunge because of non-service business restrictions and weakened consumer confidence.
According to American Shipper, there are numerous amounts of box cargoes already in transit. The Los Angeles’ Port estimate is for 835,000 TEUs in December, up 12% from last year. The concern here is, with the new wave of COVID cases, consumer demand could plummet in the middle of the ordering cycle, and imports end up with too much inventory in 2021.
Paul Bingham, IHS Markit transportation economist, is not alarmed by the uptick in COVID-19 cases. He has seen that there has been a sizeable shift in consumers, households in the United States changing their consumption from services towards goods. An astronomical amount is being purchased through e-commerce. Rather than lagging, they have been playing catch-up.
As the pandemic continues to take freight volumes on a rollercoaster ride, reefer capacity is beginning to tap out before the release of the vaccine. Freightwaves.com recently released a report citing the national reefer temperature-controlled trailers rejection index topped 48% for the first time since the release of this week’s index. The index could move higher once the COVID-19 vaccine begins distribution in the upcoming months. The takeaway from this is shippers that use temperature-controlled equipment should expect to continue paying high premiums for this service in months to come.
Although experts can identify specific trends within the trucking industry, what is around the corner, is unknown. We currently know that ports are near reaching max capacity, spot rates are at an all-time high due to the holiday season and upcoming release of a COVID-19 vaccination.
There are driver shortages, constraints on industry supply, and fewer trucks running. As a result, this has driven up rates significantly. However, Cass Freight Index has noted that it does not see much capacity returning the rest of the year, so even though supply and demand remain tight, average freight bill growth will continue into next year.