baby truck (1)

7 Areas to Observe in 2021

Posted by Mihlfeld & Associates on Dec 16, 2020 2:00:00 PM

With 2021 right around the corner, most shippers are still fully-engaged in trying to finish out 2020’s shipping needs as efficiently and cost-effectively as possible. Everyone has done the best they can weathering the freight storm of 2020, but many are wondering if 2021 will bring that much relief or be as volatile as the past 10 months. We at M&A don’t have a crystal ball telling us exactly what 2021 will bring, but we do have a fair forecast of what to look out for in the next year.

  • Oil Prices: Fuel Costs will remain consistent with 2020, including the regular seasonal fluctuations. The EIA predicts similar if not lower prices during 2021. The current oil reserves are at maximum capacity leaving some oil producers filling docked tankers for extra storage. The glut of reserves and the drastic decrease in demand as travel came to a screeching halt in 2020 means crude oil could drop below $40 a barrel in 2021 which would be the lowest price since 2016. Additionally, a world-wide increase in demand and production of electric vehicles is not helping oil futures. The only price bump we should see that is not directly related to a seasonal increase is if the COVID vaccine is completely effective and the virus is eradicated early in the year leading to a sudden and drastic spike in travel.
  • Air Freight – will continue to be unpredictable, prices will remain elevated through much of all 2021 and will only normalize to pre-COVID levels once international passenger travel returns to pre-COVID levels. Several airlines added cargo planes or retrofitted passenger planes for cargo only and some air freight companies increased capacity. However, many are unwilling to increase their cargo only capacity much more because once passenger travel resumes to “normal” levels – the capacity will return in the bellies of passenger planes. Pricing for even popular lanes is hard to predict. Expect similar pricing for at least Quarter 1 and probably Quarter 2 of 2021 with quotes only honored for a short window of time. Air freight is the transportation mode most disrupted by COVID, in regard to pricing. The effectiveness of the vaccines coupled with the return of travel are the biggest factors in stabilizing pricing in 2021.
  • Ocean Cargo – can be as volatile as air freight and that was certainly proven in 2020 as some shipping lanes regularly saw price increases as much as 200% compared to the same week in 2019. Ocean freight was wrought with issues from an unprecedented number of cancelled sailings to whole ports being closed either by the governments or a COVID outbreak. Shipping imbalances have left some ports congested and others desperate for empty containers.

Manufacturing has already ramped back up in many areas and it is expected to return to normal levels by Quarter 3 of 2021 (pending a few factors such as vaccine effectiveness). Once manufacturing returns to normal levels worldwide, many of the supply chain issues hindering manufacturers now will be corrected. Many manufacturers require components manufactured in other plants, often across the world, to keep their assembly lines running smoothly (For example major car manufacturers having to slow or halt production this year because they couldn’t get necessary components to continue to run at 100%).

Many are predicting that 2021 could actually see more goods moved over the year than in pre-COVID years. Far less ship cancellations, ports operating at 100% again, and manufacturers increasing production will stabilize prices once again in 2021.

  • SmallPack – There will be a lasting effect on small pack as many are suggesting COVID amplified the growing trend of buyer’s relying more on e-commerce than physical locations. Year-over-year e-commerce has increased by all metrics and it truly exploded during the pandemic. Most analysts agree the majority of gains seen in e-commerce will remain as people will be less likely to revert back to previous purchasing habits in large numbers. We have yet to see what effect Amazon’s new fleet will have on the major carriers or the spring up of several new “last mile” and local delivery businesses. Both FedEx and UPS (coordinating with other carriers specializing in refrigerated freight and the National Guard) are working to move COVID vaccines made by Pfizer and Moderna. They have already begun moving vaccines and they say it will not disrupt their regular shipping networks. Pricing for 2021 will follow the general GRIs, however we are looking forward to the return of Guaranteed Service Refunds (GSR) as soon as possible.
  • Truckload – the spot market has always been susceptible to pricing swings in one direction or another, but they are generally understood as capacity either waxes or wanes. It is expected to be more unstable and volatile as the market continues to grapple with the changes unleashed by the pandemic. It is difficult to make sweeping predictions for all of 2021 in Truckload, but most believe it will trend upward with seasonal fluctuations as per usual. Oil prices will remain lower than pre-COVID years and capacity will increase as drivers and support staff are less likely to be out of commission with an illness. One outlier we cannot fully account for is what the full effect will be on capacity and pricing when global manufacturing ramps back up. The overall consensus of 2021 is that capacity will be tight in many areas (especially port cities) and prices will reflect that.
  • LTL – Rate negotiations and transit times should return to normal, with the regular seasonal fluctuations as capacity evens out. Hubs that were slowed by dozens of employees being out with COVID should all return to normal operating levels with drivers returning as well. Although, there is still a national driver shortage and capacity is not what it should be – it is no worse now than it was in the few years leading up to COVID. The beginning of the year will look down as the 2020 peak season is ending, but the expectation is that 2021 will be moderate overall with a few large spikes and a low valley or two.
  • Rail – Rail is expected to take an upward swing in 2021 for the first time in quite some time. Rail received a small bump in 2020 with the pandemic and capacity being at an all-time low for other freight options. Rail inquiries have increased which equates to a higher than normal demand. Rail is working on finding a way to supplement the Truckload industry as shipping demand keeps rising with more and more people are staying home. Railroad traffic will return to the numbers of 2019, but with less passenger trains and a higher focus on the transportation of goods. Rail needs to continue to land shipping deals for manufactured goods as bulk commodity shipping such as coal and oil continues to decline in large numbers. Overall, it is expected for rail pricing to be comparable to 2019 with no large surprises.

Topics: Cost Reduction, Freight Rates, Shipping, COVID-19, Economy, 2021

New call-to-action

Recommended For You

Mihlfeld & Associates

Logistics & Technology 

We specialize in custom solutions for transportation management, software, cost reduction, invoice processing, and much more. In short, we exist to save your company money on transportation and logistics. We hope this blog helps you in your journey toward better transportation practices.

Welcome to the Mihlfeld Mile.


Become a member of the Mihlfeld Mile Blog:

  • Quality Articles and Logistics News in your inbox weekly!
  • Tips, Best Practices, and Trends!
  • Transportation Management, TMS, Supply Chain, CIP, Cost Reduction, Invoice Processing, and More!

Subscribe to the Blog

Recent Posts