Spring marks not only the return of blooming flowers (and the pollen that comes with them) but also a peak season in shipping. Produce reigns supreme as loads picking up in the southern US, from Florida to central Texas, increase between 15% and 31%. The South-to-North produce loads are very lucrative hauls for carriers. This leaves freight in two other main areas scrambling to find a truck.
- Freight that yields a lower profit level for carriers.
Shippers in the southeast US as far west as Texas who are shipping commodities that don’t fetch carriers as high of a return tend to take a backseat to produce. With carriers choosing the more profitable produce loads over most other cargo this leads to an increase in overall spot market rates as shippers have to be willing to pay a little more to compete for truck capacity. This also leads to a spike in missed pickups each year as carriers may back out of scheduled pickups as a more lucrative opportunity presents itself.
- Freight originating in areas that are not along the common produce shipping lanes.
As the goal of many carriers who operate in or near the Southeastern US is to haul as many produce loads during the season as possible, they are not looking to stray too far from those lanes. If they pick up in Florida and drop off in Chicago, they are looking for a load in Chicago going right back to Florida or at least in that direction. This leaves many shippers needing to move freight laterally or central-to-north vying for the already limited capacity.
It is not enough we see produce season stretch available capacity, we also deal with glut in ports from the post Chinese New Year surge in cargo. Ports are so congested at right now, ocean carriers are beginning to complain. They are losing valuable time waiting to be offloaded at US Ports so much so, there is a shortage of vessels and containers in China’s ports to load all the cargo needing shipped out.
As of the first week of March, 2021 the China-US West Coast ocean cargo prices were averaging 226% higher than this time last year. That is a decrease of 14% from January, however we do not believe prices will continue to decrease; expect them to remain elevated for most of 2021. Prices for China-US East Coast are up 123% and are expected to mimic the West Coast in regard to future pricing trends.
Additional Market Updates
According to DAT we are already seeing huge rate increases in the Spot Market in the first week of March. Dry Van increased 12.5% over February and upwards of 14.5% over January and Refrigerated Rates increasing nearly 10% over February and 13% over January. This is not uncommon when entering the Spring Peak Season, but was also exacerbated by the recent Winter Storms at the end of February.
Air Cargo rates will continue to be elevated for the foreseeable future. Capacity being greatly reduced by the collapse of passenger flights in response to COVID, is even further stretched by an increasing demand. Air Cargo freight is already approaching pre-COVID levels but the available space has yet to bounce back. Even with many airlines doing their best to add cargo planes or convert passenger jets to cargo jets – capacity remains scarce. Quotes are only honored for small windows of time leaving most to book what they need when they find the availability rather than when they find the price point.
The parcel giants implemented their GRIs already in 2021. FedEx is planning to begin a new aggressive late payment fee of 6% beginning this summer, however, along with UPS, they still have not reinstituted their guaranteed service refunds. The parcel giants have reduced some of the peak surcharges they implemented in 2020 in response to the huge increase in packages entering their networks as e-commerce boomed in response to COVID.
As many people are beginning to receive vaccines that are being reported as being very effective, there is hope of a return to regular business in the next few months. However, many questions about what trends are here to stay. Once all stores and shops are open for regular business and people are comfortable to browse in person again, will the e-commerce boom deflate? Many speculate even if people go back to buying the majority of their goods in person, the shipping from factory or port to retailer will increase back to pre-COVID levels picking up the loss of shipping destined to residences. Overall, the freight industry has been very reactive to changes and trends over the past few years, so a few more things have to play out before we know the whole picture of 2021.