Transportation Updates
US dry van spot rates increased 5% last week as carriers raised tender rejection rates, signaling peak-season strength. The National Truckload Index, tracking spot rates excluding fuel costs, has climbed steadily, indicating demand volatility across the truckload market. Rejection rates surpassed 6% for the second time since mid-2022, hinting at a tightening market during holiday shipping. Carrier exits have averaged 200-600 per week in 2024, following years of overexpansion, reflecting a freight market correction. West Coast freight demand has strained capacity nationwide; truckload and intermodal volumes out of California are up sharply year-over-year.
Council of Supply Chain Management Professionals: Nov 4th
The October 2024 Logistics Managers' Index (LMI) rose to 58.9, showing robust logistics sector expansion, especially in transportation. Transportation Prices increased by 5.7 points to 64.1, the highest rate since 2022, with minimal growth in Transportation Capacity. Inventory growth, mainly from retailers, peaked in mid-October as seasonal preparations ramped up; Inventory Costs slightly eased. Warehousing Utilization rose to 62.9 as firms maximized efficiency despite a reduction in warehouse construction. Future outlooks indicate anticipated rises in transportation and warehousing prices, driven by potential tightening in available capacity.
Labor negotiations covering 36 East and Gulf Coast ports are set to resume in New Jersey without mediators present. In October, the ILA and USMX agreed to extend the current contract until January 15 to avoid further port disruptions. Proposed contract terms include a 62% pay raise over six years; automation remains a contentious issue for the union. Importers are accelerating shipments to avoid potential disruptions as the January deadline and new tariffs on China approach. The upcoming administration change raises uncertainty about intervention in potential strikes, with the Taft-Hartley Act as a possible option.
September's Class 8 truck orders surged to 37,100 units, with vocational orders up 71% year-over-year, driven by infrastructure investments. Medium-duty truck orders remained below trend for a third consecutive month, indicating persistent soft demand in this segment. US dry van spot rates slightly declined to $1.59 per mile in September, reflecting muted shipment demand. Trailer orders closed Q3 at 27,000 units, with backlogs significantly lower, down 55% year-over-year. Used Class 8 truck prices dropped 5.2% in September, now 14% lower year-over-year but expected to stabilize into 2025.
Landstar's owner-operator truck count declined 12% year-over-year in Q3 due to rising costs and repair delays. Truck repair expenses and extended wait times contribute to the challenges owner-operators face in this low-rate market. Landstar anticipates further owner-operator declines in Q4 without a significant and sustained rate increase. Analysts suggest owner-operators may return slower than during the pandemic due to higher operational and borrowing costs. Seasonal rate increases may not fully benefit the sector if stability is lacking, impacting owner-operator retention further.
Economic Updates
The Federal Reserve cut interest rates by 0.25%, bringing the target range to 4.5%-4.75%, aiming to support employment. The decision was unanimous, contrasting the previous meeting's split vote, reflecting a balanced view on inflation and employment. Stocks rose after the rate cut, with the Nasdaq reaching record highs; Treasury yields dropped in response. The Fed is recalibrating policy to stabilize growth and moderate inflation, aiming for a "soft landing" for the economy. Markets anticipate another rate cut in December, with further cuts projected for 2025 to maintain economic stability.
Institute for Supply Management: Nov 4th
October’s Manufacturing PMI® dropped to 46.5%, marking the seventh straight month of contraction in the manufacturing sector. Key indices like New Orders, Production, and Employment remained in contraction territory, reflecting weak demand and reduced output. Prices Index rose to 54.8%, indicating increased raw materials costs, while Supplier Deliveries slowed slightly, at 52%. Manufacturing inventories declined as companies tightly controlled working capital amid ongoing economic uncertainty. Only five of 18 manufacturing industries, including Food and Computer Products, reported growth, with 11 industries contracting in October.
The World Bank projects a major oil supply surplus by 2025, potentially dropping prices below $60 per barrel. Factors driving the oversupply include China’s slowed growth, electric vehicle adoption, and rising non-OPEC production. OPEC+ continues high production levels, pumping 7 million extra barrels per day, adding pressure to global oil prices. Consumers in developed countries may see price relief, while high food prices persist in developing nations due to inflation. Oil companies face volatility and declining revenues, prompting the industry to adapt to shifting demand and market conditions.
Specific Articles
Averitt expanded its San Antonio facility with a new 85,000 sq. ft. distribution warehouse and 80-door cross-dock terminal. Nearshoring has increased demand for logistics in Texas; San Antonio's proximity to Mexico makes it a strategic hub. The facility offers truckload, LTL, and portside drayage services, supported by nearby Union Pacific railyard access. Averitt has over 800,000 sq. ft. of warehousing across Texas, positioning for US-Mexico trade growth. Averitt's diversified services allow flexibility across fluctuating logistics needs, strengthening its market position in cross-border trade.
Miami-based Star Transportation and five affiliates, with over 400 drivers, filed for Chapter 11 bankruptcy. Rising fuel prices, costly insurance claims, and high maintenance expenses were cited as main financial pressures. Court approved emergency funding for continued operations, including a factoring agreement with RTS Financial Services. Star Transportation’s assets total up to $1 million, with liabilities estimated between $10 million and $50 million. Bankruptcy filing follows a recent lawsuit by former employees alleging misclassification as independent contractors.
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