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Q4 MARKET UPDATE

Stay informed about freight market conditions and other factors that can impact your supply chain. In this Market Update, we cover the following: Truckload, Less-Than-Truckload, Intermodal, and International (Ocean & Air).

THIS ARTICLE COVERS

• Surprising trends on rejection levels
• Continued forecasting for capacity issues
• Parcel trends from 2021

MARKET UPDATE OVERVIEW

Capacity issues stemming from the ongoing Coronavirus (COVID-19) pandemic will follow the industry into 2022.  While the service sector is starting to normalize, driver and truck shortages as well as capacity vs demand continue to be a concern. In the following Q4 market update, we will address the current market and help to assist you with planning for the future.

TRUCKLOAD UPDATE

The 2021 peak season did not bring the same Truckload volume and rejection levels previously seen in 2020. This was unprecedented as volumes in Q3 were at historic highs and the Q4 rejection rate continued to drop.

As seen in the graph below, volume levels remained extremely high in comparison to 2018 and 2019. Activity at all major ports as well as domestic production remains high and industry experts do not anticipate a decrease in manufacturing levels until the second half of 2022.

Although Q4 volume and rejection levels were down from 2020, the national dollar per mile averages were roughly 20% higher in Q4 than they were in 2020 across all modes of Over the Road  shipments. This increase in national dollar per mile rates paid to carriers is a clear indicator that the driver, tractor, and trailer shortages will continue to be a challenge.

Over the past three months, we have seen the average dollar per mile rates climb for all modes apart from open-deck shipments. This is not an unusual cycle to see within Q4. Dry Van carriers have continued to increase their rates due to capacity constraints in order to accommodate the surge in holiday retail demands.

As winter temperatures continue to drop, commodities that typically require Dry Van trailers must now begin to use Refrigerated trailers to protect from freezing. On the open-deck side, construction projects and home improvements typically decline during the colder months. As the volume for open-deck loads decreases, carriers are forced to provide more competitive pricing to be awarded freight.

LESS-THAN-TRUCKLOAD UPDATE

Similar to the Truckload market, you can anticipate Less-Than-Truckload capacity to continue to tighten into 2022. Lack of available equipment, peak season pressure, overflow from parcel, and truckload capacity challenges are all compounding the severity of the current supply vs demand imbalance.

Expect continued carrier price increases, ranging from 8-12% on average, as carriers look to combat the rising costs associated with the following:

• Driver and labor recruitment / retention
• Increased purchased transportation costs
• Increased insurance premiums
• Increased operational costs

We are seeing Less-Than-Truckload carriers be more selective regarding the freight they induct into their network, the customers they transact with and the rules of engagement. As a result, there is a heightened emphasis and need to increase door capacity at the carrier level to address the expected increase in freight volumes moving forward.

You can expect to see carriers:

• Limiting and restricting volume Less-Than-Truckload shipments as a means of conserving capacity to serve more customers
• Instituting customer driven and geographical embargos to alleviate existing network pressures and bottlenecks
• Enforcing rules regarding tariff items (some that were historically loose) to ensure adequate compensation for each shipment and services performed
• Right sizing the profitability (taking increases) on less desirable freight (i.e., excessive length) and on suboptimal operating business (little profit/no profit)
• Refusing freight that doesn’t align with the carrier’s plan for their network vision and stabilization (overlength freight, high claims products, locations causing prolonged detention time, etc.)

We are committed to keeping you informed of the ever-changing supply chain challenges and partnering with you to provide solutions regarding service, capacity, and pricing.

PARCEL UPDATE

2021 has been another record year for Parcel shipments. With UPS and FedEx taking the approach of quality over quantity, shippers are forced to rely on immerging regional carriers such as LSO (Lone Star Overnight) and LaserShip to transport the surplus freight. During Q4 peak, it was predicted that package delivery demand would exceed capacity by about five million pieces per day.

• After 8 years of 4.9% yearly increases, FedEx and UPS will increase Ground rates by 5.9%
• Minimum charges will increase by 7.6% compared to 6.4% last year
• Parcel volume will hit the pre-COVID 2026 projection as soon as 2022
• Projected growth of 35% plus year over year projected from 2021-2022

In response to capacity issues, the carriers have already announced the following:

• Large shippers will be charged additional peak season fees
• Limitation on the number of packages UPS and FedEx will pick up weekly
• UPS will hire 100,000 and FedEx will hire 90,000 new workers
• Additional peak season charges

INTERMODAL UPDATE

As we close out 2021, overall Intermodal demand has weakened roughly 10% year-over-year. This story is an interesting tale of two cities as the Domestic volumes have increased 6% sequentially, while International volumes have declined 13% year-over-year and are down 2% sequentially.

With ocean containers being at a premium and a strong focus on a port-to-port strategy by the ocean carriers, the Domestic growth is related to the increasing amount of port transloading from International to Domestic containers.

Over the past quarter Intermodal volumes have been relatively flat with rail carriers responding to specific lane and facility service challenges. Daily intermodal volumes have consistently increased as carriers work through congestion-related service issues. Service consistency continues to be a challenge and is a direct cost-driver of assessorial expenses.

While the current level of service is less than desirable, discussions with the railroad service providers are encouraging and point to efforts being made to streamline network operations that will, in turn, lead to a higher level of service consistency in the future.

As carriers continue to work through lane and facility congestion challenges, we expect Q1 through Q2 2022 to show a marked service improvement. Container utilization (defined as trips per month), chassis availability, and drayage capacity are always critical to consistent customer service. Key areas where we will be actively working with you:

• Drayage capacity limitations – managing with flexibility and planning
• Domestic 53ft chassis street time reduction is required to increase container trips per month – turn all asset types as quickly as possible
• Winter weather – will lead to additional service variability

Import volumes, either as IPI or Domestic transloads, on both the East Coast and West Coast will continue through Q2 2022.

On the Domestic product, rail services have been market-focused with the intention of maximizing network velocity, specifically car and container turn-times. Certain metro areas have had volumes metered inbound to avoid rail ramp congestion gridlock as chassis and parking constraints reached critical points. Drayage demand for the Chicago metro area is shown below and has been on a gradual decline as have moved through Q4 2021.

On the International product, many US ports continue to experience near record levels of imported containers. In a similar fashion, inland international terminals continue to struggle with congestion issues and slower than anticipated container deliveries to end customers, exceeding parking and chassis capabilities. Drayage demand for the Los Angeles metro area is shown below and has been gradually increasing throughout much of Q4 and has only recently begun trending downward toward expected seasonal levels.

We continue to see upward pressure on rates from all intermodal providers in the form of both linehaul, drayage and accessorial increases. Accessorial costs associated with terminal storage and equipment usage will continue to increase with the intent of driving higher utilization levels for chassis, container, and terminal parking. Surge pricing instituted in Q2 remains in effect.  Our expectation is that these charges will remain in place through year-end.

Looking forward into early 2022, shippers should prepare for sustained regional pressure on drayage, container, and chassis availability due to higher-than-normal import and domestic volumes through Q2 2022. This demand will likely be driven by:

• Just-in-time shipping: Retail and Manufacturing segments struggling to improve inventory to sales ratios
• Just-in-case shipping: Several segments building inventory well beyond demand to address future inbound supply chain variability
• Existing order backlog reductions from manufacturers (specifically automotive, white-goods, consumer electronics) moving to end customer and inventory restocking

The continuing levels of strong International and Domestic demand will present service challenges, but with planning and dialog, service issues can be minimized. Together, with all the service providers in the Intermodal supply chain committed to increasing velocity and levels of service, the Intermodal product will make the continuous improvements required to support long-term volume growth.

INTERNATIONAL: OCEAN & AIR UPDATE

As the global container market was being to ease, following the holiday peak season, demand is beginning to pick up again as ocean carriers are indicating an increase in booking volumes under “premium” rates.  

Vessel congestion in the ports of Los Angeles and Long Beach continues to rise despite the port’s implementation of a new queuing process.

The new process has helped to reduce the number of vessels in San Pedro Bay, however, the total number of vessels awaiting port continues to exceed 100.  The average vessel wait time from anchor to port berth in Los Angeles is still increasing and hit an all-time high of 18 days. The congestion of backlogged vessels results in an inability to maintain regularly scheduled rotations.

On the east coast, the number of vessels awaiting berth in the port of Savannah has decreased from 23 to 18, yet Charleston is seeing an increase as more carriers bypass the port of Savannah and go directly to the port of Charleston.

Carriers agree that these missed sailings (known as “blank sailings”) will continue to result in capacity reduction in the range of 100,000 TEU to 150,000 TEU per week, which represents up to 25% of total capacity deployed in the Trans-Pacific trade.

Production activity in China increased during the second half of November and is expected to continue into 2022. Vietnam has shown modest gains at nearly 70% capacity.

Supplier and manufacturing output improvements could decline in the upcoming months if there is an outbreak of the most recent COVID-19 variant. In contrast, demand remains strong as larger U.S. retailers and their suppliers are respectively sitting on anywhere from 10,000 to 25,000 FEU (Forty-foot Equivalent Unit) containers of order backlog.

With increased demand prior to Chinese New Year in February, expect to see FAK (Freight All Kinds) and Premium rate levels increase as carriers once again struggle to handling demand in an environment of chronic capacity shortages.

IN CONCLUSION

As we conclude 2021, capacity constraints will continue to be a driving factor through Q1 of 2022. We recognize you have unique challenges, and to help meet your capacity needs, we have access to innovative technology, the latest market insights, and a flexible approach to help you maximize your business goals. We remain committed to supporting your operations as we potentially face another year of unprecedented supply vs demand.

For more detailed information regarding MODE Global’s view on the transportation market, please reach out to [email protected].

ABOUT MODE GLOBAL

With over 200 offices throughout North America, we solve a vast array of domestic, international, air, and ocean transportation challenges. Our shipping expertise encompasses small parcels, LTL, truckload, intermodal, air, ocean, and supply chain solutions to ensure every need is met.

September 2021

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Q3 MARKET UPDATE

Stay informed about freight market conditions and other factors that can impact your supply chain. In this Market Update, we cover the following: Truckload, Less-Than-Truckload, Intermodal and International (Ocean & Air).

THIS ARTICLE COVERS

• Tight capacity forecast through 2022
• Upward pressure on pricing for all markets due to increase economy output

MARKET UPDATE OVERVIEW

As we continue to navigate the uncertainty that Coronavirus (COVID-19) has brought throughout the first half of 2021, we recognize the ongoing transportation industry constraints. From capacity to driver shortages to the rise in cost of products, the industry is still facing several challenges as we near the end of Q3. Although the industry continues to face these challenges, the service sector is beginning to normalize and we anticipate a continued rebound in Q4.

As we discussed in our Q2 Market Update, the overall common theme for 2021 as it relates to the transportation industry is capacity will remain tight and it will have an impact on cost constraints and cost increases. We are still facing the challenge of meeting demand as we end Q3. In the remainder of this blog, we will take a deeper dive into SUNTECKtts’ core services to gain a better understanding of the market impacts.

TRUCKLOAD UPDATE

As Truckload volumes continue to climb through Q3, the industry faces several challenges including port congestion, a significant rise in inflation costs, as well as demand spikes. Retailers across the country are beginning to raise prices on goods such as toilet paper and diapers to offset shortages and shipping costs. Due to the added demand for volume, we can expect to see increasing rates through the end of the year.

The Truckload market continues to struggle with capacity and one of the many reasons is driver shortages. To help combat driver shortages, many trucking companies offer huge wage increases to attract drivers to the industry. However, we have seen extremely competitive job markets, such as construction and warehousing struggling to fill positions. Couple that with the e-commerce boom which created an uptick in driver demand as several hundred thousand courier driver positions were filled, reducing the amount of  CDL candidates.

In addition to driver shortages, we are seeing semiconductor, parts and raw material shortages which crimped production schedules at equipment manufacturers. Many carriers are running multiple months behind in truck deliveries, directly impacting the supply chain. The combination of these supply chain challenges negatively impacts the ability for carriers to buy new tractors and obtain new equipment, much less finding drivers to seat them.

Q3 does not look to be settling down anytime soon as COVID-19 restrictions are lifting at a faster pace than most anticipated and the US is returning back to restaurants, bars and other dining establishments. The increase in demand causes additional strain on the food supply chain and the  effect is creating volatility within the industry and the rise in rates.

LESS-THAN-TRUCKLOAD UPDATE

Quite frequently, you will see the Truckload capacity correlating with the LTL market. When Truckload capacity is tight, shippers will utilize LTL more frequently, particularly on larger shipments. Larger Truckload shipments will likely be divided into two LTL shipments, which further congests LTL carriers, who are also competing for outsourced linehaul capacity. Due to LTL carriers currently being at or above capacity, many have embargoed certain areas, with some setting lower limits to weights or lineal feet they will pick up.

The lack of supply, with no end in sight to the increasing demand, has an obvious impact on pricing. LTL rates continue to rise faster than normal. National carrier rates are rising quickly and at higher levels than regional carrier rates, as national carriers rely on longer linehauls and purchased transportation.

Finally, these market conditions are impacting service levels. Much like with rates, shorter haul lanes tend to be faring better than longer haul lanes, where bottlenecks are more likely to delay shipments. Most carriers have suspended refunds on their guaranteed products, as they simply have too many shipments delivering after the standard service days.

INTERMODAL UPDATE

As we near the close of Q3, Intermodal demand has remained strong for both the Domestic and International product lines. Intermodal service components, both rail and drayage, remain at capacity utilization levels where demand dramatically exceeds service capabilities. As a result of many months of operations at extremely high-capacity utilization levels, many railroads have taken steps to improve network throughput prior to Peak Season.

On the Domestic product, rail services have been market-focused with the intention of maximizing network velocity, specifically car and container turn-times. Certain metro areas have had volumes metered inbound to avoid rail ramp congestion gridlock as chassis and parking constraints reached critical points.

On the International product, many US ports have experienced record Q3 levels of imported containers. In a similar fashion, inland international terminals reached gridlock due to vessel bunching and slower than anticipated container deliveries to end customers – exceeding parking and chassis capabilities. The congestion seen at Chicagoland terminals forced a weeklong embargo on inbound containers from the Port of Los Angeles/Long Beach.

While the current level of service is less than desirable, discussions with the railroad service providers is encouraging and points to efforts being made to streamline network operations that will, in turn, lead to a higher level of service consistency in the future.

We continue to see upward pressure on rates from all intermodal providers in the form of both linehaul and accessorial increases. Accessorial costs associated with terminal storage and equipment usage will continue to increase with the intent of driving higher utilization levels for chassis, container, and terminal parking. Surge pricing instituted in Q2 remains in effect and has been extended to many historically non-Peak Season markets.  Our expectation is that these charges will remain in place through year-end.

Shippers should evaluate inventory lead-times with the expectation that there exists the real possibility that transit times will be altered in Q4 to ensure greater consistency in on-time performance. The continuing levels of strong International and Domestic demand will present service challenges, but with planning and dialog, service issues can be minimized. Together, with all the service providers in the Intermodal supply chain committed to increasing velocity and levels of service, the Intermodal product will make the continuous improvements required to support long term volume growth.

INTERNATIONAL: OCEAN & AIR UPDATE

With a significant rise in COVID-19, especially with the Delta variant, the concern right now is that many countries have reported being worse off than they were in mid-2020. 

Several Southeast Asian countries are essentially on full lock-down quarantine. As a result, both manufacturing and marine operations are operating at a fraction of full capacity and some have shut down completely.  Because of the heightened focus on the Asia to US trade, particularly the return of empty containers to Asia, finding space for US exports is a significant challenge and rates are substantially higher than we’ve seen since 2019. Ocean carriers are prioritizing the return of empties over loaded US exports due to the high revenue potential of reloading the imports.  

Non-stop demand and scarce capacity made worse by delays are also keeping freight rates climbing. Since late July, prices from Asia to the US West Coast, including typical premium surcharges, increased more than seven times their level a year ago. Large volume importers are reporting they are receiving only 10-20% of their volume moving under their negotiated contract levels.  All other volumes are moving at FAK or Premium levels. Ocean carrier capacity levels are the highest they have ever been. The issue is not the number of vessels or the slot capacity but rather the effective utilization of those vessels. Transit times, including cargo staging at origin and the vessel voyage, from Shanghai to Chicago via the port of Los Angeles/Long Beach have more than doubled. Resulting in transit time taking approximately 146 days for a container to circulate back to the point of origin for reloading, effectively reducing “functional” container capacity by 50%.

IN CONCLUSION

As we move into Q4, MODE continues to work closely with carriers to ensure any embargoed areas have additional carrier options to provide consistent service through this large capacity crunch. Looking into Q4, we anticipate a continued rebound, and hope the uncertainty that the Coronavirus (COVID-19) continues to bring begins to settle.

For more detailed information regarding SUNTECKtts’ view on the transportation market, please reach out to [email protected].

ABOUT SUNTECKTTS

With over 200 offices throughout North America, we solve a vast array of domestic, international, air, and ocean transportation challenges. Our shipping expertise encompasses small parcels, LTL, truckload, intermodal, air, ocean, and supply chain solutions to ensure every need is met. 

DALLAS, August 10, 2021 — MODE Global, LLC (“MODE Global” or the “Company”) announced it has completed the acquisition of RR&F Logistics (“RR&F”). RR&F, an agent of SUNTECKtts, is based out of Rochelle Park, NJ offering full-service transportation services throughout North America. Following the acquisition, MODE Global will now facilitate more than 1.5 million annual customer shipments and generate almost $3 billion of revenue.

The Company offers a broad range of capabilities across all major modes of transportation including truckload, less-than-truckload, rail intermodal, drayage, air, ocean, and parcel freight. The Company will leverage its increased scale and resources to continue investing in technology and innovation for the benefit of its agent, shipper, and carrier communities.

“We are excited to announce this transaction with RR&F Logistics, an agent of SUNTECKtts. RR&F’s knowledge in the transportation market will continue to enhance MODE Global’s service offerings,” commented Lance Malesh, MODE’s CEO & President. “The acquisition allows us to continue the build out of our operational capabilities to support our strong network of customers and agents.”

“We are truly excited to join the MODE Global team and look forward to continuing to grow our business and provide our clients with unmatched service,” said Gregg Romanzo, RR&F Logistics co-owner.

“In a highly competitive industry, having the right team to deliver excellent service is priority one. We couldn’t be happier to now have the MODE Global team and their expertise to help our continuing growth,” stated Norman Frigon, RR&F Logistics co-owner.

“We look forward to leveraging our customer-centric approach with the tremendous opportunities and resources MODE Global provides,” said Anthony Russo, RR&F Logistics co-owner.

About MODE Global

The MODE Global Network of Companies is one of the nation’s leading logistics and transportation providers. With over 30 years of experience, MODE Global provides efficient reliable service to more than 10,000 customers across a diverse set of end markets and modes of transportation. MODE has relationships with over 75,000 carriers and operates from over 230 offices throughout North America.

About SUNTECKtts

SUNTECKtts operates as a multi‐modal transportation solutions provider through a network of sales, operations, and capacity specialists. The company offers a business process outsource program through which independent agents represent SUNTECKtts in the freight transportation marketplace. This agent network services shippers throughout the United States and Canada.

About RR&F Logistics

RR&F Logistics (SUNTECKtts NYC) is one of America’s top Third-Party Logistics providers (3PL). RR&F Logistics, an agent of SUNTECKtts located in Rochelle Park, NJ, Acton, MA and HQ in Jacksonville, FL. RR&F is a full-service, transportation logistics provider that operates through a network of sales, operations, and capacity specialists.

Media Contact:
Amy Nash
Director of Marketing
[email protected]  
972.972.7334

Stay informed about freight market conditions and other factors that can impact your supply chain. In this Market Update, we cover the following: Truckload, Less-Than-Truckload, Intermodal and International (Ocean & Air).

MARKET UPDATE OVERVIEW

The Coronavirus (COVID-19) threw a level of uncertainty into 2020 for the transportation industry with ongoing constraints into 2021.

Although our economy is poised for growth this year, the acceleration we have experienced over the last six months has impacted the timeline of capacity and the ability to meet demand is a continuous challenge across the transportation market.

We continue to see a decline in the service sector with growth in the durable goods sector. As the service sector begins to normalize, we anticipate a rebound for this sector within Q3 and Q4.

The overall common theme for 2021 as it relates to the transportation industry is capacity will remain tight and it will have an impact on cost constraints and cost increases.  In the remainder of this blog, we will take a deeper dive into the core services by SUNTECKtts to gain a better understanding of market impacts.

TRUCKLOAD UPDATE

Truckload volumes were strong at the start of the year with tight capacity. In mid-February, we had a significant weather event causing volumes to shoot up quickly and the demand has only increased throughout Q2.

As a reminder, carriers reject loads on contracted pricing for two reasons. They either truly do not have capacity, or the rates have climbed to a point where they are servicing other shippers at high spot market rates vs contracted rates. It would appear that things were starting to calm down until the weather event in February. Although tender rejections were trending down, carriers were still at an extremely high rejection rate of 20%.

What we have discussed thus far is what has already occurred, let us now review a few items to be aware of. It is clear weather has had a huge impact; however, the Truckload market was already struggling with capacity due to driver shortages and changes to insurance requirements.

One of the primary reasons we keep hearing about driver shortages not improving is The Drug and Alcohol clearinghouse rules. They are now preventing drivers from going to a new carrier to get hired immediately after being fired for drug and alcohol issues from their previous employer. Last year there were over 56,000 violations and of those violations 45,000 lost their jobs. The drivers are given an opportunity to complete a return-to-work program to begin driving again. The most concerning stat that we are seeing is 75% of drivers who lost their jobs have not completed the program. While we agree with the clearinghouse rules, it has resulted in a high number of drivers being removed from the market within the last year.

Another item to be aware of is insurance changes.  The cost of insurance for owner-operator and trucking companies is high and still rising. The minimum insurance requirements are being reviewed and could potentially increase from $750k to $2 Million.  If that passes, it could cause a number of trucking companies to shut down and rates to go up immediately.

LESS-THAN-TRUCKLOAD UPDATE

As you can imagine, the truckload market tends to impact what we see in the LTL market. When truckload costs spike, shippers will start to push the envelope on larger LTL shipments to avoid having to pay higher rates. Sometimes it is simply a capacity issue where they are unable to locate a truck in a given lane, so they look to LTL.  Additionally, LTL is directly impacted by purchased transportation. Carriers will look to the linehaul network for purchased transportation to keep from getting their equipment out of balance, or simply when volumes spike, they have additional options.

When we see service issues with LTL carriers it is important to keep in mind just how vastly different the amount of capacity is from Truckload to LTL.  Due to the barriers to entry, there are no new LTL carriers of size entering the market.  Occasionally you may see a startup with a consolidation model, however, most are brokering LTL freight to carriers with capacity.

LTL rates are currently on the rise.  The LTL blanket pricing programs are used by carriers as a dial to turn volume up in a given market when they want it and turn it down when they don’t.  One way they do this is by adjusting the pricing. This year we are expecting national carriers to take sizable price increases. This can vary by lane and depend on the carrier.  Some carriers are standardizing the base rates across all blanket programs. When this occurs, lane rates often double.

The other method to reduce volume would be to put embargos in place.  The hot spots are Southern California, Oregon, Oklahoma, Texas, Tennessee, Chicago, Pennsylvania, and New Jersey – and as discussed when one carrier makes a change it impacts others quickly.  One part of purchased transportation that many large LTL carriers have historically relied on is Intermodal for their linehaul capacity.

INTERMODAL UPDATE

As with other modes, intermodal demand has been very strong since early summer of 2020 and will continue well into 2022.  Intermodal services are experiencing challenges with a surge in domestic and international volume.  The large increase in volume has created an environment where majority of North American railroads are at capacity.  Within all rail networks, to allow trains to effectively move each week, it is critical to keep operations fluid.  To do so, many railroads have implemented changes to their intermodal operations. One change we have seen is precision railroading. Precision railroading allows longer trains to continue running from one origin to the next with limited stops.  This is an effort to streamline processes to ensure consistent transit. While the current service can be seen as less then desirable, these efforts will lead to much more consistent intermodal service in the future.

The job of intermodal marketing companies (IMC) has become much more complex over the past two years.  Railroads are now requiring the IMC to execute the following:

• Reserving equipment
• Reservations to bring a shipment into an origin rail ramp
• Have a shipment depart a destination ramp within 24 hours of arrival (regardless of if the railroad was on time)
• Manage a seamless product to customers

Because of these changes, it is taking a significant amount of time to execute a proficient intermodal shipment.

Throughout 2021, we have seen upward pressure on rates from all intermodal providers, in linehaul increases and accessorial increases. Additionally, we are seeing some carriers exit lanes altogether simply because the lanes do not match their network. As we move forward into Q2, we expect pricing will continue to increase. Price changes will have more of an effect on new users than long-term users of intermodal services. You can also expect accessorial costs to increase to assist the railroads in improving the utilization of containers and keeping the terminals operating fluidly. Some railroads have already instituted their Peak Season Surcharge and those charges will most likely remain in place throughout 2021.

Shippers should expect that there will conversations about potentially changing transit times to ensure more consistent on time performance and that the North American rail network will continue to see increased volume.  The high volume leads to challenges, but with planning and dialog, service issues can be minimized.

INTERNATIONAL: OCEAN & AIR UPDATE

When it comes to the current international market condition, there are two primary drivers – extremely high demand from US importers and the ocean carrier’s collective reaction to elevate rates to record high levels.

Fueled by consumers being at home more during quarantines and government stimulus money, the retail segment has seen incredible sustained volume demands starting in Q3 2020. Retail volume forecasts are expected to be up nearly 25% YoY in the first half of 2021. Some are predicting similar levels extending well into the second half of the year.  The vast majority of these high demand retail items (home furnishings, furniture outdoor items, fitness equipment, electronics, etc.) are sourced by US importers from Asia. This huge spike in demand has put a serious strain on the Trans-Pacific container trade.

The ocean container trade has struggled to handle this volume increase and has reacted by pushing ocean rate levels to record highs, which have remained high for several months. Although Trans-Pacific Ocean spot rates have stopped climbing, and in some cases pulled back slightly, the rates remain at record high levels.

As a result, three categories of ocean carrier rates have emerged in the market and are being offered by carriers to handle volumes. Contract rates, FAK (Freight All Kinds) spot rates and now “premium” rates. These “premium” rates which are thousands higher than FAK spot levels are essentially rates based entirely on shipper’s urgent need to move more volume and a willingness to pay whatever it takes.

Importers have shown no slowdown in their demand for more volume even in the face of these unprecedented rate levels. Available capacity is extremely tight on all Asia to US services. Booking delays and cargo rolls are significant. Empty equipment shortages in Asia are also a serious concern as many US importers are holding containers longer and carriers struggle to get empties loaded on vessels to get back to Asia.

One ongoing threat is port congestion and slower throughput at most major US ports to handle volumes coming in faster and with larger vessels. Ports of Southern California has suffered the worst congestion it has ever seen. Vessels waiting for a berth at port are being staged (at anchor) outside the port in record numbers. One key distinction compared to other congestion years is the larger size of vessels deployed now. The average size of vessels at anchor in February were ships that could hold 14-15,000 TEU (Twenty Foot Equivalent) containers. In 2015, the last major congestion, the largest vessels sailing was 10,000 TEU. The challenges we are facing are amplified by the larger vessels in the trade today.

The takeaway from this situation is loaded containers will be delayed coming into the US, but the larger challenge is vessels will quickly get out of rotation in their regular schedules, thus creating missed sailing opportunities back in Asia.

The long-term forecast for 2021, is that until demand for imports slows substantially, not much is going to change in ocean trade. Capacity will remain extremely tight into Q4 of 2021 and equipment imbalances could also add to that scenario. Contract ocean import rates for 2021 (established on May 1st) could be as much as 60-100% higher compared to 2020 rate levels. In conclusion, for much of 2021, most import customers are going to struggle to find capacity and they will be paying significantly higher rates compared previous years.

ABOUT SUNTECKtts

With over 200 offices throughout North America, we solve a vast array of domestic, international, air, and ocean transportation challenges. Our shipping expertise encompasses small parcels, LTL, truckload, intermodal, air, ocean, and supply chain solutions to ensure every need is met.

DALLAS, TX November 4, 2020 — MODE Transportation (“MODE” or the “Company”), a leading multimodal third-party transportation and logistics provider, announced today that Lance Malesh has been appointed President & Chief Executive Officer of the Company. Jim Damman, who has led the Company as President & CEO for over 15 years, has been appointed Chairman of the company.

These actions are the result of a carefully planned leadership succession process undertaken by Damman and the Board to ensure the continued success of MODE for years to come.  Damman and Malesh will be working closely together to execute a comprehensive transition plan. Following the transition, Damman will continue to work with Malesh and the Board to drive the strategic agenda for the business. 

Jim Damman was named President of MODE in 2004. “On behalf of the entire MODE organization, we want to thank Jim for his leadership and dedication to MODE’s agent, customer and carrier partners over the last 16 years,” said Daniel Gluck, Managing Director at York Capital. “During his tenure, the Company consistently expanded its agent and customer relationships, more than tripling revenues to over $2 billion. We are excited to welcome Lance to the company and look forward to him perpetuating MODE’s strong growth and leadership in the transportation and logistics industry.”

Lance Malesh is an accomplished senior executive with 20 years of experience in technology, operations, sales, and marketing. Combining his extensive experience, along with a hands-on management style, he has helped companies implement new technologies and business strategies that have driven growth and profitability. Malesh most recently served as Chief Commercial Officer for BDP International and previously was President / CEO of BridgeNet Solutions.

“I am pleased to announce Lance’s appointment to the President & CEO role following a comprehensive search,” said Jim Damman, “It was important to me to find a strong successor to lead the great people at MODE Transportation into the future, and I am confident that Lance will accomplish great things at MODE. I look forward to working with him and the Board in my new role.”  Lance Malesh said,“Jim and the MODE organization have a rich history, and I look forward to working with the team and partners to help build upon the strong foundation that is in place.”