end user outlook 2022
transportation semi truck
Shipping woes // Container ships stalled, freight volumes pinched by supply chain bottlenecks
The ports of Los Angeles and Long Beach in California, in late August, reported that 39 ships lay idle within sight of the port.

Delays have been commonplace in recent weeks and months, owing to stronger import demand into North America amid drawdowns in warehouse stocks for many retailers, according to S&P Research. The delays have been exacerbated by logistical challenges such as port closures in China and escalating intermodal tie-ups in the U.S.

Recently, U.S. rail providers have metered or halted intermodal rail traffic in order to correct terminal congestion, particularly in the Midwest, resulting in drawn-out container dwell times.

“Accelerating demand has led to a sudden influx of containers being imported, due to which ports were struggling to cope with the additional demand. With port closures seen around the world, queues began to build up at key hubs,” S&P Research analysts wrote.

This recent spike in demand has come ahead of Black Friday and the fall/winter holiday season. Worry about being able to stock store shelves in a timely fashion has led some importers to secure cargo well ahead of time.

Further, there was a general equipment imbalance, with demand from North Asia to North America significantly outweighing the demand on the backhaul route. “The sustained and high level of demand has left supply chains groaning in the market, with issues emerging in moving containers out of the port due to a dearth in [truck] chassis supply in the U.S.”

Meanwhile, the American Trucking Associations’ seasonally adjusted For-Hire Truck Tonnage Index fell 1.2 percent in July to 109.8 after falling 2 percent in June.

“Softness in tonnage over the last few months is due more to supply constraints, rather than a big drop in freight volumes,” says ATA Chief Economist Bob Costello.

“Not only are there broader supply chain issues, like semiconductors, holding tonnage back but there are also industry-specific difficulties, including the driver shortage and lack of equipment. For-hire truckload carriers are operating fewer trucks now than a year earlier. It is difficult to haul significantly more freight with fewer trucks and drivers.”

The U.S. Bureau of Transportation Statistics reported that freight rail traffic during July reached 905,000 carloads, up from 849,000 carloads during July 2020. Intermodal traffic (from rail to truck) reached 1.07 million carloads, compared with 1.05 million a year earlier.

Freight moving across borders rose significantly. The value of freight moving between the U.S. and Canada during June totaled $58.8 billion, from $40.5 billion in the same month last year, while the value of freight between the U.S. and Mexico totaled $67.2 billion, compared with $41.6 billion a year earlier. Inland waterway freight volume during August totaled 46.8 million tons, up from 44.3 million tons during August 2020, according to the Army Corps of Engineers.

Preliminary net orders for Class 8 trucks, at 26,500 units, fell 1 percent from June to July. Orders rose 25 percent year over year, however, with orders now totaling 394,000 units for the previous 12 months, according to FTR Transportation Intelligence.

“The industry is in a holding pattern at the bottom of this order cycle. Ordering for 2022 has commenced at most OEMs but remains delayed some due to cost uncertainty and the possibility of enduring supply chain bottlenecks,” says Don Ake, FTR’s vice president of commercial vehicles.

“Fleets need new trucks right now, and they perceive this need will continue throughout next year,” he says. “However, OEMs are having difficulty establishing reasonable 2022 pricing, with commodity and other costs elevated. It is uncertain if current higher production costs are transitory or will persist into 2022.”

FTR’s latest freight volume outlook is slightly weaker at 6.3 percent growth year over year in 2021, compared with its earlier 6.9 percent growth projection.

Todd Tranausky, FTR’s vice president of rail and intermodal, says capacity is expected to remain tight into 2022. “While rate increases are expected to moderate through the next several months, they will remain in positive territory, meaning shippers’ rate relief might feel good but it is a matter of degrees, as rates will still go up year over year,” he predicts.