2024 Top 100 Importers & Exporters Cover Story
at the ports of Los Angeles and Long Beach , driving an increase in eastbound intermodal train movements and worsening a deficit of westbound railcars .
Union Pacific Railroad and BNSF Railway are increasing railcar supplies in Southern California in anticipation of a stronger peak shipping season in August . Rail container dwell times at the Los Angeles – Long Beach terminals have increased steadily this year , from 4.2 days in January to just over 7 days in March , according to the Pacific Merchant Shipping Association .
Lacking a catalyst
But gains in US imports aren ’ t enough to float all boats . US truckload and less-than-truckload ( LTL ) markets remain soft , with excess capacity and depressed demand .
The consensus is that a stronger catalyst of some type is needed to boost US freight demand , which has remained depressed despite an expanding US economy that dodged a recession in 2023 . But the ingredients for market change haven ’ t come together yet . It ’ s unclear whether they will come together in the back half of the year or in 2024 at all .
“ Year-over-year import growth by itself isn ’ t going to ensure a strong truckload market .”
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“ I ’ m not seeing that catalyst right at the moment ,” Jason Miller , a professor and interim chairperson of the Department of Supply Chain Management at Michigan State University , told the Journal of Commerce . Neither imports , interest rates , manufacturing output or housing starts and construction are where they need to be , said Miller .
“ Imports are a very small fraction of actual spending and actual freight ,” he said . “ Year-over-year import growth by itself isn ’ t going to ensure a strong truckload market .” US truckload rates , as measured by the US longdistance truckload producer price index ( PPI ), were down 6.5 % year over year in March , and about 24 % lower than their May 2022 peak , data from the US Bureau of Labor Statistics shows . The PPI is a measure of all-inclusive rates , both contract and spot . The truckload PPI has been relatively flat since last June .
In contrast , LTL rates bounced off their bottom last year and continue to rise , thanks to the collapse of Yellow , once the third-largest LTL provider . Yellow ’ s exit reduced LTL capacity by about 10 %, according to transportation research firm SJ Consulting Group . The long-distance LTL PPI was up 2.5 % year over year and 6.4 % from last July in March , according to BLS .
Even LTL pricing gains are limited by market softness . Rates have climbed not because of stronger demand but limited capacity , as evidenced by SJ Consulting Group ’ s analyses of volumes among the top 40 LTL trucking companies . Yellow ’ s freight has been reallocated and absorbed by competitors , but there ’ s little — if any — “ new ” freight hitting the market .
When that new freight arrives , it most likely will come from strong US manufacturing output , said Miller , who ’ s also a Journal of Commerce analyst .
“ Most trucking freight is generated by domestic manufacturing plants ,” he said , citing the US Commodity Flow Survey . “ The PMI [ purchasing managers index ] data was looking better and then April came in a little weaker .”
In April , the Institute for Supply Management ( ISM ) US manufacturing PMI dropped to 49.2 from 50.3 in March . Any reading below 50 indicates contraction . The ISM index had only turned to expansion in March . S & P Global ’ s US manufacturing PMI , which had been in expansion territory since January , dropped to a neutral reading of 50 in April .
The drop came as new orders for US manufacturers fell for the first time since December . The ISM PMI New Orders Index for April dropped from 51.4 to 49.1 . S & P Global ’ s PMI also noted a modest decrease in new orders in April .
“ In 2017 and 2018 , we were getting new order readings in the high 50s and low 60s ,” Miller said . “ Today ’ s PMI is not providing anything promising .”
Senior Editors Ari Ashe , Greg Knowler and Bill Mongelluzzo contributed to this report .
email : bill . cassidy @ spglobal . com
16 Journal of Commerce | May 20 , 2024 www . joc . com