JULY BLOG

6 Factors impacting freight market prices in the month of July

Whether you are a shipper, receiver, or carrier, it’s good to know what is affecting the cost of freight in today’s market. Check out six factors in July that are impacting freight market prices.

Government survey suggests rising tariff concerns and trucking shortage are affecting activity

Economic demand continues to grow in the start of the third quarter, but government survey results suggest that trucking capacity and concerns over tariffs have limited the performance of several divisions. Details from the Federal Reserve’s Beige Book and data from regional business surveys suggest that demand is growing but there continues to be a struggle to find available carriers to move freight. The result? Production delays and unfulfilled orders.

The recent escalation of the United States’ trade dispute with China and the implementation of tariffs was a primary concern in the surveys. One respondent from the Philadelphia district noted that “the effect of the steel tariffs has been chaotic to its supply chain, disrupting planned orders, increasing prices, and prompting panic buying.”

Six of the twelve federal districts highlighted the trucking industry’s capacity issues, noting that the shortage of commercial drivers disrupted business activity.

Pump prices back on the rise in July

The first half of July, we saw an increase in prices at the pump after a June full of gas and diesel dips. After small decreases throughout the month of June, the national average for on-highway diesel crept up to $3.243 per gallon nation-wide. That is 76.2 cents higher than the same week last year.

National gasoline prices also were up 1.3 cents to $2.857 per gallon, resulting in a 56-cent increase from the same time last year.

Demand continues to exceed capacity, as DAT barometers still point to strong growth

Toward the end of July, record high DAT dry van and reefer charts have eased up slightly as trucking companies become more comfortable with ELDs. However, flatbed charts continued to set record highs until recently in July as they begin to scale back very slightly. These three modes of freight continue to reflect that demand exceeds capacity.

Rail freight volumes continue to climb

The Association of American Railroads said U.S. rail traffic for the week ending July 21 was 553,024 carloads and intermodal units, up 4.9 percent compared to the same week in 2017. Freight was up 3.8 percent with 265,338 carloads, while intermodal volume was up 5.9 percent on-year with 287,686 containers and trailers.

For the first half of 2018, U.S. railroads reported total combined traffic of 15,498,252 carloads and intermodal units, which was a 3.9 percent increase.

Tonnage rises 7.8% in June, Up 8% in first half of 2018

This month, American Trucking Associations reported truck tonnage at the end of June was 7.8 percent higher than a year prior and is up nearly 8 percent through the first half of 2018. The increase doubled the 3.8 percent gain seen in the first half of 2017. ATA Chief Economist Bob Costello anticipates the growth in tonnage to remain at very high levels in the months ahead.

Cass Freight Index Report, another firm that measures freight activity, reported that “June demand was exceeding capacity in most modes of transportation by significant margins.”

U.S. warehouse supply at its tightest in two decades

Warehouse availability rates, which include properties that are vacant or will soon be vacant, had fallen for a record 32 quarters. For U.S. retailers, manufacturers, importers, and exporters, warehouse space is the tightest it has been since 2000. New warehouse space is becoming occupied as soon as it becomes available.

E-commerce has been driving up demand for warehouse space and has also pushed retailers to adjust how they use spaces they already occupy. Some distribution centers have added fulfillment operations, while other warehouses have converted to “cross-dock” facilities to handle last-mile delivery of certain items.

Additionally, the changes to trade policy could throw off the current near-alignment of supply and demand in industrial real estate.

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