Economy

Early February Logistics Report

February 14, 2015

Dry cargo rates continue to plummet as the Baltic Dry Cargo index dropped to record lows last week. The index fell to 553 on Wednesday and continued to slide downward to end the week at 530 points.

MID-SHIP says shipowners and operators are suffering major revenue losses, with one owner/operator declaring bankruptcy last week. Charterers worry about operators defaulting as well as contracts that contain much higher freight rates than are currently found in the market.

“Cheap rates are also disrupting trade patterns as suddenly cargoes can be purchased from origins that were not contemplated before but with low commodity prices, coupled with very low freight rates, new competitors have evolved,” writes MID-SHIP in their Feb. 10 report.

Low prices on iron ore and coal have dampened seabourne trade, exacerbating shipping revenue problems.

US barge traffic is slowed somewhat although steel imports continue to be strong and moving north on the river system.

The West Coast port negotiations continue to deteriorate with port closures over the long holiday weekend. Congestion and delays has shifted trade to eastern ports. MID-SHIP reports that, according to PIERS Data, container volume through the Port of Los Angeles fell 30 percent in January while East Coast ports increased during the same period. Congestion at ports continues to grow with 22 container ships reported waiting at anchor on Saturday at the ports of Los Angeles and Long Beach.

On Saturday, Feb. 14, the White House announced Thomas Perez, secretary of labor, will attempt a mediation settlement between the ILWU and PMA. A statement from the White House said the president is acting “out of concern for the economic consequences of further delay.”

Rail traffic increased by 3.4 percent in January, according to data from the American Association of Railroads. Coal and crushed stone, gravel and sand led the increase in carloads for January.

A trucking industry increase received affirmation by U.S. Transportation Secretary Anthony Fox. “We obviously have a lot of things moving around this country today by rail, by ship, by air. That’s going to change. We’re going to have a 60% increase in truck traffic, we estimate over the next 30 years,” said Fox. The increase will be due in part to consumer online shopping.

The comment was a result of a Transportation Department report outlining the agency’s outlook for the US transportation sector. The report highlights the need for improved infrastructure to accommodate the future of the transportation industry. Trucking also continues to struggle with driver recruitment and retention.

Diesel fuel averaged $2.835/gallon last week, rising for the first time this year. Fuel surcharges are currently between $.38 to $.40/one way miles.