Shipping and Logistics

Freight Volumes Recovering from Pandemic

October 16, 2020

North American freight volumes are almost back to 2019 levels, says Cass Information Systems. The September Cass Freight Index for shipments rose 7.1 percent from August to September and was just 1.8 percent below last year’s levels. The index recovered 27.6 percent since reaching a low in April. Cass expects shipments to remain strong through the end of the year as inventories are replenished.

A surge of imports at West Coast ports supports freight index data. September imports were up 17 percent year-over-year at the Port of Los Angeles and have caused disruption as ports scramble for warehousing and chassis for transport.

“Large U.S. importers are bringing in a disproportionate amount of their containers to Southern California and then moving truck or rail around the U.S. to avoid stock-outs,” said Cass. “This results in higher transportation costs, but it’s necessary to keep goods in stock (versus waiting for the longer transit time it takes for containers to get from Asia to the East Coast or Gulf Coast ports).”

U.S. rail volumes improved in September and climbed 1.9 percent year-over-year in the week ending Oct. 10. Combined North American volumes for carloads and intermodals increased 1.8 percent.

The U.S. trucking industry is reporting tight capacity, but with variations across carrier sectors. Retail and consumer packaged goods are up 10 percent, said DAT, but industrial shipments are lagging. DAT is also seeing a trend among retailers and grocers to shift from just-in-time inventory to stockpiling against a potential re-surge of COVID-19. Some capacity tightness is due to a shortage of drivers, already a problem pre-pandemic, that has worsened due to layoffs during the crisis and the inability of many drivers to pass drug testing.

“The industry is ordering a lot more trucks, and trailer orders are surging, but I don’t think that’s really going to impact capacity,” said ATA Chief Economist Bob Costello Costello at a shipping symposium last week. “At the end of the day, you have to have a driver to put in the seat. If you can’t do that, I don’t know how you’re going to increase capacity.”

Costello said another factor in tight capacity is the closure of some smaller companies due to the pandemic or, in some cases, the high cost of liability insurance.

Tight capacity generally drives higher spot rates, a trend that has been evident in the past several months. Rates climbed 11.4 percent from August to September and are up 115.9 percent compared to September 2019. Rates are elevated across each segment: van, reefer and flatbed.

Demand for trucks slipped in the week ending Oct. 12 following a surge for last week’s e-commerce sales, but is expected to remain strong through the remainder of the year. Despite challenges ahead, the American Trucking Association’s latest long-term freight forecast expects freight volumes to grow 36 percent between now and 2031.

“The COVID-19 pandemic has had an unprecedented impact on many parts of the economy and trucking is no exception,” said Costello. “However, despite significant contractions in 2020, the forecast makes it clear that the long-term trend for trucking, as well as for the overall freight economy is positive.”