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What will redistribution of imports mean for surface transportation?

The redistribution of imports increases risk of putting domestic networks further out of balance

(Photo: Jim Allen/FreightWaves at Port Houston)

Chart of the Week:   Inbound Ocean Shipments Index – Houston, Los Angeles, Savannah, New York, Oakland SONAR: IOSI.USHOU, IOSI.USLAX, IOSI.USSAV, IOSI.USNYC, IOSI.USOAK

Import volumes continue to climb, creating bottlenecks at some of the largest ports in the U.S. Importers are scrambling to find a more reliable point of entry by booking freight coming into less-congested areas. The Inbound Ocean Shipments Index measures freight booking activity for shipments entering the U.S. at the port level based on estimated departure dates. The Port of Oakland has been outpacing many of the nation’s largest ports in terms of shipment growth since the end of September. Port Houston recently saw a huge spike in bookings in the middle of March. What will this do to the already strained surface transportation providers networks and subsequently rates?

Over the past year the driving storyline for the economy and transportation has been the surging consumer demand for durable goods, which has led to extreme growth in imports and domestic freight movements. 

The ports of Los Angeles and Long Beach account for over 40% of the total maritime import shipment volumes. Image – SONAR Tree Map of import market share

The largest lanes for maritime imports originate in China and end on the North American West Coast, predominantly the ports of Los Angeles and Long Beach. As of last week, the Southern California ports handled over 40% of the shipments entering the U.S. 

According to this week’s chart, bookings for freight bound for alternative ports are increasing faster than LA and Long Beach. Given these are percentages of much smaller starting figures, the changes are significant against the backdrop of historic norms. 

Not only are the ports infrastructures set up to handle a smaller amount of container volumes, but the surface transportation providers such as drayage, rail and truckload will also be tested as freight flow patterns disrupt network balance. 

For drayage providers, this will simply be an abundance of demand that will inevitably push rates higher and keep them busier than normal. The amount of drayage capacity will directly impact what happens downstream to warehouses and trucking providers, potentially limiting or delaying their exposure to surging demand.   

Rail networks were already tested last fall with heavy volumes moving from west to east, creating large imbalances. This new pattern may actually help even things out on their end with freight being more evenly dispersed. The big risk to rail in the long run if importers decide to push more freight into the East Coast ports is eliminating the cost advantage rail has for long haul moves over 800 miles. This could mean lower volumes over time. 

Truckload networks take a long time to build efficiently and drastic changes to domestic freight flows can wreak havoc on available capacity. Some markets may benefit from additional volumes. Northern California for instance is normally oversupplied in relation to the rest of the country with more freight entering than exiting the area. A growth in import volumes could help balance the markets as outbound demand rises. 

Savannah, however, is on the opposite end of that spectrum. Savannah produces more freight than it consumes thanks to the port and a relatively low population density. Carriers will have trouble finding enough inbound loads to keep the market well supplied. Carriers will more than likely reposition trucks from Florida and South Carolina to meet the growing demand. 

While these are nearby, they will also require “deadheading,” in which they move the truck without an active paying load, driving up the outbound rate.

Imports have been fueling domestic freight volumes over the past several months. Chart: SONAR – Outbound Tender Volume Index, Customs Shipments – USA

In the big picture, this also means more freight to move in general throughout the U.S. As mentioned previously, there may be limitations to downstream providers that buffers their experience to an extent, but that will lead to an extended period of elevated demand versus a large spike.

Looking at import shipments clearing customs and tender volumes for truckload shipments, there appears to be a ceiling that has formed for the time being. This supports the notion that a spike is unlikely without a strong catalyst. 

So even as imports grow and are redistributed across various ports, the main risk to transportation markets will be pushing certain areas out of balance. 

About the Chart of the Week

The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real time. Each week a market expert will post a chart, along with commentary, live on the front page. After that, the Chart of the Week will be archived on for future reference.

SONAR aggregates data from hundreds of sources, presenting the data in charts and maps and providing commentary on what freight market experts want to know about the industry in real time.

The FreightWaves data science and product teams are releasing new datasets each week and enhancing the client experience. To request a SONAR demo, click here.

One Comment

  1. MrbigR504

    Gonna be reeeeal interesting to see how all that dead heading will be fairly compensated for the owner operators if this comes to pass. Don’t take no shorts driver’s, they need us more than we need them to move these damn cans! JB Hunt, Swift & Hub can’t get those 20’s and 40’s that’s for damn sure! Their gonna have to sh-t or get off the pot and come correct with the money! Ships and trains can’t load and unload if nobody’s hauling these cans! STAY WOKE DRIVERS!!!

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Zach Strickland, FW Market Expert & Market Analyst

Zach Strickland, the “Sultan of SONAR,” curates the weekly market update. Zach is also one of FreightWaves’ Market Experts. With a degree in Finance, Strickland spent the early part of his career in banking before transitioning to transportation in various roles and segments, such as truckload and LTL. He has over 13 years of transportation experience, specializing in data, pricing, and analytics.