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Will the import boom lead trucking to an active ‘off’ season?

Photo: Jim Allen - FreightWaves

Chart of the Week:  US Customs Maritime Import Shipments, Outbound Tender Volume Index – USA SONAR: CSTM.USA, OTVI.USA

Imports and truckload tenders have been moving in near lockstep since mid-May as the U.S. crawls out of the pandemic-induced recession. With elevated import volumes forecast to continue into 2021, this could mean trucking may have a stronger opening quarter even after the traditional holiday peak season ends. 

Prior to COVID-19, the connection between imports and domestic trucking had been somewhat disjointed due to slowing demand and high inventory levels. Trade and sourcing concerns were at an all-time high in 2019 as the U.S. and China exchanged blows via new tariffs on goods. This inspired many companies to grow inventories to their highest levels since the oil-induced mini-industrial recession in 2016 in an attempt to avoid further tariffs.

Business inventory levels have fallen to the lowest levels in five years in relation to sales. Chart: SONAR – TBIS.USA

There has also been an increasing trend to keep more inventory thanks to the growth of e-commerce. Consumers are now conditioned to expect their online orders within a few days of placing them online thanks to programs like Amazon Prime, which is what makes it so competitive with traditional brick-and-mortar storefronts now that prices have risen in the online environment.

The increasing service expectation means that retailers need to keep multiple items or SKUs close to consumer populations for quick fulfillment. The pandemic threw a wrench into what was a well-oiled system by not only cutting off the production source of many of our consumer goods, but also changing consumer demand behaviors. 

With supply chains struggling to recover after the U.S. and China shut down to flatten the curve in early 2020, consumers did not stop consuming. Looking at the Outbound Tender Volume Index (OTVI), which measures total truckload electronic tenders in the U.S., there was a large spike in March, with the index rising nearly 30% in three-weeks’ time before receding faster than in rose as people hoarded for what they thought would be a few weeks of sheltering in place. 

During the same period, total maritime import shipments clearing customs declined beyond the typical seasonal threshold that follows Chinese New Year (CNY) — the drop in imports was compounded by China’s response to COVID-19, with factories closing longer than normal around the nation’s most celebrated national holiday.

After sitting at home for a month, American consumers changed their behavior from hoarding toiletries and food items to home improvement and electronics, purchasing at rates 30%-40% above what was expected. Eventually, the inventories depleted for many of these items that were not forecast to grow at such an astounding pace. 

This trend continued into the fourth quarter as shippers are still struggling to replenish inventory and keep up with demand. This means goods do not have much time to sit in warehouses before heading to distribution centers with peak retail season looming around the holidays.

Rail loaded container volumes have recovered to 2018 levels, nearly 6% above 2019 in late October out of Southern California. Chart: SONAR – ORAILL.LAX

Contributing to the capacity crunch, railroads implemented peak season surcharges in August, basically denying capacity to noncontracted shippers for volumes above expectation off the West Coast, which forced much of the long-haul freight moving more than 500 miles onto trucks instead of on the rails. Freight moving more than 500 miles has a bigger impact to trucking capacity than sub-500-mile moves. 

Thanks to low inventory, unexpected demand and tight railroad capacity — a preferred method of transport for many shippers importing into the U.S. for moving across the country — there is little ambiguity between the time a shipment enters the U.S. and when it gets loaded on a truck. 

The rails are starting to adjust their schedules and add capacity that they had drawn down earlier in the year, but the freight that typically moves this time of year is shorter haul with much higher service requirements, which is not conducive to rail.

According to FreightWaves’ Ocean TEU Volume Index, total twenty-foot equivalent units scheduled to leave their points of origin over the next week are 59% over last year — a trend that has been in place since August. This freight will not hit the U.S. for two weeks after departure at earliest, and it is showing no sign of slowing. 

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 data sets each week and enhancing the client experience.

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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.