Supply Chain by the Numbers

- Nov. 2, 2017 -

  Supply Chain by the Numbers for Week of Nov. 2, 2017

US Truckload Rates Jump Sharply; Big Duties Coming on Chinese Aluminum Foil; US Manufacturing is Showing Strength; Container Carriers Back on Megaship Order Spree



That was the sharp rise in US truckload rates in September, according to the just released Cass Linehaul Index, which measures per mile rates before fuel surcharges and other accessorials, as determined by the more than $1 billion in freight bills Cass pays for shippers each month. That put the index at a level of 128.2, an all-time record, and which means rates are up 28.2% since the baseline month of January 2005. After showing year-over-year declines for 13 months in a row, the Cass Linehaul Index has now only been positive now for six months, but the strength is accelerating, supporting other indicators that freight rates are finally climbing as freight volumes strengthen. A shortage of drivers is fueling the upward rate pressure, with JB Hunt, for example, warning customers that rates may soon rise 10% or more, mostly due to a lack of drivers to seat in available tractors.



That was the level of the US Purchasing Manager’s Index for October, according to monthly measure from the Institute for Supply Management. That was down a bit from the September score of 60.8, which was the highest index since May 2004, but it is still well above the 50 mark that separates manufacturing expansion from contraction. Similar story for the Creighton's Mid-America Business Conditions Index, which covers nine states, as it rose to 58.8 in October from 58.2 in September. It is the 11th consecutive month the index signaled strong economic growth for factories in the region that includes Minnesota, the Dakotas, Iowa, Kansas, Missouri, Nebraska, Oklahoma and Arkansas. "Both the national and our regional indices indicate that the manufacturing sector is expanding at a very healthy pace and that this expansion will spill over into the broader national and regional economies in the next three to six months," commented Ernie Goss, director of the Creighton Economic Forecasting Group.



That is the incredible preliminary range of duties that will be imposed on imports of Chinese aluminum foil into the US. That after the Commerce Dept. found that Chinese state subsidies for its domestic foil industry disadvantaged American products. The department will issue its final determination for the duties on Feb. 23. China has reacted strongly, saying US move ignored World Trade Organization rules and called on the government in Washington to fulfill its international obligations. China will "take necessary actions" to protect the legitimate interests of Chinese companies and reserves rights to resolve the dispute under WTO mechanism, it said. From Jan. 20, the day Trump took office, through Oct. 25, the Commerce Department said it initiated 77 anti-dumping and countervailing duty investigations, up 61% from the previous year. A true trade war may be in the offing.



That is how many megaships, defined as those with TEU capacity of over 18,000 TEU, currently on order, according to the latest estimates from Alphaliner. That after a period of relative asset discipline in 2016 and into 2017 in the container shipping industry, after an earlier ship buying spree that led to huge overcapacity in the face of declining growth in container volumes. Now volumes are back on the rise – but probably not nearly as fast as capacity is being added once again. COSCO, the world’s fourth biggest container line, is getting 17 new megaships next year and Evergreen 11 by 2019. MSC and CMA CGM, the second and third biggest operators, will get major new deliveries starting in the second half of 2019. Alphaliner says shipping demand would have to grow 8% annually for the overcapacity to be cleared next year. If growth is a more realistic 5%, overcapacity will extend into 2020 – assuming there are no new ship orders on top of what is already on the books, unlikely scenario. So it should still be largely good rate times for shippers.