Supply Chain by the Numbers

- July 13, 2018 -

  Supply Chain by the Numbers for Week of July 13, 2018

No Stopping US Transportation Rates; Manufacturing Jobs Now Offer Security; US Trade Deficit in Goods with China Sets Another Record; Carriers being Hammered by Rising Bunker Fuel Costs



Wow – that is the year over year change in June in the Cass Linehaul Index, which measures per mile US truckload rates before fuel surcharges and accessorials. That is the highest monthly increase in rates since Cass Information Systems launched the index in January 2015 – but was just barely above the previous record set the month before in May, as transport costs continue to soar. The index has not only been positive now for 15 consecutive months, but the strength is continuing to accelerate. "We are increasing our realized contract pricing forecast for 2018 from a range of 6% to 8% to a range of 6% to 12%, and current data is clearly signaling that the risk to our estimate may be to the upside," stated Donald Broughton, analyst and commentator for the Cass indexes. "We believe that this is the strongest normalized percentage level of truckload pricing achieved since deregulation” – back in 1980.


$152.2 Billion

That was the US trade deficit in goods with China through May this year, an all-time record according to data released last week by the Census Bureau. So despite the reasonably good news on US manufacturing employment, it is not the result of slowing imports, it seems. The Census Bureau in fact finds the dollar value of the goods the US has bought from China so far this year is 3.87 times greater than the dollar value of the goods China has bought from the United States. Before this year, the largest merchandise trade deficit with China in the first five months of the year was in 2015, when it hit $148.4 trillion in constant dollars. The last month that the U.S. ran a merchandise trade surplus with China was April 1986. What happens as the US tariffs take hold? We'll see.



That's about how many US manufacturing employees are being laid off per month in the past few years. That may sound like a lot, but in fact that number is not only way down from 300,000 or so furloughed per month in the recession year of 2009, it is the lowest pace in Labor Department records back to 2000. In the 12 months ended in May, the manufacturing sector accounted for 6.6% of all involuntary discharges in the US according to the Labor Department data, down from 9.9% during the last economic expansion between 2001 and 2007. What's more, even during that 2001-07 expansion, more than 2 million manufacturing jobs were lost, then another two million more disppeared during the recession. But since 2010, manufacturers have added more than one million jobs. For the first time in a long time, there is job security in manufacturing, the Wall Street Journal says.



That's by how much the bunker fuel that powers most ocean cargo ships has risen this year – putting additional hurt on the bottom lines of many container carriers. In fact, not long ago, the world's three largest container carriers, Maersk Line, MSC and CMA CGM issued emergency fuel surcharges to supplement their existing fuel levy mechanisms. Many other carriers followed suit. But wait? Don't carriers already have mechanisms to adjust fuel surcharges when bunker costs rise? Yes and no, it appears. Turns out that with larger shippers the carriers often wave the surcharge in favor of an all-in rate – great when fuel costs are low, but brutal as bunker costs soar. "This combination of lower all-in rates and higher fuel costs is a toxic pairing for carriers, many of which have published financial losses for the first quarter. Similarly poor, if not worse results can be expected for the second quarter," said the analyst at Drury last week.