Supply Chain by the Numbers

- Sept. 26, 2019 -

  Supply Chain by the Numbers for Sept. 26, 2019

Freight Numbers Sending Mixed Signals; Prediction for Strong Holiday Sales; Rates are Falling, but Container Ships Keep Coming; After Tariff Exemptions, Apple to Keep Production in Texas



That was the rise in August Freight Tonnage Index from the American Trucking Associations, in data released this week. That solid gain comes as other measures suggest truckers are seeing tough market conditions. For example, the Cass Freight Index for August – which measures US "shipments" – saw a 3.0% drop in August, following declines of 5.9% in July, 5.3% in June, and 6.0% in May. That caused Cass to write that the shipments index has gone from "warning of a potential slowdown" to "signaling an economic contraction." But the ATA index not only was up strong in August, it is up a solid 4.3% on a year-to-date basis, with ATA economist Bob Costello saying "truck tonnage shows that it is unlikely that the economy is slipping into a recession." So what is the real story? Hard to say, but the ATA noted that its tonnage data is dominated by contract freight, which is performing significantly better than spot market freight this year.



That amazingly how many container ships of 11,000 TEU or greater are scheduled to be delivered to the global market before the end next year, according to a new estimate from the analysts at Alphaliner. That news as container shipping rates are once again plummeting in the face of seemingly never ending overcapacity in the sector. Carriers are already offering heavily discounted rates of below $500 per TEU from Asia to Europe and of less than $1,100 for sailings to the US west coast. Container spot rates have fallen to a four-month low and are some 18% below the level of a year ago in a soft market weakened by trade wars, according to the Shanghai Containerized Freight Index (SCFI). Alphaliner warned that "further rate weakness" was likely for the rest of 2019 due to "ineffective" capacity management by container lines. Alphaliner says carriers laying up container ships to take out capacity is an increasingly losing strategy due to the considerable costs of keeping large megaships idle and not producing revenue. All this is "sending financial shock waves through the boardrooms of major container lines," TheLoadstar reports. All this is continued good news for global shippers, but will in the end result in more mergers and bankruptcies.



That is the expected increase in retail holiday sales this year, according to a new forecasts from the analysts at Deloitte. If accurate, that would be a nice jump from the 3.1% growth in 2018. That despite the growing concerns about the economy, fueled by the US-China trade war. And naturally, Deloitte forecasts ecommerce sales will grow much faster than overall retail, rising 14%-to-18% to $144 billion-to-$149 billion in holiday season sales, ahead of $126.4 billion in 2018.
Deloitte economic forecaster Daniel Bachman partially attributed the expected growth in the 2019 holiday season to a still very strong labor market. 2018 holiday retail came in below expectations, for reasons still not clear, given the strength of the economy, though the government shutdown may have played a role.



That is the number of components for which Apple is now getting exemptions from tariffs on China's imports. Why? Because that's what it took for Apple to keep production of its new Mac Pro computer in Texas, reversing previously announced plans to shift assembly of the computer to China. The exclusions for components, including a power supply and a logic board, cover a period from September of last year to August 2020, and the US will refund tariffs already paid. Apple had already picked Taiwanese contractor Quanta Computer to assemble the nearly $6,000 desktop computer outside Shanghai. The high-end computer, which was introduced in 2013, had been assembled in Austin, Texas, by contractor Flex and was touted as Apple's only Made in USA product.
Reports were that Apple had asked suppliers to move as much as a third of production for some devices outside China to avoid the tariffs.

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