By Cain Adams
Trinity Logistics/Longboard Logistics
Meridian, ID
Oh no, “Christmas trees are shipping so rates will go sky-high!”
Nope, not this year, guys. Instead, we are hearing capacity is climbing, which will, in turn, bring rates down. I bet you love hearing this. A freight broker saying rates are going down? This is the first Christmas season we have seen this happen in years. I guess those interest rate hikes worked?
Demand across the board is down. Customers are going on vacations; sheds are getting 20-30 calls from random brokers daily, and customers are wondering where those guys were last year when they needed more help. When it is tight, the phones do not ring. When it is loose, customers wish they did not have a published number.
Normally during Thanksgiving week, my office loses an average of $2,700 on loads we need to recover due to carriers jumping off after finding a high paying load. Not this year. This year was steady with zero fallouts. It felt like a normal week. You see, my office does not give loads back to the customer. We recover the load. We do not ask for more money from the customer. We take a negative if we need to. Seems fair. We take it. We keep it. We deliver it.
More great news: When capacity goes up, diesel prices start to come down due to less demand. SP Global stated in its December Short-Term Energy Outlook that the EIA lowered its forecast for the average 2023 retail diesel price by 17 cents to $4.48/gal, falling 11 percent from the expected full-year 2022 average of $5.05/gal thanks to high refinery utilization.
We will have to take into consideration the European Union’s ban on Russian imported fuels. The ban starts in February 2023. Pins and needles over here. We also must see if the emergency supply will try to fill up a bit. In my opinion, we should do this as soon as possible. Year 2023 is going to be a long one, and we need as many tools as possible to make it less bumpy.
We are seeing more drivers asking for fuel advances. This means drivers are getting tight on margins and needing to borrow money from the load they are hauling before it arrives at the destination. Thank goodness many drivers factor their loads, and we think even more will factor in the coming year.
Interest rates are up so conventional banking loans will get more expensive for carriers needing a credit line. I just hope carriers choose the right factoring company, because they too may be borrowing from a bank on a credit line.
What happens when a factoring company is locked into a contract with a carrier at 1.5 percen interest yet needs to borrow money at 3 percent? If a factoring company has deep pockets and can cover for 30-60 days, then they will be okay. Year 2023 will bring less loads. This too will place some strain on factoring companies, and they may need to raise their factoring rates to carriers. The squeeze is on.
We will also see a squeeze in the restaurant area of the business. Restaurants are seeing a decline in foot traffic. Inflation has hit home so more people are choosing to eat at home because it is three to four times cheaper than going to a restaurant. Furthermore, restaurants had to raise their prices, which has been a turn off to customers.
Restaurants need to figure out how to reduce their costs by being more creative. We all may end up cooking our own food. In a restaurant. Imagine that? First, it is self-bagging in stores and now it is cooking classes and paying for it? Who knows.
And finally, ocean vessels. CNBC reported a 90 percent year-over-year drop-in ocean freight rates for cargo from China to the West Coast. There are going to be a lot of empty boats and containers in 2023. This will push container rates down even more. Chinese manufacturing orders are expected to drop 40 percent by next summer. They say price wars are coming. Stand by for a weird 2023.
We hope you can gain some momentum from this article. Remember to take care of those who stood by you when high prices were here. Keep your wallet tight and keep your relationships solid. It may become a dog-eat-dog year to come.
Hold your tongue when you must. We see relationships fall apart when stress is high and when money is not rolling in the door in wheel barrels. Go into 2023 with a solid business plan. Look at your 80/20 business mix. What customers are falling behind on payments? What cities have upcoming events which may increase demand? What are the other growing regions doing differently?
Take a few weeks and do 10-15 minutes a day to ask these questions. Be proactive now so it helps you figure out 2023. Now get to work and thank you all for staying the course. This country needs you more than ever.
