Focus on Logistics
By Cain Adams
Trinity Logistics/Longboard Logistics
December is here. Already?
You ask, “Does this mean January will bring a new year and a lower cost truck?” Not exactly. Trucking will remain tight through December and out to February or March.
If you have Ruby Slippers, you may catch a break. That just means you are special.
My office decided to try and say “NO” today to many trucks who asked for more money than what we wanted to pay on all lanes. We didn’t book many loads today, but we wanted to test the market. And we were able to find about a 10-15 percent savings over last week on all lanes out of the Northwest. We were able to save a bit more from Wisconsin going west but had to come up on lanes going from Wisconsin to Florida and the East Coast.
Most trucks were still asking about holiday rates. Trucks are really thinking all of December should be Christmas, and we had a lot of hang-ups once we said, “Christmas is one day, not 31 days.” We were not trying to be rude; we were just trying to ask for reasonable rates.
Our thoughts, $4 per mile is a bit extreme, and $3 is where it seems to average out in the Northwest.
Our opinion for December is about the same as November and will be for January, so keep your boots on. It’s going to feel like mud. The first 10 days will be slower on orders, so customers will want to bring rates down a bit. Brokers should work hard to get the rates down.
Customers going to Florida should watch tomatoes and see when they will start this year. Cooler temps may keep them in the fields a bit longer, and once they start moving, this will give some leverage and lower rates going into Florida.
Rates are still extremely high all over from west to east. Going east to the west is far less expensive. We think containers will start bypassing California and working their way into eastern ports. Then, they will be hauled back to the central parts if needed. On average, a container is sitting at port for five days in California. The system out there is broken – the port is $2 billion under-funded and getting a makeover.
Containers are being shipped back to China empty instead of allowing American goods to be put on them. The only products making it into port in China are agriculture products such as soybeans and corn. This is because Brazil ran out of soybeans to sell, and corn in China was flooded out earlier in the year.
China needs the product to feed livestock.
Containers are in extreme short supply, especially the 40-foot-high cube containers. These are used for consumer goods, and China is trying to have these containers shipped back empty so they can fill them back up fast. If they’re empty, it takes about 22 days to be returned to the West Coast. The shipping companies in China are actually paying more money for empty containers over American-filled containers. It’s a faster turnaround if they come in empty, and this has been creating a hardship for export companies here in the U.S. Exporters are extremely upset.
Furthermore, the lack of containers means there is still going to be a backlog of freight in China, and it will keep our prices higher.
There are three main container building companies in China, and all of them are backordered till mid-spring. We expect these containers to keep California and the East Coast busy during the first quarter and into the second quarter.
We expect the COVID vaccine to be rolled out during the first quarter. It will be shipped in special packaging and dry ice, and it will also take priority — so we all need to pay attention to how it will be rolled out. The vaccine may be a logistics disruptor.
For 2021 we think there will be a boom in travel. This will push fuel prices up by year’s end, and we could see a surge in the service industry and a decline in retail. People will want to eat out, take their vacations and stop eating at home.
If you need new luggage, you may want to check Wal-Mart. We heard they filled 50 containers full of luggage just to be ready for the travel-ready globetrotters.
And you may also want to purchase airline tickets sooner than later. Once people are vaccinated, airlines will raise travel rates to get back in the black.
What will it mean for freight? We think the first quarter will be expensive. We think it will start coming down in the second quarter. Once the shift to Texas takes place, we think things should be a bit more settled. Border crossings may be slower, so trucks may shy away from McAllen – but we will not know till we are actually crossing product.
Spring and summer merchandise is already being ordered for giant retailers because those retailers know Chinese New Year can hold up freight. And because there is a lack of containers, retailers want to fill anything they can and ship now. That means a lot of the spring freight will land early and cause trucking to loosen up a bit in April.
We think customers will want to gain more contract pricing with carriers for 2021 but may have problems with the pricing. Carriers may be less likely to enter contracts with so much uncertainty and great spot market rates. So, if you have a great carrier who is willing to enter those contracts and fulfill them, you should sign them up. We cannot believe how tight freight is this year. We have never seen anything like it.
We hope your Christmas is amazing and, we hope everyone eats a few onions a week. Keep those immune systems up and stay in great spirits. We feel blessed to help in any way we can. It is an amazing industry with so many amazing people who work together to put food on tables. I’m not sure there is a better job out there. Keep caring, people. We all notice you.