Demand for Freight Drives Up Spot Market Rates

Transport Topics has released on article about how the demand for freight has driven up sport market rates, which could affect our customers who are sending loads that need immediate movement. Read the article below to see the trends and current prices to help you better plan your shipments and manage your freight accordingly:

Trucking has seen a turnaround bolstered by spot market rates and increased demand.

“There is definitely strong upwards trends in both demand and rates,” Nick Wynkoop, product manager for rates and analytics at Truckstop.com, told Transport Topics. “Usually in past Junes, we’ve had yearly peaks in spot markets. That’s usually the highest month. This year, instead of dropping off for July and August, we have continued the upwards trend for spot freight.”

Truckstop.com is an online freight-matching marketplace that tracks industry trends weekly in partnership with FTR Transportation Intelligence. Their latest report found that during the week ended Aug. 7, demand for loads increased 5.4% to 80.05 index points from 70.96, and spot rates for that week increased 1.6% to $2.32 from $2.28.

“This has been a very fast evolving environment,” said Avery Vise, FTR vice president of trucking research. “So if you go back to the April and even May time frame, we saw a fairly significant decline in rates in the spot market. You don’t tend to see contract rates change that quickly.”

Spot market rates apply to shipments that need to be moved immediately. Contract rates are the price agreed upon to move a type of shipment over a certain amount of time.

“We’ve seen a pretty dramatic firming of the rate environment,” Vise said. “If you look back to mid-April, we were down on the order of 25% year-over-year in spot rates. At this point, total spot rates are up about 17%.”

The weekly report showed the dry van segment had the most significant year-over-year spot rate increase at 35% for the week ended Aug. 7. The refrigerated segment followed at 27%. The flatbed segment was up 12%.

“We’re talking about levels similar to the increases we saw in the peak in 2018, [when results were up 16%],” Vise said. “But there are differences that are important. One is, we have a demand-driven response here that is combined with capacity. Both are setting the stage for this.”

DAT Solutions found similar trends. Its Truckload Volume Index, a measure of dry van, refrigerated and flatbed loads, increased 2.1% in July from June, bucking seasonal trends, and was 3.7% higher than July 2019.

“States are reopening at different rates and are being hit by the virus at different times. This is leading to unseasonal peaks and valleys in manufacturing output and consumer demand,” Ken Adamo, DAT chief of analytics, said Aug. 13.

“Carrier networks are out of balance due to inconsistent freight demand at a commodity and lane level, and this is leading to a spike in demand for spot freight in order to meet the capacity need,” he added.

DAT said its load-to-truck ratio for vans was up for the third straight month to 4.4, up 25% from June. Spot van rates averaged $2.03 per mile nationally, up 23 cents compared with June and 19 cents higher versus July 2019.

Reefer volumes in July were up less than 1% month-over-month. The load-to-truck ratio was 7.4, four times higher than April’s all-time low of 1.7 loads per truck. The rate was $2.30 per mile, up 15 cents compared with June, and 11 cents higher year-over-year.

Flatbed volume in July was steady compared with June and down 6.6% compared with July last year. The spot rate was $2.20 per mile, 13 cents more than June but 7 cents lower than July 2019.

The trucking industry has much volatility since early in the year when the coronavirus pandemic started rippling through the economy.

“With COVID, supply and demand has been all over the place,” said Kevin Zweier, vice president of transportation at Chainalytics. “Demand for shipments were down when we were in March, April and May and then it started coming back in June, July and August. That’s where we’ve been seeing the rise in spot rates.”

Further, trucking companies have had to adapt to demand shifting considerably in favor of retail (over the commercial sector) since more people have been staying in instead of going out to restaurants and bars.

“All of these things are adding up,” Adamo said. “Spot rates are up. At their lowest, they may be $1.35 in April when we saw all the restaurants were closed and people weren’t going out. And now we’re seeing rates bumping up if not exceeding $2 a mile for the spot market. That’s just tremendous. Unprecedented levels of rate increases.”

Jim Nicholson, vice president of carrier sales and operations at Loadsmart, said there is reason to believe there will be prolonged demand through the rest of the year with the strength in imports leading into the holiday retail season.

“Consumer spending remains healthy,” Nicholson said, “supported by stimulus and shifting spending patterns, including from services to retail.”

Source: Transport Topics

Parcel Market Update - UPS' Profit Soars to Record

Article Summary:

• Earnings per share almost doubled what was expected (Expected: $1.07 Actual: $2.13)

• This was driven primarily by the increased accessorial charges assessed to the thriving e-commerce segment of their delivery network

  • Domestic Delivery spiked 65.2% which caused them to assess the $0.30 e-commerce surcharge and a handful of “hidden” accessorial charges

UPS reported their Q2 earnings this morning, and we wanted to bring a couple items to your attention:

1. Earnings per share almost doubled what was expected (Expected: $1.07 Actual: $2:13).

2. This was driven primarily by the increased accessorial charges assessed to the thriving e-commerce segment of their delivery network.

   • Domestic Delivery spiked 65.2% which caused them to assess the.30 e-commerce surcharge and a handful of “hidden” accessorial charges

What this means for distributors:

1. UPS has figured out how to dramatically increase profitability in a COVID-19 world.

2. UPS knows UPS shippers have had to change their delivery network and business strategy towards e-commerce.

3. UPS knows most shippers can’t change to FedEx (and vice versa) or strategically renegotiate due to the changing network and environment.

What this means for the bottom line:

1. UPS has levied accessorial charges and made it very difficult for parcel shippers to change and/or not pay these increased charges. Most customers are having to eat the charges and don’t have the staff to recoup any money.

We would love to talk more about this as part of your overall distribution chain/transportation strategy and about how we’re helping other distributors to offset these increases. For more information, please reach out to us at eShipping.biz.

Source: Business Insider

July Sees Continued Surge in Full Truckload and International Rates

A quickly changing market and increased rates can affect our customers’ FTL and international shipping. We want to keep you informed to help you navigate your distribution chain strategies. Please read the below summary of an update on July’s rates from Freightos:

Full Truckload rates in July were the highest they’ve been in more than 13 months. International Asia to US ocean rates are up 73% compared to this time last year.

Aggregated national full truckload data compiled by DAT show rates continued to rise through July. They now average $2.02 per mile (incl. fuel), the highest monthly average in more than 13 months.

The rates surge since the record-breaking low’s in May are remarkable, climbing $0.43 per mile (27%) in just two months.

Looking further upstream, International import spot rates shows a similarly dramatic increase.

The Freightos Baltic Index which tracks Asia to US West Coast pricing has current market conditions at $2,711 per 40' container which is $1,185 (73%) higher that this same time last year.

Having been relatively flat year to date, the rates surge since the end of May has seen container prices increase by $1,173 (72%) in just two months.

Source: Freightos.com

Asia to US Capacity Update

eShipping’s primary agent in China and SE Asia reports that ocean vessel space to the United States continues to be tight despite the removal of nearly all blank sailings.

Overall, capacity is beginning to approach 2019 levels; however, based on carriers’ prospective September bookings, there are indications that the back half of August may see volumes peak for 2020 before tapering off.

Vessel space out of Cambodia in particular remains extremely tight.

Current capacity notes from China for weeks 34-39:

• Central China: Shanghai space to the USWC and USEC remains full due to elevated levels of PPE. COSCO and other carriers still have weight limitations to the USEC. Ningbo space to the USWC and USEC is full especially for Ocean Alliance carriers. Gulf Coast routings have capacity and present valid possible routing alternatives.

• Northern China: Compared to peak congestion near the end of June space out of Dalian has improved considerably. COSCO has available capacity to the USEC and MSC, ONE, and YML are seeking volume to both US coasts. Qingdao space to the USWC ports is full however capacity is available on USEC routings.

• Southern China: Vessel space on all services remains very tight.

• Taiwan and Fujian services are full through the end of August.  

Current capacity notes from additional SE Asian locations:

Operational Summary by Location:

eShipping Distribution Services to Open a Dallas/Fort Worth Warehouse This Fall

We are excited to announce that this Fall 2020, eShipping is poised to open our next warehouse facility in the Dallas/Fort Worth area!

As one of six eShipping Distribution Services warehouses, this facility offers clients 145,000+ square feet of state-of-the-art warehousing and fulfillment services, customized to each client’s specific needs.

“eShipping Distribution Services is ready to increase the scale of the company, which translates to new investments that benefit customers in other locations,” Matt Weiss, Chief Operating Officer, said.

With this addition, our customers benefit from having multiple routing options on the ocean imports, allowing them to bring supplies all-water via Houston or inland by rail from Long Beach.

“A Dallas/Fort Worth warehouse has frequently been requested from our customers,” Matt said. “We are excited to increase the scale of the company that benefits our customers in other locations.”

For a complete list of warehousing services or to lock in your 2021 rates, contact us today at eShippingDistributionServices.com.

PierPass Fees at Ports of Los Angeles and Long Beach to Increase 4.2% Effective Aug. 1

Bill Mongelluzzo, Senior Editor at the Journal of Commerce, provides this update on the LA-LB port complex announcement regarding PierPass changes:

“Terminal operators will increase the traffic mitigation fee (TMF) used to fund night and weekend gates at the Los Angeles-Long Beach port complex by 4.2 percent starting Aug. 1.

The TMF, which is adjusted each year based on the West Coast longshore contract, will increase to $33.47 per TEU and $66.94 per FEU on all non-exempt containers, the West Coast Marine Terminal Operators Agreement (WCMTOA) announced Tuesday. Exempt containers include empties, laden containers that transit the Alameda Corridor, and containers that are transshipped. Empty chassis and bobtail trucks are also exempt, WCMTOA said in a statement.

In addition to the 8 a.m. to 5 p.m. weekday gates that most US ports offer, the 12 container terminals in Southern California normally operate four weeknight gates and one weekend day gate. When it was instituted in 2005, the TMF was charged only on container moves made during the peak daytime hours when traffic on local streets and freeways was the heaviest.

Originally, truck moves in the off-peak hours did not pay the fee, but that changed in late 2018.

By discouraging daytime traffic, the TMF created operational problems, including truck “bunching” in the late afternoon as truckers queued up outside the gates, waiting for the fee to end with the beginning of the night shift.

PierPass Inc., which manages the extended gates program for WCMTOA members, in late 2018 switched to a flat fee charged on all non-exempt truck moves, both day and night. John Cushing, PierPass president, told JOC.com last December that as a result of the new flat fee, truck bunching at terminal gates was eliminated, truck turn times improved, and the approximately 50-50 split between peak and off-peak hours remained.”

Source: LA-LB gate fees to rise 4.2 percent Aug. 1

US Ocean Import Rates Continue To Rise Despite Low Volumes And Blank Sailings

Ethan Buchman, in the Freightos Weekly Update makes note of two key Ocean Import trends at the moment:

• US ocean import volumes are still low, significantly so, with no sign of normalizing any time soon

• US ocean import spot rates are the highest they’ve been in 18 months.

Full Article:

“Summer import projections are better than they were a month ago, but ocean volumes to the US are still expected to be down significantly through September.

And ocean carriers agree, announcing 75 more cancellations this week, with more expected in the coming days.

So far 10-15% of sailings from Asia to Europe have been cancelled through August, and 5-10% have been blanked to the US. The bump in demand has also resulted in some rolled shipments out of China, with some shippers reporting delays of up to two weeks to get on overbooked ships.

But there are some signs of a return to normal: Air rates continued to decline from their near-record highs out of China as PPE demand cools, with Freightos.com marketplace data showing rates falling by 5-25% across lanes out of China since last week.

Data from WebCargo – who announced a new partnership to offer live eBookings and pricing with Air Bridge Cargo this week – shows a 63% increase in air cargo eBookings in May compared to April, as some shippers may be motivated by the recent decline in rates and some commercial cargo returns to the market. And after being hit hard by travel restrictions, some passenger air travel is also being restored, which will add capacity to the cargo market even as volumes dipped in the last few weeks.

There are also signs of life in US trucking employment, with Wall Street taking note, and eCommerce is still surging. As a result both UPS and FedEx announced rate hikes for high-volume shippers this week, and logistics operators added thousands of jobs in May to keep up with the volume of orders.”

Truck Movement Declines Across US After July 4th, Businesses Close Again

Beginning after the close of the July 4th holiday, truck movement “is down in nearly all 50 states over a two-week moving average,” according to TransportDive and U.S. DAT data. This downturn coincides with record-breaking COVID-19 positive-test cases and businesses closing again in hot spots such as Arizona, Florida, Georgia, and Texas. However, this downturn is not universal across industries, and in some markets where businesses remain open, trucking companies are facing capacity challenges and meeting demand.

The eShipping team is tracking industry-specific shifts in the market and helping our customers plan accordingly for the continued volatility. While the week-to-week uncertainty creates unique challenges, we will continue to proactively manage our customers’ freight programs and support with a full menu of services, from technology to procurement to financial and recovery services.

Brief of Article:

• Truck movement is down in nearly all 50 states over a two-week moving average, according to data from FourKites. "We are seeing the residual effect of coming off a quarter end and the July 4th holiday," Glenn Koepke, VP of network enablement at FourKites, told Transport Dive.

• Inbound movement was particularly lower in several of the Great Lakes states. Movement in Michigan was down nearly 30% compared to its two-week moving average.

• The downturn coincides with states closing businesses again after a resurgence in COVID-19 cases. States witnessing a spike in positive cases, such as Arizona, Florida, Georgia and Texas, faced decreases in truck movement ranging from 10% to 12%.

Full Article:

Shades of red represent a decline in inbound truck movement against a two-week moving average.

Screenshot from FourKites

After volume growth in May following a floor in late April, trucking movement is again trending down across the U.S. DAT data revealed similar trends in the demand slowdown. Load-to-truck ratios fell in van, flatbed and reefer the week of June 29 compared to the week before, though in all three modes the ratios were significantly higher in June compared to May. FTR and Truckstop.com reported a 16% week-over-week dip in load volume the last week of June.

The up-down, up-down again pattern of trucking movement makes the market unpredictable and uncertain, and makes planning and forecasting difficult for trucking executives. "The world is tougher and tougher to predict these days," Joe Boyle, CEO at Truce Software, told Transport Dive.

Part of the volume downturn can be attributed to seasonal trends. "Produce volumes from Mexico typically tail off quickly this time of year, and are now down 27% week over week," DAT wrote in an email. The U.S. Department of Agriculture found seasonal truckloads of produce fell 17% week over week June 28 as a result of fewer imports.

Many retailers and grocers stocked up ahead of the Fourth of July, which created a demand increase over the last two to four weeks, Koepke said. "In the weeks right after a quarter end or holiday, volume typically declines," he said.

Volume downturns are not universal across industries. FourKites' customer base has a strong presence in food and beverage, grocery, and CPG, so its data reflects movement in those industries. Agriculture, construction and manufacturing restarted in New York in mid-May, making June the "first full month where the state’s main manufacturing freight markets were fully active," Dean Croke, principal analyst for DAT, wrote in a Wednesday blog post. Month over month, dry van volumes rose 26% in June in markets in upstate New York.

Tight capacity may also contribute to the nationwide downturn of trucking movement. Boyle said trucking firms are facing the challenge of meeting demand and expanding capacity. FTR data showed an 11% decline in the supply of trucks the last week of June. DAT said capacity was tighter in the majority of southern markets, many of which were first to reopen businesses.

As a result, rates remain elevated. "The holiday might have even contributed to rate increases given decreased truck capacity in all segments," FTR wrote. Spot rates are up across modes, according to DAT, though the firm said its model shows early July as the peak for rates.

Shefali Kapadia / Transport Dive, data from DAT

The near-term future holds continued uncertainty for the trucking market. "The market is in a significant state of flux," Koepke said. "Shipment volumes are fluctuating significantly week-to-week, [and] states and cities opening up at different paces causes imbalances in supply and demand within a market."

The upcoming back-to-school season is typically busy for supply chains, but not all school systems will move forward with normal reopening plans. New York City Mayor Bill de Blasio announced public schools will limit classroom attendance to one to three days per week, a move that would reduce the need for services such as school lunches, creating a knock-on effect on the industry transporting supplies.

Import volumes at U.S. seaports continue to decline, resulting in fewer loads for haulers. Preliminary June estimates predict a 6% year-over-year import volume decline. Imports shrank 9.3% year over year at the Port of Long Beach last month.

The National Retail Federation forecasts the lowest level of imports for peak season since 2014. Cass said it does not expect a return to pre-pandemic volumes until next year.

"There's such a lack of predictability right now," Boyle said. "The good news ... in the fleet segment is that this is essential work, so it's continued to be a very busy and demanding time."

Source: Truck movement declines across US after July 4th, businesses close again

House Lawmakers Vote to Raise FTL Carriers Mandatory Insurance Coverage to $2 million

John Gallagher is a Washington Correspondent writing for FreightWaves and makes two main points in his article:

• House of Representatives, Transportation and Infrastructure Committee approve amendment that more than doubles the amount FTL carriers are required to hold in insurance coverage

• The bill must still be approved by the full House before moving to negotiations in the Senate

Full Article:

“Lawmakers marking up the U.S. House of Representatives’ version of the surface transportation reauthorization bill have approved an amendment to more than double the required amount of insurance coverage for truck owners from $750,000 to $2 million.

The amendment, introduced this week by U.S. Rep. Chuy Garcia, D-Illinois, passed the House Transportation & Infrastructure Committee late Wednesday by a vote of 37-27.

Proponents of the amendment argue that the current insurance liability requirement does not adequately compensate victims of accidents involving large trucks. Opponents of the measure, including small-business truck owners represented by the Owner-Operator Independent Drivers Association, warn that raising the limits could put small-business truckers out of business.

“This amendment will do absolutely nothing to improve safety on our highways,” Todd Spencer, President and CEO of OOIDA, said in a statement. “What this proposal will do is destroy small trucking businesses in every corner of the country.”

OOIDA had initially supported several provisions in the House version of the reauthorization of the FAST Act, called the Investing in a New Vision for the Environment and Surface Transportation in America (INVEST in America) Act, a five-year, $494 billion surface transportation bill unveiled earlier this month. Those provisions included increased funding for highway construction, funding for truck parking projects, and provisions to limit excessive detention time.

But Spencer said his group now opposes the bill with the inclusion of the provision to hike insurance coverage for truckers. “Small business truckers have been working around the clock to keep the country healthy, while risking their personal well-being and struggling to stay in business due to historically low freight rates caused by COVID-19. Unnecessarily increasing their insurance rates is not the way to thank them.”

The bill must be approved by the Democrat-controlled House, in a vote scheduled for late June, before moving to negotiations with the Republican-controlled Senate.”

Source: House lawmakers vote to raise mandatory insurance coverage to $2 million

Cass Freight Index For May Suggests a Long Recovery Road Ahead

Cass Information Systems released their Transportation Index Report for May 2020 providing a unique look into the health of the industry’s economy.

• Domestic shipment volumes increased 1.6% in May compared to April, but still lag significantly in relation to previous years

• Freight Expenditure lowered again in May, down another 5.7%

• June shows signs of continued rebound, albeit from a particularly weak base line

In analyzing the shipment trend data, David G. Ross, CFA, author of the Cass Freight Index explains that, “volumes dropped 23.6% vs. year-ago levels, slightly worse than the -22.7% year over year change in April.”

While modest, there was a 1.6% increase in shipment activity between April and May. This, as the Cass research team note, “shows, in our view, a continued severe weakness in the U.S. economy that is counter to the stock market surge we saw from mid-May.”

Regarding freight expenditures, the Cass Freight Index is down 21.2% year over year, the worst reading since the global financial crisis, falling a further 5.7% relative to April.

The good news is that there are small but consistent increases in intermodal volume through May and into the first week of June. The gains appear to be powered by improved INTL volume through US ports and offer hopes for a domestic ripple effect for the month of June.

Mr. Ross summarizes the month’s data by offering, “the Cass Shipments Index likely bottomed for this cycle in April, May was not as strong as anticipated. June readings should be better and, like many other things right now, will depend on how quickly the economy re-opens and how quickly the very high unemployment levels can retreat.

Source: Cass Freight Index - May 2020

Changes to the Hours of Service Regulations Offer Increased Flexibility For Drivers

The U.S. Department of Transportation has updated the truck drivers Hours of Service (HOS) regulations.

A summary of the changes:

• An adjustment to the sleeper-berth exception, allowing drivers to split their mandatory 10 hours of rest in two different ways (an 8-2 or 7-3) split, as opposed to being forced to take it all at once

• The ability to count time spent on activities such as waiting for the truck to be loaded as break time rather than having to be entirely off duty

• The extension of the maximum on-duty period for drivers hauling goods short distances to 14 hours from 12, and the distance limit to 150 air miles from 100 miles

• For the adverse driving conditions extension, the ability to drive more slowly or take a break if needed without exceeding the driving window by extending the maximum window that driving is permitted by two hours

The goal, according to the Federal Motor Carrier Safety Administration is to provide increased flexibility “without adversely affecting safety.”

These changes are scheduled to take effect on September 29, 2020 – pending any legal challenge.

The full HOS rules can be found here: FMCSA - Hours of Service Rules

US Ocean Import Rates Continue To Rise Despite Low Volumes And Blank Sailings

Ethan Buchman, in the Freightos Weekly Update makes note of two key Ocean Import trends at the moment:

• US ocean import volumes are still low, significantly so, with no sign of normalizing any time soon

• US ocean import spot rates are the highest they’ve been in 18 months

Full Article:

“Summer import projections are better than they were a month ago, but ocean volumes to the US are still expected to be down significantly through September. And ocean carriers agree, announcing 75 more cancellations this week, with more expected in the coming days.

So far 10-15% of sailings from Asia to Europe have been cancelled through August, and 5-10% have been blanked to the US. The bump in demand has also resulted in some rolled shipments out of China, with some shippers reporting delays of up to two weeks to get on overbooked ships.

But there are some signs of a return to normal: Air rates continued to decline from their near-record highs out of China as PPE demand cools, with Freightos.com marketplace data showing rates falling by 5-25% across lanes out of China since last week.

Data from WebCargo – who announced a new partnership to offer live eBookings and pricing with Air Bridge Cargo this week – shows a 63% increase in air cargo eBookings in May compared to April, as some shippers may be motivated by the recent decline in rates and some commercial cargo returns to the market. And after being hit hard by travel restrictions, some passenger air travel is also being restored, which will add capacity to the cargo market even as volumes dipped in the last few weeks.

There are also signs of life in US trucking employment, with Wall Street taking note, and eCommerce is still surging. As a result, both UPS and FedEx announced rate hikes for high-volume shippers this week, and logistics operators added thousands of jobs in May to keep up with the volume of orders.”

Logistics Analytics as a Competitive Advantage

Overview:

• Picking a 3PL solely off price is a short-term technique

• Logistics providers that can show value in the analytics space will do better long-term for your company

• 95% of shippers agree that analytics are necessary

In 3PL Central’s recently published 2020 Industry Report, they quote Supply Chain Executive Magazine in saying, “The days of third-party logistics companies competing on prices are over. The successful ones now use another factor to gain an edge: analytics.”

This couldn’t be more evident in the environment eShipping, competitor 3PL’s and Freight forwarders find themselves.

Armstrong & Associates note that in 2018 that 86% of domestic Fortune 500 companies use 3PLs for logistics and supply chain functions. As the only partner directly connected to every player along that chain, 3PLs must ensure that the terabytes of data processed on a daily basis flow through without any flaws or disconnections.

According to Eye For Transport (EFT), 95% of shippers agree that analytics are a necessary element of 3PL expertise however only 26% of shippers are satisfied with current analytic capabilities.

How does your access to fast, accurate, and relevant data stack up?

If you’re not completely satisfied with your current analytics visibility, please contact us at connect@eShipping.biz or click here to set up a time where we can talk about your business and logistics goals.

5 Ways Amazon is Changing the Manufacturing Industry Forever (And What To Do About It)

Overview:

• Amazon has set online shopping customer experience standards for B2B companies

• B2B professionals want the came online shopping experience as B2C

• Manufacturers should invest in eCommerce and fulfillment solutions to stay ahead of the industry and customer needs

Procurement professionals and B2B buyers now expect high levels of customer service, shipment visibility, and an enjoyable checkout experience when purchasing products and materials from suppliers. In fact, companies are switching suppliers for a more consumer-like experience, with "free" shipping, instant order visibility and tracking, predictive shopping, and more.

The Amazon Effect has already impacted companies across multiple industries and paved the way for a new way of thinking.

How can manufacturers, distributors, and suppliers improve their supply chain customer experience? What are practical examples and strategies to create an eCommerce buying experience like Amazon? How can we plan for and adapt to so we can stay ahead of the competition?

Watch the video below.

Uber ‘Re-Evaluating’ Non-Core Units Like Freight, WSJ Reports

Overview:

• Tech heavy freight management solutions under pressure to return profits

• Uber Freight lays off 6,700 employees and raise rates on several key customers by double-digit percentages

John Paul Hampstead, Director, Passport Research

Uber Technologies has laid off 3,000 more employees and closed 45 more offices, The Wall Street Journal reports, just after the first round of layoffs that totaled more than 3,700 employees.

CEO Dara Khosrowshahi wrote in an email to employees that Uber was “making really, really hard choices right now,” including re-evaluating non-core cash burning businesses like Uber Freight and autonomous driving. Khosrowshahi said that Uber was looking at “strategic alternatives” for its staffing business Uber Works, but did not use that language specifically for Freight.

“We remain committed to growing the Uber Freight business, innovating in the Freight industry, and supporting our partners – carriers and shippers alike,” an Uber Freight spokesperson told FreightWaves. “Today’s news does not impact our product roadmap, or our ability to provide best-in-class service to our customers.”

Uber Freight, Uber’s digital freight brokerage business, had already adjusted its growth strategy and the way it priced freight to customers as part of Uber’s new emphasis on driving toward profitability. As late as February 2020, Khosrowshahi said that Uber would be EBITDA-profitable by the end of 2020, but the coronavirus pandemic pushed that date back to 2021.

Uber’s financial reporting and channel checks across the freight brokerage industry confirmed that Uber Freight was adjusting its model earlier this year. Uber Freight raised contracted rates on several large customers by double-digit percentages. Multiple sources told FreightWaves that the digital brokerage gave back a multi-million dollar award to a Fortune 100 consumer packaged goods shipper earlier this year.

And the digital brokerage’s attitude toward growth changed – the first quarter of 2020 marked the second quarter in a row that Uber Freight’s gross revenue had declined sequentially. Still, the $199 million in gross revenue Uber Freight reported in the first quarter 2020 put it on a $796 million annual run rate, enough to place the business in the top 15 or 20 freight brokerages in the United States.

But Uber Freight is far from achieving profitability; the segment lost $64 million in ‘adjusted EBITDA’ in the first quarter of 2020, which was admittedly better than the $81 million loss in the fourth quarter of 2019. Uber’s financial reporting makes it impossible to reconstruct Freight’s gross margins – the typical measure of performance for non-asset third-party logistics providers reliant on purchased transportation – or its operating costs. Uber Freight’s operating costs are thought to be much higher than most freight brokerages because of its investments in technology, which allowed the business to move tens of thousands of touchless loads.

In January, the Chicago Tribune reported that Uber was offering some of its new Chicago space up for subleases; when FreightWaves questioned Uber Freight management earlier this month, they did not comment further on the subleasing.

The question around Uber Freight has always been how and why it fits into Uber’s overall business. Uber’s Rides business was unique because the company created capacity by convincing people to drive passengers in their own cars, but the Freight business cannot create Class 8 trucks out of thin air. That left Uber Freight subject to the supply-and-demand dynamics of a fragmented, highly competitive market with many tech-savvy brokerages already established. Freight brokerage revenue, it turns out, is more volatile – and so are its margins – unlike the B2C marketplaces for rides and food delivery that Uber has effectively been able to create and control.

Ultimately the difficulty of acquiring non-recurring freight revenue and managing volumes in a volatile, cyclical industry makes freight brokerage a fundamentally different kind of business than Rides. And the variable performance of a digital freight brokerage could ultimately be dilutive to Uber’s valuation, if it got big enough to matter.

In July 2018, FreightWaves wrote about Uber shuttering its autonomous trucking program, which had the potential to make its freight brokerage offering something truly revolutionary: “If Uber Freight loses the benefit of selling the concept of an autonomous trucking future, investors might prefer company executive attention on protecting and building out the core business.”

Record Drop in Ocean Container Volumes Within Last 30 Years

Overview:

• Container volumes contract at sharpest levels in 30 years

• Carriers manage vessel capacity accordingly to hold rates firm

Sam Chambers, writing for Splash 247, reports on new data from London based research firm, Clarksons who expect 2020 to see the sharpest contraction in global ocean container trade on record. The research considers both the recent volume contraction as reported by several of the major ocean carrier’s as well as the projected recovery through the remainder of this year.

While container volumes plummet, Lars Jenson from SeaIntelligence Consulting tells Splash that “unlike in the financial crisis, freight rates are holding firm [and that] the outlook for 2020 cannot at this moment to said to be as bad as what we saw a decade ago [Financial Crisis] from a profitability perspective.”

Through a series of blank sailings readjusting sailing schedules ocean carriers have successfully been able to hold the line on container rates. The Global Container Freight Index managed by Freightos bears this out. The COVID-19 related post Chinese New Year rate dip from mid-January to the beginning of March has recovered, with global container rates now just about where they were at the start of the year

The Asia to United States Capacity Crunch

Overview:

• Shippers opt for a premium charge to guarantee to load

• Fixed-rate capacity cut

• USEC and Gulf routings offer some relief

Jessica Wang, Global Pricing Manageress at Honour Lane Shipping, in her weekly market update - notes the alarming capacity shortage on Asia to US and Canada West Coast lanes.

“The current space to the USWC is serious,” Ms. Wang says. So much so, that shippers are resorting to paying a premium charge to increase their chances of getting their containers loaded. As Ms. Wang notes though, “Not all carriers can provide this service, it depends on carriers’ actual space situation and policy… Carriers cut a lot of space normally dedicated to their fixed rates due to the big rate difference between the Spot and Fixed rates.”

The capacity crunch is as much to do with carriers imposing their own blank sailings and rerouting popular sailing routes which had been left depleted during the height of the COVID-19 global shutdown, as it is to do with a surge in bookings as the US begins to reopen. Carriers are expected to add additional vessels into their rotation to address the backlog, but the impact of that capacity will be incremental. Ms. Wang expects the space to improve “… step by step around the end of June or early July.”

Ocean container rates continue to stay strong. The China to US West Coast spot rates are around 30% higher entering June than they were this time last year. eShipping is encouraging US consignees who have the flexibility to route their containers through the Gulf or US East Coast to consider doing so. The capacity crunch is less severe on many of those lanes, and rates remain flat relative to the same time, 2019.

"Durable Goods" Data Shows Alarming Decrease For Second Consecutive Month

Overview:

• Key economic logistics forecasting drops 17% in April

• Shipments of core GDP related products decrease for the third month in four, fueling recession fears

Thursday, May 28 The Commerce Department released the Monthly Durable Goods Report which makes for bleak reading. An ominous sign of future economic activity particularly as it relates to the shipping industry.

The manufacture and shipment of Durable Goods (expensive items that last three or more years), and one of their subset categories, Core Capital Goods (tangible goods or services) are used by economists as leading indicators of future economic activity because as Investopia notes, “Businesses and consumers generally place orders for durable goods when they are confident the economy is improving. An increase in durable goods orders signifies an economy trending upwards.”

The full report, which can be found here notes, “New orders for manufactured durable goods in April decreased $35.4 billion or 17.2 percent to $170.0 billion… [which] followed a 16.6 percent March decrease.” The report confirms that, “Transportation equipment, down three of the last four months, led the decrease, $23.9 billion or 47.3 percent to $26.6 billion.”

Like with Orders, the Shipments of Manufactured Durable Goods decreased in April for the third time in the last 4 months by, “$41.5 or 17.7 percent to $192.3 billion. This followed a 5.5 percent March decrease.”

Additional GDP reporting from the Commerce Department released May 28 revised first-quarter GDP figures to a 5 percent decrease instead of the previously estimated 4.8 percent contraction. These datasets as Lucia Mutikani of Reuters explains, “ leaves economists expecting gross domestic product could drop in the second quarter at as much as 40%, the worst since the Great Depression.”

Sources:

Census.gov - April Durable Goods Report

Reuters.com - USA Economy

Investopedia - Durable Goods

Tracking Which States Are Opening

Many states in the U.S. are cautiously opening back up as the effects of the coronavirus (COVID-19) outbreak begin to slow down. As you continue to manage the effects of COVID-19 in your daily operations, it is important to know which states are lifting restrictions, what restrictions remain, and which types of businesses are reopening.

Daily Tracking Link: See Which States Are Reopening and Which Are Still Shut Down

PR Newswire: YPO Member-Led Coalition, Urgent Response Network, Names eShipping Their PPE Distribution Chain Partner Amid COVID-19

Urgent Response Network and eShipping Are Working Together to Better Serve Americans Amid COVID-19

DALLAS (April 21, 2020) – Leading nationwide supplier of Personal Protective Equipment (PPE), Urgent Response Network, today announces their partnership with distribution chain management company, eShipping. This partnership allows for seamless storage and transparent distribution of critical PPE to Americans across the United States.

YPO Member-led coalition, Urgent Response Network, was born out of necessity as Chairman and co-founder, Brent Skoda, saw the need to provide quality, reliable, and affordable PPE to Americans amid COVID-19. Together, he organized other YPO members and their companies to help create solutions that provide healthcare organizations, governments, businesses and frontline workers access to critical PPE during a time of immense need.

With 30 years' experience manufacturing soft goods in Asia, Urgent Response Network quickly mobilized their logistics team to negotiate prices daily in an extremely dynamic market and work with a quality assurance team to ensure all PPE products are verifiable, authentic and of the highest quality. Currently, their team is staffed with 250 personnel located between offices in Dallas/Fort Worth, Texas and Shanghai, China.

Their new partner, eShipping, are experts in supply chain logistics and have a philosophy of "People-Inspired Shipping" which is aligned with Urgent Response Network's belief that the needs and well-being of their customers is of primary importance. With hundreds of employees, eShipping understands that businesses and distribution must remain operational during times of crisis like COVID-19, and have processes that ensure organizations like Urgent Response Network successfully supply PPE products to their clients on time.

"Myself, along with a number of my YPO contacts, saw the global and national impact of COVID-19 and knew that we had to step in and help in any way possible. With our combined expertise in manufacturing, global logistics and finance, we've been able to become a leading, trusted and reliable supplier of PPE nationwide," said Brent Skoda, Chairman and Co-Founder of Urgent Response Network. "We selected eShipping because their systems give our customers end-to-end transparency to know exactly where their PPE products are from the time they leave the manufacturing plant to when their products arrive at their door. This is incredibly important as it gives buyers comfort in knowing their PPE will arrive as promised. Our new partnership with eShipping, a leader in supply chain logistics, is the final piece of the puzzle to ensure we provide superior and seamless distribution of our PPE."

"The work being done by Urgent Response Network aligns with what eShipping stands for," said Chad Earwood, Founder and CEO of eShipping and YPO member. "We are honored to add Urgent Response Network as one of 2,300+ highly-valued logistics customers and work together to distribute Personal Protective Equipment (PPE) to front line workers across the country."

For more information on Urgent Response Network or eShipping, please visit UrgentRN.com and eShipping.biz.

About Urgent Response Network:

Urgent Response Network is a YPO member-led coalition working to assist governments, health systems and businesses with access to critical medical supplies. Urgent Response Network has been manufacturing soft goods in Asia for 30 years with a client base that includes MLB, the NHL, the NFL, the NBA, Gulfstream and many Fortune 500 Companies. The company is resourced with 250 personnel primarily between offices in Dallas / Fort Worth, United States and Shanghai, China.

Directly in response to the COVID-19 outbreak, Urgent Response Network repositioned sourcing, manufacturing, logistics and quality control infrastructure to procure critical Personal Protective Equipment ("PPE") to the United States.

About eShipping:

eShipping is a distribution chain management company and technology provider headquartered in Kansas City, Missouri. eShipping is a diverse company, providing a full suite of domestic and international freight management services including the strategic management of LTL, Truckload, Expedited and Hot Shot, Freight Forwarding, Customs Brokerage, Parcel, Warehousing, Claims and Disputes, and Freight Bill Audit and Payment. Their transportation solutions are rooted in the mindset of continuous improvement, knowing that growing a business requires a complete evaluation of the supply chain, from start to finish.