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Updated on 15 February, 2024
The following information is built on market data from public sources and C.H. Robinson’s information advantage—based on our experience, data, and scale. Use these insights to stay informed, make decisions designed to mitigate your risk, and avoid disruptions to your supply chain.
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With recent alarming headlines, many global shippers are asking "Should I be preparing for supply chain chaos like I experienced in 2021-2022 again?" Many shippers based in North America are monitoring situations in the Red Sea and Panama Canal and wondering when and how this could affect their North America supply chain and 2024 transportation strategy. As a global transportation provider, C.H. Robinson can help navigate complex situations with the full picture. Our global teams have outlined short-term and long-term affects that shippers should be aware of when making decisions.
The situations in the Suez Canal and Panama Canal are having an impact on available capacity (supply), but low North America market demand is preventing a significant increase in overall ocean container prices. After an initial surge in spot pricing and additional surcharges based on original uncertainty with the Red Sea and Panama Canal crossings, ocean rates are showing signs of steadying and in some lanes slowly decreasing. Ocean carriers are increasing the chartering of vessels to help supplement the number of vessels needed to support the diversions. Carriers also seem to be managing rates in a manner to prevent a mass shift in volume to the West Coast, keeping existing capacity and networks intact. The daily number of vessels passing through the Panama Canal has decreased by one-third, from 36 historically down to 24 in mid-January. Recent rains allowed for a brief reprieve, but February bookings will be reduced to 18 per day. In response, some steamship lines are beginning to route freight across Central America via train where it is reloaded on vessels heading north to the Gulf and East Coasts of the U.S. to maintain an East Coast port strategy.
Outside of ocean container price fluctuations, the largest impact currently seems to be with transit times and delays in product arrival. These longer transit times have led to delays in repositioning empty containers in Asia, leading to an increase of new container equipment costs by over 20% in January. C.H. Robinson recommends creating contingency plans to ensure you have enough product on hand to allow for the additional transit time for ocean deliveries and considering if temporarily switching to air for critical deliveries is a need. Many U.S. shippers have inquired about international air conversion. Despite seeing some shift from ocean freight to air, pricing has not increased significantly for air freight, making it a viable option for time sensitive deliveries. C.H. Robinson offers service solutions for international modal conversions to meet customer demands.
Some shippers are considering rerouting freight and building modal conversion contingency plans, should the impacts to their supply chain continue to be felt. There are several situations C.H. Robinson would like to make shippers aware of related to ports and drayage.
At this point, C.H. Robinson does not anticipate domestic surface transportation disruptions in Q1 due to the Red Sea and Panama Canal situations. Overall, the truckload marketplace remains over-supplied without any near-term increase in demand that would create pressure on the market. The largest challenge could be on localised drayage levels in the West Coast as mentioned above. Intermodal capacity also remains in a state of over-supply with units available to return to service to adjust to market dynamics when needed.
The situations in the Red Sea and Panama Canal are very fluid, changing by the week. Should challenges persist throughout the year with both the Red Sea and Panama Canal, we anticipate changes and roll outs will be slow. With economic forecasts anticipating muted growth in 2024, we do not anticipate the level of disruption experienced during the pandemic period.
However, there are factors that we would encourage shippers to consider in their scenario planning and strategy creation.
To learn more about the direct or indirect impacts to your supply chain, please connect with your C.H. Robinson representative. You can also sign up to receive timely updates via our Client Advisories.
Tune in for new ways to leverage today’s softer market, and strategies to prepare for the next shift.
The winter weather storms inflated the LTR for a few weeks in January, but the market has loosened in recent weeks since the storms have passed. Week 6 shows a LTR of 1.4:1 as compared to the 5-year average of 3.5:1.
The refrigerated spot market TL shows a similar pattern and softness as dry van. Similarly, winter weather storms temporarily caused tightness in January, but that has since subsided. Week 6 shows a LTR of 2.3:1 as compared to the 5-year average of 7.1:1.
The flatbed LTR continues to be historically low, with very little change to that narrative. The weekly ratio has been softening each week this year, despite the winter storm disruptions in January. Week 6 shows a LTR of 6.7 as compared to the 5-year average of 31.1:1.
Our 2024 Dry Van linehaul forecast is being slightly altered from the previously stated 3% y/y to 4% y/y growth. The adjustment here does not reflect any change in our view of the future, but rather, reflects the temporarily elevated costs in January due to the disruption caused by the winter storms. We still predict that most of the first half of the year costs will return back to the low levels experienced in 2H 2023, excluding the last couple weeks of the year, which was inflated due to expected holiday constraints. We don't expect the market to see lasting increases until the back half of 2024, after more carrier supply has exited.
We are estimating the average 2023 linehaul carrier breakeven at $1.65/mile. This breakeven estimate has proven less useful in this down-cycle due to many of the dynamics that we have noted in the past, primarily due to increased cumulative profits amassed by many owner operators during the up-cycle shortly after the pandemic when spot pricing increased significantly. However, it is still important to estimate this breakeven level, even if it differs significantly for different carrier segments, as it does ultimately set the floor for how low rates can go over the medium to long term. While we do not yet know where this breakeven estimate goes in 2024, if we assume it remains flat with 2023 at $1.65/mile, this represents an almost two-fold increase in the annual rate of truckload operating cost inflation from a low 2% CAGR in the 10-year pre-pandemic period to a 4% CAGR from 2020-2024. (The breakeven estimate is a product of ATRI (American Transportation Research Institute) 2022 cost per mile operations cost and our analysis of the first three quarters of 2023 operations costs of public trucklines.)
Our 2024 refrigerated linehaul forecast similarly remains unchanged for the back half of the year, although adjusted to account for the previous winter storm pressures, at 3% y/y growth. We expect the pattern to follow that of the dry van forecast as well, as the dynamics surrounding the temperature-controlled truckload marketplace are the same as those in the dry truckload space.
The contractual landscape has remained relatively unchanged since last month. The contract environment tends to follow the spot environment, so given our forecast above for spot pricing, we don’t see too much change within this space holistically for several months. Although one thing to keep in mind is the duration of said contracts, as longer-term commitments may see different pricing than shorter-term commitments.
Generally speaking, Q4 and Q1 are when the majority of RFP activity happens, as shippers are preparing for the new year. During this time, it is important that shippers segment their freight. Freight characteristics, attributes and geographies make lanes very different from each other and thus a strategic, data-driven approach is essential to determine which lanes should go out to bid in the RFP versus which are better off in the spot market. Talk to your C.H. Robinson account team about how they can help you to utilise this segmentation logic to make the best decisions for your procurement process and avoid costly tender rejections that inevitably will move in the spot market.
The majority of shippers' freight portfolio are managed through contracted capacity and pricing arrangements. These truckload agreements are most often managed as committed pricing for six or twelve months at defined load volume awards. Most successful executions of these agreements are in Transportation Management Systems (TMS) where loads are tendered to transportation providers. Those tenders are accepted or rejected. Two key metrics are used to discern the success of the truckload award plan. First Tender Acceptance (FTA) is the percentage of tenders awarded to transportation providers that are accepted. Route Guide Depth (RGD) is an indicator of how the back-up transportation provider strategy works if the awarded provider rejects the tender. A robust trucking budget should plan for less than 100% tender acceptance due to the reality of forecasting by the shipper and capacity communities. In today's market, that variance to performance is small and incremental costs for back up strategies are lower than they were in tight years like 2021 and 2018.
The following insights are derived from TMC, a division of C.H. Robinson, which offers a large portfolio of customers across diverse industries throughout the United States.
The regional view of route guide performance displays a pattern of high performance in all regions. The January North America average RGD average of 1.18 (1 would be perfect performance and 2 would be very poor) is the lowest/best RGD for January in the last seven years. The North American average RGD has shown little variance recently even during the winter storms mid-January, decreasing (improving) 1% m/m and 2% y/y.
Week 6 posts a decreasing national average RGD of 1.20. All regions of the USA experienced similar route guide performance. This view of contract truckload route guides performing exceptionally well is yet another evidentiary point that the truckload market continues its pattern of oversupply.
Overall, route guides are performing very well, with primary service providers accepting loads at pre-pandemic levels and the first backup provider accepting rejected tenders most of the time.
FTA of 90% in January 2024 was better than January 2023 posting of 89% and flat from December 2023, reinforcing that today's market continues to be oversupplied.
A stable RGD performance for each of the three delivery distance bands continues. Route guide depth is largely around 1.2 depending on the distance band, with short haul doing the best and medium distance loads showing the most first tender rejection and deepest route guide performance. That said, even the mid and long-haul segments are performing close to the short haul distance band.
January distance band performance (“improved” means better route guide performance and “declined” refers to more backup carrier use):
C.H. Robinson has two customer communities, shipper customers and carrier customers. What follows are insights from conversations with carriers of all sizes to offer perspective into their top concerns over the past month. Below is a summary of the reoccurring themes and a display of some variety of market experiences.
A key value proposition of C.H. Robinson to our contract carriers is aggregating lane volume and demand pattern variability to a more predictable experience. Our carriers have more predictable volume from C.H. Robinson and as a result are interested in and able to offer consistent capacity and market pricing with high performance.
During January we experienced a relative and brief tightening in capacity due to the disruptions caused by the winter storms. We also saw some expected tightening regionally out of Florida due to the outbound floral rush for Valentine’s Day. The impacts from both of these events have subsided and we are now back to observing standard seasonal trends. The DAT U.S. LTR for week 6 is at the lowest point of the year at 2.3:1. The expectation is for this to remain relatively flat over the next several weeks nationally, although there will likely be some regional variance. Costs are expected to remain depressed during this time as capacity remains ample. There does still remain the risk of winter weather impacts in the coming weeks, but likely less so than the past few weeks. Work with your C.H. Robinson team to stay informed on regionalised opportunities and how to best schedule freight to capitalise on the best price and service.
All of trucking's service segments have regional variance in capacity and pricing, as displayed earlier in this report through the spot market maps from DAT. Today's flatbed market is displaying balance between loads and trucks in most regions of the USA, but the Mid-South and Southeast have recently shown some signs of stress.
Unlike dry van and refrigerated truckload, flatbed capacity was rather unaffected by the winter storms in January. The DAT LTR has decreased/softened w/w this year, including the weeks of the winter storms. Following the standard seasonal trends, we expect some tightening to occur in the back half of February and into March. This nationwide tightening will be driven by increased demand out of the southern states. The tightening of capacity will lead to an increase in costs as well, although due to the state of the market cycle overall, the decreases in capacity and increases in costs are likely to be somewhat muted in comparison to prior years. For perspective, the DAT LTR 5-year average is 31:1 whereas current year in week 6 it is at 6.7:1.
Collaborate with your C.H. Robinson team and talk about the proactive approach we can offer to your book of business as we approach this period of seasonal tightening.
C.H. Robinson has two customer communities, shipper customers and carrier customers. What follows are insights from conversations with carriers of all sizes to offer perspective into their top concerns over the past month. Below is a summary of the recurring themes and a display of some of the variety of market experiences.
Market insights
Equipment
Drivers
A key value proposition of C.H. Robinson to our contract carriers is aggregating lane volume and demand pattern variability to a more predictable experience. Our carriers have more predictable volume from C.H. Robinson and as a result are interested and able to offer consistent capacity and market pricing with high performance.
Muted seasonal trends continue as Q4 progresses
Expect refrigerated spot market pricing to slowly increase into week 47 as perishable consumption peaks for the Thanksgiving holiday. Followed by a lull and rising again to close out the year. This follows typical seasonality for the Temp Control marketplace to the calendar year. We do expect a “muted” holiday season across all geographies. An area of the country that is picking up steam is the Pacific Northwest with commodities such as potatoes, apples, onions, cherries and holiday trees. We expect relief from these seasonal inflection points very early in January 2024. We will continue to provide guidance throughout the remainder of the year as things develop.
Flatbed markets displaying some balance
All of trucking's service segments have regional variance in capacity and pricing as displayed earlier in this report through the spot market maps from DAT. Today's flatbed market is displaying some balance between loads and trucks in the Pacific Northwest and Gulf Coast regions of the USA.
Winter weather considerations
To prepare for weather, you can collaborate with our C.H. Robinson team and talk about the proactive approach we can offer to navigating conditions this time of year.
Proposed regulation change:
To improve safety and bring Canadian rules into alignment with international codes, Transport Canada is proposing a change to the Transportation of Dangerous goods regulation (TDGR). Though still under review, the proposed change could lead to increased cost for companies as it affects how they handle importation of DGs, invest in new equipment or train employees to comply with the new regulations.
Volume pattern update:
Last November, the spot freight market saw an improvement in cross-border delivery leading to a 10% gain in volume growth m/m yet a 19% decrease y/y.
Freight move breakdown:
Though yet to be published, December volume followed a similar pattern with lower freight volume than the previous year.
To begin the new year, there was a slight surge in volume due to the holidays, mostly on northbound freight moves. The backlogues are being worked through and are slowly clearing off. Freight activities are almost back at their pre-holiday low levels and with an abundance of capacity, especially for intra-Canada and southbound freight.
While the volumes and prices are forecasted to be low until the middle of the year, more customers are starting to lean towards a long-term pricing strategy to attempt to lock in lower rates before the anticipated market shift.
C.H. Robinson is the largest cross-border provider of truckload transportation. Please seek out your account representative for capacity planning strategies designed to bring the most capacity possible to your supply chain with the greatest price stability.
In the projected landscape of 2024, the surge in nearshoring activities in Mexico is anticipated to persist, fuelled further by emerging global risk factors. This trend has prompted carriers to proactively enhance and modernise their fleets throughout 2023, positioning themselves for the anticipated uptick in business. Presently, this proactive stance has resulted in a temporary oversupply in the market, as the fruition of nearshoring investments may take some time to materialise and translate into tangible gains for the freight market.
Carriers, recognising the impending demand, are now offering competitive pricing in exchange for dedicated commitments, creating an advantageous scenario for shippers seeking cost-effective solutions for their 2024 deliveries. However, this dynamic landscape is not without its challenges, particularly with the introduction of the Carta Porte—a mandatory fiscal document in Mexico functioning akin to a Bill of Lading. This legal requirement for cross-border transactions has introduced complications for both shippers and carriers unprepared for this additional regulatory hurdle imposed by Mexican federal authorities.
Some of the best practices we have seen to produce the best results to comply with Carta Porte have come from shippers that are using version 3.0 during this optional period, instead of version 2.0 and send the delivery information in advance to make agile the process.
Carriers who have invested in infrastructure to generate the documents automatically, which speeds up the process and avoids errors, are having less hassle converting to Carta Porte and minimising risk of penalties or seizures.
Within the realm of intra-Mexico deliveries, capacity constraints are evident, as carriers show a preference for cross-border business. The allure of more favourable rates, coupled with less-than-ideal loading and unloading conditions, has shifted their focus. Safety concerns in specific states, such as Puebla, Tlaxcala and Mexico State in the central area of Mexico, further contribute to this inclination.
For those grappling with the complexities of the Carta Porte or seeking strategies to mitigate risks in their cross-border supply chain, our team stands ready to assist. Boasting an extensive footprint in Mexico and over 30 years of invaluable experience, we offer expertise and guidance to navigate the evolving landscape of the Mexican logistics industry.
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TOP STORY: Intermodal up swing
Volume growth holds
Intermodal volume is sustaining the upswing that started last year. The four-week moving average for volume across all of North America is up 9.5%. It is highly unusual for peak to occur in November, but that is what occurred when y/y domestic volumes moved ahead of 2023 in the weeks leading up to Thanksgiving. Most analysts expect this volume to continue to grow slowly through 2024. The West Coast import volumes are returning and they appear to be benefiting from the issues with the Panama and Suez canals.
While volumes slowly recover, there are no capacity-constrained domestic container markets. Drayage and rail capacity is still abundant. As the rail and drayage providers see the volumes grow, the deep discounts we have been seeing are expected to temper throughout the first half of the year.
Pricing prospects
The all in IMDL spot rate continues to be negative y/y. IMDL spot rates are 10% lower than at this point last year. Spot rates are rising slowly with the increased volume, but most analysts don’t expect them to turn positive until the second half of 2024. Contractual rates are normalising and are expected to be flat for 2024.
FTR's pricing pressure index projects 0.2% increases for contractual rates in 2024. The rails are still offering capacity in historically capacity deficit markets. Making commitments before the second half of 2024 is critical in markets like southern California and outbound Mexico before the market shifts back to historic norms.
Competing service to truckload
Rail transits continue at or above five-year averages. Watch for winter weather, especially in southern markets. This will slow rail transits but should be transitory. Additionally, expedited service options provide savings with similar speeds to over the road in many lanes.
The railroads continue to look for unique solutions to get more containers on their networks. Set your strategy for 2024 now because railroads historically don't take on new clients or even additional lanes with existing clients when the market is tight.
Places where the global supply chain meets North American supply chains—like ports and airports—are also affected by the cyclical market and other disruptors. Below we offer some of the notable current situations.
General Update
For a full market report on global forwarding, visit the C.H. Robinson Global Freight Market Insights.
As the first third-party logistics provider to adopt a new electronic version of an essential delivery document, C.H. Robinson has advanced the digitisation of the LTL industry by implementing an eBOL with 10 of the top LTL carriers and is in progress with four more. Standards for the eBOL were developed by the NMFTA’s Digital LTL Council, creating greater efficiency and real-time visibility for LTL shippers.
Today, when a driver arrives at a shipper for pickup, the shipper provides the driver with a paper bill of lading (BOL) that is manually labelled with a tracking number (PRO) by the shipper or driver. The BOL is then brought back to the terminal for the carrier to enter all delivery details manually. With eBOL, the need for manual data processing is removed and the potential for exceptions is drastically reduced. Data flows between C.H. Robinson and LTL carriers electronically, allowing for PRO numbers to be assigned within seconds.
This elimination of manual entry reduces errors that could lead to delivery delays, invoicing delays, bill-to corrections or secondary invoices. The automated process provides faster visibility to the tracking of your freight, as a tracking number is generated within seconds of the delivery being tendered to the carrier. This also enables time savings on the dock since shippers will not have to locate carrier PRO books, add PRO stickers to the BOL or wait for the driver to arrive before being able to PRO the freight.
More information on eBOL can be found in this Electronic bill of lading guide. Ask your account team how you can implement eBOL today.
The SMC3 Jump Start 2024 conference took place in Atlanta, GA on 22-24 Jan. During this three-day supply chain event, we met with 42 LTL carriers to discuss their expectations of the market that lies ahead of us this year. Numerous carriers shared similarity in their forecasts of 2024 for muted volume growth, with most expecting tonnage the first half of the year to be flat to slightly down on a year over year basis. They also shared similar beliefs that the back half of the year would lead to modest volume growths, noting positive expectation in economic factors and consumer demand. In these conversations, nine carriers commented on their acquisitions of terminals from the Yellow auctions, stating that none of them had any hard timelines on when these newly acquired terminals would be operational. This bolsters our previous assumption that without any near-term expansion in available terminals in the market, there will continue to be pricing pressures due to this supply constraint. Although due to the low tonnage and no demand increase in sight in the short term, these pricing pressures will remain moderate, similar to what we are experiencing in today’s market.
Please contact your C.H. Robinson representative to discuss capacity strategies and customer specific pricing that outperforms today's GRIs.
The 2023 FedEx and UPS 5.9% average rate hike masks a complex reality where actual delivery costs vary significantly based on distance, package weight and service speed.
Important freight related legislation passed as part of the National Defence Re-authorisation Act in December that has got little notice from freight industry press. This provision streamlines a unique presidential permitting process that is intended to accelerate the completion of planned bridge and border crossing capacity expansions at Brownsville, Laredo and Eagle Pass, TX. This was a bi-partisan effort by Senator Ted Cruz and Representative Henry Cuellar, both from Texas.
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