North American Freight Market
Last Update: February 10, 2021:
Global Client Advisories | Global Forwarding Insights | Trade & Tariff Insights | North American Freight Market
Stay informed about freight market conditions, supply and demand influencers, and other factors that can impact your supply chain.
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.
In this edition of our monthly update, we cover both the spot and committed truckload markets; LTL, ocean, intermodal, and cross border information.
Strong U.S. imports stress inland transportation and logistics operations
This month we open our North American surface transportation report with insights about ocean import logistics chain. Examining its current state in the Asia to U.S. trade lane is helpful to planning and strategizing.
The U.S. trucking market during the COVID-19 pandemic has offered a roller coaster experience of supply to demand as well as pricing at unprecedented levels. One of the many contributing factors is the demand placed on trucking and intermodal around the port regions. While we see delay issues in all U.S. ports, Los Angeles and Long Beach are clearly the most challenged. The U.S. has been experiencing strong import growth through late 2020 and continues into 2021. As global economies reopened, businesses with reduced inventories are calling on their Asia based supply chains at the same time to replenish inventories run down during the early months of COVID-19 restrictions. As a result, most ports in Asia and specific ports in China are stressed with volume uptick and suffer from lack of empty containers. To exacerbate the situation, Chinese New Year (“CNY”) starts February 12th, and shippers are pushing to get volumes out prior to the CYN break. Forecast for the global logistics market is +17% Y/Y in 2021, and we have seen volumes between China and U.S. increase 30% from the same time last year.1
The table below offers perspective on physical nodes of ocean transport between China and U.S. We offer this to help our clients have a sense of the variance to service impacting North America inventory replenishment and why import moves are being terminated at the port and cross docked to truck vs. intermodal/rail of the ocean container inland is chosen frequently in this market.
Commodities driving growth include PPE, fast moving consumer goods, DIY merchandise and healthcare products such as disinfectants. And with increased import volumes in December and January, bottlenecks at the ports persist and are further exacerbated by the Nor’Easter storm for ports in that region.
Truckload
Today’s truckload market is one of debate. Seasonal relaxation of tension is driving hopeful forecasts for the balance of the year. Analysts struggle forecasting 2021, as the variables to the economy and trucking market from COVID-19, economic recovery, and stimulus programs draw varied and evolving forecasts.
It appears that while analysts have not agreed on the 2021 market, there seems to be a trend toward increased tension vs. a relaxed market. Below are two analyst forecasts for year-end 2021 truckload. We are not suggesting these are in fact correct. These analysts amend their forecasts each month with most months of the past six showing increasing costs for 2021. C.H. Robinson is watching these forecasts and continually amending our forecasts as variables evolve.
Key to considering forecasts and their evolution is the portfolio of influences to the trucking market studied by the analyst community. Here are some of the more influential attributes that we commend to our clients for ongoing study in 2021. Note that these points are not an exhaustive list of modeling inputs.
Truck and driver supply
- New truck orders and sales are forecasted by ACT Research3 for a net increase of 40,000 additional class-8 tractors (~3% increase).
- A driver headwind is expected as noted in our January report. Two key labor demographics to truck driving jobs are the baby boomer generation and the newly 21-year old; both are contracting for the next few years.
- Where carriers are unable to hire against newly purchased trucks, it is anticipated that carriers will update the fleet and sell off older assets instead of sitting on tractors that can’t be seated.
- Ongoing COVID-19 stimulus packages are considered to again put pressure on the driver labor pool, providing financial assistance that could keep some drivers from filling seats.
Truckload volume
- COVID-19 stimulus is expected to contribute to demand and freight.
- Inventory replenishment continues to be center of discussions about 2021 freight demand.
- COVID-19 vaccine use is expected to help shift spending behaviors from pent up demand and the return of the services sector, to workers from that sector able to spend again.
Voice of carrier
This past month’s carrier business reviews were more focused on the larger carrier community. Below are some key points:
- Volumes seem to be bouncing back in February.
- All carriers cited being at capacity or over booked.
- There is a focus on efficiency.
- Striving to turn back long dwell and multi-stop loads.
- Driver efficiency is central to load acceptance.
- Focus on regional routes and short haul as a way to get drivers home more often.
Spot market update
As seen in Figure 1, cooler colors are presenting recent improvement in market tension. Shown is the seven day period of February 2-8. Your C.H. Robinson representative can provide this update weekly.
The committed truckload environment
The spot market is a leading indicator of the broader and much larger committed market. The broader contract/committed market is more difficult to measure because those relationships are held in transportation management systems (“TMS”) and other datasets at the shipper and supplier level vs. more publicly available views from spot market trading platforms. Below are perspectives on today’s environment from TMC, a division of C.H. Robinson.
Route guide performance
This month’s route guide performance trends and insights help describe the broader contract market. Most of the shippers in this dataset use a traditional waterfall route guide. As such we can look broadly across industries and markets for common trends across this shipper community. Route guide performance is often measured by looking at a couple key metrics. Route guide depth (“RGD”) is how deep into a route guide is needed for loads to be accepted, or the average number of tenders per load.
- Week of January 3rd saw 1.82
- January 2021 saw 1.94 following December 2020 at 2.18
The other is first tender acceptance (“FTA”) or the percent of time the primary (intended) supplier accepts the shipment tender.
- January 2020 was 88%
- November 2020 was 82%
- December. 2020 was 80%
- January 2021 was 81%
This month’s chart (Figure 2) reflects week over week RGD regionally. At 1.98 for the week of January 31 as compared to 2.36 for the week of January 3rd. Route guides are performing better through the somewhat typical early year cycle. Midwest continues to be the most problematic all be it improved from December. Finally, the 400-600 mile loads diverged again from other distance bands to a RGD of about 1.8 against the nationwide average of 1.60 for the week of January 31st.
In conclusion, the forecast for the 2021 trucking market is still evolving. While actual tension and pricing forecasts continue to evolve and are not identical, forecasts are broadly trending toward increased tension and pricing.
Flatbed
- Continued record load to truck ratios in the spot market, with top demand drivers from:
- Home improvement and new housing markets.
- Metal suppliers for both the manufacturing/industrial and automotive are at near capacity.
- Supply chain freight continues to shed loads from route guides into the spot market.
- C.H. Robinson flatbed experts see both contract and spot repricing strategies from flatbed shippers.
Temperature controlled
- California: Volatility remains the constant with demand and supply tight.
- High import volumes and pricing attract reefers to run dry import loads.
- Midwest and Northeast: Demand continues strong against stagnant supply and Nor’ Easter weather.
- South Florida: Inbound demand and supply is lighter than seasonal averages against surge in outbound Valentine floral demand driving up pricing.
Intermodal
- Analysts are suggesting 2021 volumes to look like 2020 with West Coast port demand high and careful allocation of capacity by the railroads.
- Dray demands remain high in major metro areas with aggressive efforts to reposition capacity to deficit markets.
- Freight into West Coast port markets is very attractive as it feeds capacity for inland moves.
- Transactional loads can be covered, and C.H. Robinson is succeeding meeting client needs despite some of the rail strategies for priority commitment to contract customers over spot customers.
- Dray carriers increasingly are declining loads with historically long dray periods.
Cross border
Mexico-U.S. border insights
- El Paso/Ciudad Juarez crossing: anticipated customs and border protection staff to address the immigration caravan from Honduras will be drawn from U.S. interior ports of entry rather than other U.S./Mexico crossing points as in previous situations should result in fewer delay issues across the U.S./Mexico crossing points.
- Southbound empty containers continue to be diverted from Laredo’s main crossing, World Trade Bridge (“WTB”) to the Columbia-Solidarity bridge 22 miles away will help with congestion. This is working well to improve crossing times at Laredo, but costs continue to rise due to the increased mileage to reposition trailers.
- Trade volumes are up Y/Y from a dollar perspective in both Mexico inbound raw material, components, and accessories for manufacturing and finished consumer goods export to the U.S. These elevated volumes are expected to continue, and C.H. Robinson will keep our clients informed on border performance and costs.
Intra Canada and Canada-U.S. border insights
- Truckload cross border from Canada into the U.S. continues to experience lower tension, while inbound volumes to Canada continue to climb, leading to imbalance of supply for some inbound regions. Source: Load Link
- The Canadian ELD mandate occurs in June, 2021. So far, no ELD tools are approved, thus raising concerns with carriers. Source: Truck News.
- Trailers are being used to store “non-essential” goods in Ontario and Quebec during the stay at home period. In-store retail activity is expected to increase as restrictions are lifted.
Full load summary
We invite our clients to engage your C.H. Robinson team regarding our research portfolio offering insights on applied strategies and attributes of freight correlated to performance in any market. Your C.H. Robinson team will discuss capacity strategies and business processes that will help bring increased operation and spend performance.
Less Than Truckload (LTL)
- Industrials continue to strengthen LTL’s freight portfolio with ISM’s PMI at 58.7.4
- Estes purchases the balance of Clear Lane Freight and moves its corporate operations to Richmond.
- Freight embargos continue in multiple regions for transactional freight.
- YRC has dropped the “R” for Roadway and reverted to Yellow as its company name.
Parcel
- Pandemic changes to consumer buying habits continue into 2021 with parcel services’ ongoing response to the accelerated growth of ecommerce.
- Consumer spending with online merchants was up 44% in 2020, triple the increase in 2019.5
- 40% of U.S. consumers say that they will continue to divert some of their shopping to online sources.6
What can shippers do to improve their parcel experience?
- Dynamic business intelligence offers the opportunity for proactive shipment statuses.
- SMS text messaging offers effective status updates to consignees.
- A tracking platform can put real-time updates and challenges right at your customer service teams’ fingertips.
Global
Ocean
- Market demand continues to be strong pre-CYN rush, and shippers struggle closing out pending shipments before the workforce departs early for CNY.
- Last week of January saw a shortage of truck power in China as there is a push by local Chinese government authorities to stagger the departure of the workforce and/or truckers leaving on their own earlier than we have seen in the past. This will continue to be a challenge in the market leading up to CNY.
- It appears that ~30% of total workforce will not be traveling home during CNY, and some factories in China may stay open to help recover their productions sooner post-CNY.
- Carriers are leaving capacity in the market in Q1 vs. seasonal contraction. Schedule reliability will be managed through schedule recoveries by skipping ports and void/blank sailings of entire strings to give additional relief needed to the terminals to improve schedule reliability, as vessel delays are reaching 7+ days.
Air
- With new COVID-19 strains and outbreaks, many countries are now requiring pilots and airline crews to quarantine or limit overnight layovers. These changes will likely add to the inconsistencies and put pressure on air freight costs.
- Demand surge leading into CYN is adding to congestion at major airport hubs in North America. The result is delays in cargo being made available for pickup and long lines at the terminals.
- COVID-19 vaccine distribution has yet to have a significant impact on the general air cargo market but is something C.H. Robinson continues to watch closely as vaccines gain approval in additional markets. Airlines covet high-yield pharmaceutical cargo and will prioritize.
Thank you for being a valued customer
We invite our clients to engage their C.H. Robinson or TMC commercial representative to discuss collaborative strategies designed to offer quick and effective response. Our modal expertise and capacity portfolio afford for elasticity in full and partial load shipments to help minimize service disruptions in this unique market.
If you have any questions, please do not hesitate to contact your C.H. Robinson or TMC commercial representative for further information or look up any of the services listed within this report at www.chrobinson.com.
References
- 1 Global Trade, January 29, 2021 How Will Ocean and Air Market Conditions Affect Your Shipping Decisions?
- 2 FTR February Truck Report published February 1, 2021. https://www.ftrintel.com/
- 3 ACT Research January Freight Forecast published January 12, 2021 https://www.actresearch.net
- 4 Institute of Supply Management’s Purchasing Managers January 2021 Index
- 5 Digital Commerce 360 US ecommerce grows 44.0% in 2020
- 6 Retail Dive Stores are open, but the pandemic keeps shoppers away
Figures
- 1 DAT Freight and Analytics, Truckload Van Load to Truck ratio. www.dat.com
- 2 TMC, A Division of C.H. Robinson. Routing Guide Depth by USA Regions