Hello and welcome to the Robinson Roundup, our regular series where we cover critical and timely topics in the transportation marketplace. My name is Ryan Hammett and I'm joined here by my colleague, Mat Leo. We have several topics on today's agenda which include hurricane season and the potential impact on freight volumes and costs, our updated truckload cost per mile forecast and finally, we will cover global shipping disruptions that are impacting price and service and recommend several practical considerations for how shippers can de-risk their global shipping plans.
Yeah, so let's start off with the hurricane season which officially began on June 1st and lasts through November. And while this does seem like a long season, 80% of the storms occur between August and October. And this year is expected to be an above average season due to the currently higher temperature waters within the Atlantic and the strong El Nino. And this has already proven to be true as Hurricane Beryl is the earliest hurricane to ever reach a category four or five and it's the only category four storm to form within the month of June.
One thing that is worth noting is that an overactive storm season doesn't necessarily translate to more landfalls as these storms may stay within the Atlantic Ocean. However, even that could still impact supply chains as ocean vessels may be delayed or rerouted. And generally speaking, more storms means more chances that landfall can occur. So to better understand the impact to truckload, we analyzed multiple hurricanes to see how shipment volumes and cost per mile were affected and the primary impact comes shortly after landfall.
As you can see on the chart here costs increase on both inbound and outbound freight. This is due to a shortage of supply as trucks exited the area in preparation for the storm as well as due to a surge in demand. As businesses look to get back on track and make up for freight that was supposed to ship but was delayed by the storm.
There's also new demand for inbound relief freight such as water, food, generators and construction materials. Not only is this inbound freight additive to normal demand, it's also time critical. Now every hurricane is different. So depending on the speed, the intensity, the location of the landfall and path of the storm, the exact impact of cost will vary, but we hope that this visual helps put the short term impacts into perspective.
Yeah. And speaking of costs, let's move on to our truckload cost per mile forecast for the second half of the year. As mentioned, we did make a recent update to our forecast and the new forecast projects, the DAT spot dry van cost per mile forecast for the US to decrease by 5% in 2024 compared to 2023. Uh Previously, our forecast was a 2% decrease year over year, but two factors primarily led us to cutting that forecast. That's higher than expected class 8 tractor production and sales and combined with the ongoing slower than expected attrition of carrier supply.
Now, recent costs over the past few weeks and months have been trending as we initially projected, but it's our outlook on the back half of the year that has led to the decreased cost forecast. So as this chart shows, we expected costs will return back down to low levels after the fourth of July holiday surge. And while we do expect an increase of cost to occur towards the end of the year as it relates to standard seasonal increases that we see just about every year.
But we have tempered that forecast given the current state of supply Q4 is now projected to see cost growth at just 5% compared to the same period in 2023. And there are some regions within the US that have experienced some tightness, particularly California and Southeast, but we believe that these are seasonal in nature and not indicative of what's happening in the larger market or in the long term. We do offer more context around the forces that are driving our cost forecast changes within our Robinson Report as well as a related forecast for temperature controlled spot cost per mile. So we encourage you to read that in further detail.
Well expanding our scope beyond just cost of the US domestic market. When we look at the complexities of the global forwarding market, the primary issues continue to be pricing and schedule reliability. Pricing has seen volatility because of the steady increase in costs across both air and ocean that stem from several global disruptions and reliability is impacted by ongoing capacity issues coupled with port delays, especially in transshipment ports. Mat, could you outline the market forces for us that are presently working against the global supply chain?
Some of these are known issues like the Houthi rebel attacks that have essentially whittled transit through the Suez Canal to a tenth of the normal amount, right, as well as the Panama canal vessel per day restrictions. Now essentially current demand and high global shipment volume coupled with the vessels being tied up due to these challenges has created a situation where it's just not enough capacity to cover the need, even with the new capacity vessels that are entering the market. And while these Panama Canal restrictions are now lifted, the ripple effect is still being felt.
There's also impact from the realized and potential labor strikes within Germany, Canada, the U.S. East coast and Gulf coast ports. And also there's a number of factors driving international freight demand including the restocking for holiday and back to school seasons. GRIs uncertainty with tariffs within the pending US elections. So all of these inputs create market dynamics that increase risk and cost.
Consequentially, we have seen many buyers making orders now as we try to get ahead of the peak season and the perceived crunch that normally unfolds over the next three or four months. Yeah, it it sort of reminds me of that old saying when one person coughs, the rest of us catch a cold, right? This idea of the knock on effect of global supply chains follows that same pattern.
Those market dynamics Mat that you just discussed, they manifest themselves and carrier booking cancellations and additional surcharges even to those customers who have secured fixed pricing earlier in the year. So we know the adverse inputs that are causing these cost increase and diminished schedule reliability. But let's talk practically for a moment about the steps we'd encourage our customers to look for savings or if not savings, then at least maybe cost controls.
Definitely. And and it all starts from evaluating the total cost to operate whether you're buying raw materials for manufacturing or final goods for retail purchases or anything in between. It's important to weigh all the contributing cost factors together such as the cost of goods purchased and the routing selections of the transportation. Ultimately, it comes down to being deliberate and delivering the right goods at the right time for the right cost.
And in order to do this, you may need to have separate transportation strategies for each source good and the criticality of each on the timeline of delivery. That will help you determine if you need to utilize air, ocean, and/or LCL. Having a strategy for each component helps provide a more granular and fine tuned budget. Yeah, exactly. So that level of nuance and detail is really materializing as a hallmark of shipping in 2024. When you think about total landed cost, once you've considered the mode used, another component becomes the route itself.
You need to be aware of the dynamics at origin ports, transshipment ports and the destination port and rail, It's all really vital. So we're encouraging people to consider scenario planning with your team and diversifying your routing strategy to ensure that if there is a crimp in the supply chain, you know that you have an alternately routed fallback plan in place.
I think specifically of what's brewing in the labor negotiations with the East coast dock workers and the Canadian railroads. Those influences are bound to impact the amount of cargo being diverted to the US West Coast from the East Coast and to the Pacific Northwest, from the Canadian West Coast. Every shipper's appetite for risk is going to vary, but now is the time to evaluate the strategies before a potential disruption occurs, which would require you to make decisions on the fly. Right. Exactly. And the idea is to plan in advance before market forces push you to make a decision in haste.
And after considering your mode and route options, the last consideration that will help you bring back top line savings. And it's not the least important, but it's the idea of trade policy. And you can consider how you classify what you import, where you source it from and explore the GSPs to potentially avoid the ADD and CVDs as well as exploring your potential involvement in duty drawback.
So having a well thought out customs strategy is an immediate win, win for your business as it gives you the surety to know you're utilizing all the advantages from a trade and tariff perspective, and also keeps you, you know, help to avoid these unforced errors that occur and potentially missing a preferential sourcing country. Not to mention, steer clear of any punitive tariffs that you could eat, that would eat into your profits, right? So if you have not considered your trade policy recently, C.H. Robinson's customs and compliance teams can help you with those considerations and your account team can help make those connections for you.
So to summarize, we would say that at the time of this July video, we're seeing a prolonged period of cost and schedule reliability issues in global shipments and having the right relationship is vital. C.H. Robinson, as always would love to connect with you and help you understand how our team can help free you to do what your company does best, which is manufacture and produce the inventory that your customers need.
So allow us to help you with exploring the ways we can apply cost strategies and alternatives that best suit your needs to keep your inventory moving. Well, thanks for joining us. Remember Robinson goes further than anyone else in providing you with global perspectives for how to manage your complex transportation strategy. For more details and additional insights. Reference the Robinson Report on our website.
Robinson Roundup is a quick look at the top freight market updates from C.H. Robinson. In this edition, hear our experts discuss: