The FreightWaves IOSI and TEUs indices show that shippers are still ordering goods from outside the country at a record pace. Shippers have booked about 13% more twenty-foot equivalent units (TEUs) than they did last year and about 80% more than they did in January 2020, according to the IOTI, which measures how many TEUs are being booked by the estimated time of departure. This is a traditional time for imports to slow down.
During the Lunar New Year, which is China’s most important holiday, this week marks its start. The Lunar or Chinese New Year (CNY) is usually a slow time for imports because everyone in the country goes on vacation at the same time. There was not as much of a drop in production and imports to the United States last year because of the holiday as there was this year. Each vertical line on this week’s chart represents the start of CNY in the last three years, as shown on the graph.
Greg Miller, a senior editor at American Shipper, wrote this week about a drop in traffic out of the ports of LA and Long Beach. Among other things, one of the most important things to remember is that this is mostly because of problems with handling the amount of traffic. Unfortunately, this has become a political issue, which makes it more difficult to understand reality because there are so many different points of view.
The ports of Los Angeles and Long Beach handle about 30 to 40 percent of the total import container volume in the United States. There was a steady line of ships in San Pedro Bay for the whole year, which means there has been no shortage of work, with as many as 96 ships waiting or on their way to the port complex in late December.
If there has been a drop in container volumes, it’s because there hasn’t been enough space, drayage, or transportation capacity to handle it. This hasn’t been the case for more than a year.
For more than a year now, FreightWaves’ Outbound Tender Rejection Index (OTRI) has been above 19 percent. This is a measure of how willing or able carriers are to meet shippers’ requests for truckload capacity. In 2019, a year when there was enough capacity to meet the amount of demand, the index averaged about 5%, which is about what it did in 2018. In other words, there isn’t enough space for surface transportation.
They are at the heart of the supply chain for many businesses, so the ports are very important. This means that both upstream and downstream participants have an effect on how well they work. As a result, containers build-up and there is no space left for them to go. The ports don’t have any control over how much space they have to work with down the road, and it looks like there won’t be much relief in the form of a seasonal lull after CNY.
In general, there is less activity about four to six weeks after the start of CNY. It peaked last year at this time, which led to a huge surge in domestic freight transportation demand in March.
It’s not clear whether CNY will have a big impact on production this year as well, according to a number of reports, including one from Deutsche Bank that used mobility data to track population movements. Reports say that COVID has a lot of government and social factors that make it hard for people to go on vacation and travel at this time of year.
The irony is that transportation demand is being limited by transportation capacity to some degree. There is less to move down the river because there isn’t enough transportation upstream. So the lack of a CNY-caused lull might not cause a surge in imports and surface transportation demand, but it will probably help keep it going for a while longer.
Chart of the Week
An interesting chart from SONAR called FreightWaves was chosen as the Chart of the Week. It shows how the freight market is doing. A chart is chosen from thousands of possible charts on SONAR to help people see the freight market in real-time. Each week, a Market Expert will post a chart and explain it live on the front page. When the Chart of the Week is done, it will be kept on FreightWaves.com so that people can look back on it in the future.
This is how SONAR works: It gathers data from hundreds of different sources and shows it in charts and maps. It also gives real-time commentary on what freight market experts want to know about the industry.
New data sets are being released by FreightWaves’ data science and product teams every week, and they’re making things better for clients.
