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Logistics Intelligence Brief
Monday, July 26, 2021

Trucking

Q2 U.S. Bank Freight Payment Index highlights strong freight shipment and spend levels

Logistics Management Jeff Berman July 23, 2021

American Trucking Associations (ATA) Chief Economist Bob Costello wrote in the report that while shipments are still below peak pre-pandemic levels, the index has seen significant gains, adding that the national truck freight market improved during the second quarter, as the economy gained momentum emerging from the effects of the pandemic. “The national shipments gain was notable during the second quarter, but the spend index surged from both the first quarter and year-over-year,” wrote Costello. “These robust gains stem from extremely tight truck capacity due to a profound driver shortage, as motor carriers have been unable to increase supply sufficiently to meet the growing demand. As a result, pricing increased considerably as shippers worked to get loads moved in the time frames needed. In addition to increased freight rates during the second quarter, the spend index was pushed up by rising diesel fuel prices, which are reflected in increased fuel surcharges. As industries ramp up output from increased demand in the second half of the year, truck freight demand will grow as well. The challenge for the motor carrier industry will be meeting that demand in the face of one of the largest supply crunches in history. Increased new driver training and rapidly rising pay will help, but it will take time to get additional drivers into the market.” And he added that second quarter shipments were also supported by sectors emerging from the impacts of the pandemic like travel and restaurants. On the spending side, Costello pointed to the pairing of higher volumes and pricing, including higher fuel surcharges, resulting in a new record, also noting that the pricing gains are visible through a much larger gain in spending than in shipments compared to a year ago.

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M&A intensifies as carriers seek ‘holistic’ portfolio

Transport Dive Jim Stinson July 23, 2021

Right now, carriers appear to believe the freight market will continue to sustain itself near or at peak levels, meaning it is not yet purely a seller's market, Vise said. FTR's research supports the conclusion that the market is far from a peak, Vise said. As for the increase in deals, Vise said carriers feel the uncertainty about the freight economy is over. And recently, the National Bureau of Economic Research, an independent agency based in Cambridge, Massachusetts, announced the pandemic-related national recession lasted only last two months, from February 2020 to April 2020. As for what the future of transport M&A looks like, Vise said it's possible more TL firms will buy LTL carriers, and vice versa. Sathe said the big movement will be in mid-market firms, Sathe said, but it won't stop there. Carriers and private equity appear to feel the recovery is solid and will sustain itself for a long time. "We see significant deals in the e-commerce space," said Sathe. "I have never seen so much money chasing deals.

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Industry

Supply-Chain Backlogs Turn Chicago Into New Chokepoint (Subscription Based)

The Wall Street Journal Paul Berger July 23, 2021

The congestion is the latest bottleneck in supply chains that have been knocked off balance this year by container shortages, tight capacity and events such as the grounding of the Ever Given container ship in the Suez Canal in March, backups at the Yantian port in Shenzhen, China, and other incidents that led to ongoing delivery delays. In Chicago, the freight railroads are trying to catch up as containers arrive faster than they can be switched for onward transport, leading to ever-higher stacks of boxes at the region’s yards. The strains are being exacerbated by labor and equipment shortages across the shipping, trucking and rail industries. Union Pacific, which along with BNSF hauls containers to and from the Southern California ports, earlier this month said it would suspend service from the West Coast to Chicago beginning the night of July 18 for up to seven days to ease the backlog of containers.

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US imports to keep driving global shipping imbalance (Subscription Based)

The Journal Of Commerce Michael Angell July 23, 2021

US imports have driven the global container shipping chaos, having grown 10 percent yearly since 2019 while other trades saw moderate gains in comparison. Low inventories, a strong US economy, and shippers not wanting stockouts or depleted shelves make the demand outlook strong until at least early 2022. Alan Murphy, chief executive of Sea-Intelligence Maritime Analysis, said that the crunch in container ship supply is exclusively the result of North American demand. Since September 2020, North America alone has added about 500,000 TEU of new demand monthly over the same level seen in 2019, Murphy said, citing data from Container Trades Statistics (CTS). While global container ship demand through May 2021 is flat relative to 2019, North American demand has grown 10 percent on an annualized basis since that time, Murphy said. “We are not seeing a global demand boom, we are seeing a North American demand boom,” Murphy said during the recent JOC.com Midyear Container Outlook. “That’s really the challenge because we are not used to this kind of growth.”

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Logistics real estate market shows no signs of slowing

DC Velocity July 23, 2021

JLL conducted its inaugural survey on Global Logistics Real Estate this spring to gauge activity in the market and identify trends that may affect future growth. The company surveyed 720 logistics experts in 43 countries and territories on a range of issues. More than 70% of respondents said they expect demand in the e-commerce sector to “increase significantly” following the highest year-on-year growth by any occupier group globally in 2020: e-commerce accounted for 16% of 2020 total logistics and industrial leasing in the United States, 22% in Europe, and 33% in China, according to the report. The research also revealed continued strong growth for warehouse facilities, driven by demand for express and parcel delivery, third-party logistics services, healthcare and life sciences, and construction and materials. Looking ahead, the research identified pressures on future growth, including a limited supply of entitled land for logistics space around the world and the need to satisfy sustainability demands. More than 70% of respondents said improving energy efficiency is the highest global priority, with Europe leading the way in making progress on that goal.

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U.S. rail carload and intermodal volumes are up for the week ending July 17, reports AAR

Logistics Management July 23, 2021

Intermodal containers and trailers—at 277,952—rose 4.1% annually, topping the weeks ending July 10 and July 3, at 241,528 and 276,073, respectively.

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Government/Safety/Sustainability

FMCSA to States: Phase Out Paper CDL Disqualifications

Truckinginfo.com July 23, 2021

A final rule published on July 23 by the Federal Motor Carrier Safety Administration revises existing regulations to require that states implement a system and practices for the “exclusively electronic exchange” of driver history record information through the federal Commercial Driver's License Information System.

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U.S. Infrastructure Talks Near Finish as Senators Face Time Pressure

Bloomberg Erik Wasson July 26, 2021

Senators negotiating a $579 billion infrastructure package are aiming to finish negotiations early this week, under pressure from colleagues to salvage an August recess and to allow the Senate to turn to preventing a government shutdown and debt ceiling default in the fall. A pending five-week break scheduled to begin Aug. 9 is motivating the 22-member bipartisan group to end dickering over relatively minor components of their plan after Republicans spurned Senate Majority Leader Chuck Schumer’s deadline for action last week. “If it’s not ready for Monday vote, we’re going to lose a couple of weeks on our August recess if we don’t, so it’s got to be ready,” Montana Democrat Jon Tester said last week. “We should pay for this increase in infrastructure spending by repurposing money we already approved, but hasn’t yet gone out the door,” Pennsylvania Republican Senator Pat Toomey, who isn’t part of the negotiating group, said Sunday on CNN. “But that’s a point of great contention with the Democrats.” A Republican aide familiar with the negotiations said billions of dollars still separate Democrats and Republicans on transit. The main dispute is over how to divide money from the highway trust fund between roads and transit. Democrats want 20% to go to transit and GOP lawmakers want a smaller portion.

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Economy

Will US consumers throttle back on buying stuff?

Freight Waves Mark Solomon July 25, 2021

If shippers, third parties and carriers living for nearly 18 months with overstretched supply chains were hoping for some relief from consumers who have had their fill of stuff, they haven’t gotten it. “Shippers are in a tough environment,” said Phil Levy, chief economist for Flexport, a digital freight forwarder based in San Francisco. Telling them that the consumer isn’t easing off on goods purchases is “not what they wanted to hear.” Monthly data from Flexport supports Levy’s contention. From January 2016 to February 2020, the ratio of personal expenditures on services and goods was remarkably consistent. About 68% to 70% of spending went to services, and 30% to 32% to goods. The shift in the ratio began, not surprisingly, in the early spring of 2020 as lockdowns, for many, made goods-buying the only outlet for their dollars. The ratio hit 33.8% during the summer of 2020 and dipped toward the end of the year. It then jumped, much to Flexport’s surprise, to 35.3% in March 2021, a time when it was thought the country had begun to turn the corner in its fight against the pandemic. Levy said he expects the goods component of the ratio to settle for now at about 34%, a level similar to what was reported in the summer of 2020. If the ratio normalizes there, that indicates goods-buying will remain elevated longer than many surmise, Levy said.

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