In today’s fast-paced supply chain environment, it is important to know and understand the trends most likely to shape the future. DHL Supply Chain’s quarterly report highlights what to watch for each quarter to help you navigate the ongoing and transformative changes driving today’s supply chain. The data used was taken from reports by DGF, Morgan Stanley, FTR, Sonar, Cleveland Research, and Xeneta.
Now let’s look at the 3 most popular transportation trends in the world in the first quarter of 2023.
1. Spot Market Rates
Although we saw spot market rates rise slightly during the holiday season, we are now seeing a normalization against last year’s high rates in the first quarter; spot rates continue to fall and remain below contract rates.
Tender rejections remain historically low, which means capacity is loosening. This is a good sign, as it indicates that plenty of economic activity is taking place. Analysts predict that we will reach the market bottom with spot rates in the first half of 2023.
2. Port Congestion
While port congestion has decreased significantly compared with COVID-19 levels, congestion and service disruptions at Northeast and Gulf ports continue to strain the market. Container dwell time at Southern California ports has continued to normalize over the last 45 days. We see two main reasons for the significant reduction in port congestion.
First, companies based in the U.S. are taking steps to reduce inventory, which lowers the amount of import activity and eases congestion. Second, as more activity shifts to Gulf and East Coast ports, the entry point to North America is becoming more diversified. We are seeing volatile import bookings at customs, which is a good indicator that congestion will continue to remain low.
3. Freight Volume
Freight volume continued to decline in the first quarter. Although the industry typically sees an increase in truckload demand in January and February each year, this year the increase in those two months occurred at the slowest pace in the past five years. This means that seasonal demand at this time of year may be lower than what was typically seen in previous years. One reason for this is that declining manufacturing output continues to lag behind the output of recent periods, which is an indicator that inventory is being drawn down.
Given the decline in volume, surprisingly we have not seen a high number of bankruptcies among truck owner-operators. This is likely because many of them have locked in low interest rates. If interest rates continue to rise, further affecting major purchases, freight volumes will likely remain low and could eventually lead to an increase in bankruptcies. If this happens, it will recalibrate the demand rate.
Final Words
• As the economy slows, market conditions appear to be stabilizing.
• U.S. GDP posted an increase in the third quarter, but this does not hide any of the key indicators that the overall economy is slowing.
• Diesel prices continue to face pressure due to current inventory challenges and the impact of the OPEC+ oil production cut.
• Further interest rate hikes are inevitable and will likely remain in place longer than expected; recession risks have eased, but they still look significant.
• The direction of the economy depends on American consumers, but it is showing signs of weakening, especially in the housing sector, as mortgage rates rise and inflation erodes consumer savings.
