US Import Demand is Dropping Off a Cliff

[greyhounds]

It says so right here:

https://www.freightwaves.com/news/us-import-demand-drops-off-a-cliff?j=155420&sfmc_sub=50660216&l=256_HTML&u=3127081&mid=514011755&jb=30004&utm_source=sfmc&utm_medium=email&utm_campaign=FW_Daily_6_7_22&utm_term=Read+More&utm_id=155420&sfmc_id=50660216

This, if true, will sure change things in the transportation world.  It might even free up some crews to run locals and such.

[SD70Dude]

greyhounds

It might even free up some crews to run locals and such.

Nah, they'll just get laid off.  Way simpler.

[Convicted One]

There are even stories out there about Target having to cut prices to clear out over stocked merchandise, cancelling orders, and reimbursing suppliers for sunk costs incurred due to the cancellations.

My first thought was how this, if widespread, would likely impact logistics companies....however as a consumer I'm delighted to see market forces at long last working in my favor. 

 

edit add:  After reading your link I see they mention Target, as well.

[Euclid]

I don’t think is it too complicated.  Demand is falling off a cliff because inflation is driving prices to the moon.   

[SD60MAC9500]

 

No demand is not dropping off... Freightwaves is putting out another sensationlist piece. They've already been criticized by industry veterans for misleading and poor reporting..

FW fails to take into account mean data.. Current freight is well above the average. Asian TEU imports are up 37.5% from 2019..

FW is not accounting for intermodal ramp bottlenecks. Especially Chicago, Memphis, Houston, etc... Also not accounting for invetnory still piled up at the ports. Which as of recently is moving at a somewhat quicker pace..

 

 

 

 

[Convicted One]

SD60MAC9500

No demand is not dropping off... Freightwaves is putting out another sensationlist piece.

 

Actually, if you run a search for "Target overstocked", you'll find a slew of sources other than Freightwaves running similar stories,  many also including other major retailers.

And, they are citing decreased demand....thank goodness, at last. The post pandemic splurge appears to be waning.

[Convicted One]

Euclid

I don’t think is it too complicated.

Hopefully now all those geniuses hoarding container chassis, will choke on them.

[BaltACD]

China being shut down for a month or more wouldn't have anything to do with it.

[kgbw49]

If a greater proportion of your take home pay is going for food and fuel, it is a pretty simple equation that there will be less for other "stuff".

The core inflation rate that has been over 8% the last several months does not include food and fuel in the calculation.

[SD60MAC9500]

 

Convicted One

 

 

SD60MAC9500

No demand is not dropping off... Freightwaves is putting out another sensationlist piece.

 

 

 

Actually, if you run a search for "Target overstocked", you'll find a slew of sources other than Freightwaves running similar stories,  many also including other major retailers.

And, they are citing decreased demand....thank goodness, at last. The post pandemic splurge appears to be waning.

 

Yeah... First to fiddle isn't necessarily the best to fiddle either...FW didn't look at long term data showing the opposite of their claim, and other's who ran with the Target story... Target is a small fry in the scope of chain retailers that import goods. Walmart is the one to watch as their import volume is roughly 8% of total US TEU imports per annum.. That's very significant..

On top of all that. Raw material data is one of the key data points pointing at future freight demand.

FW and others are just the little boy that cried wolf..

Yes Balt, Shanghai lockdowns were a reason why freight demand has softened to near Pre-COVID levels. The shutdown killed any manufacturing activity. We are still above 2019..

 

 

 

[Convicted One]

kgbw49

If a greater proportion of your take home pay is going for food and fuel, it is a pretty simple equation that there will be less for other "stuff"

I agree, but that's (necessity)  usually where change takes root.  IMO, there was so much pent up frustration bought about by the quasi-quarantines, that once relaxed....there was an orgy of consumerism.

Being forced to make discomforting choices between either food for the table or a new electric razor, might be just the moderating influence we need?

[Backshop]

SD60, thanks for your commentary.  I have been getting FW popping up on my google page.  At first I thought that they were straightforward but some of their recent articles called that into question.  Your views on it have made me realize that I shouldn't put too much weight on what they say.

[charlie hebdo]

Not just Target. The slowdown in retail sales andglut of aging inventory is widespread. From CNBC:

"Retailers from Walmart to Gap face a glut of inventory as inflation-pinched shoppers skip over categories that were popular during the first two years of the pandemic. Gap, for instance, said customers want party dresses and office clothes instead of the many fleece hoodies and active clothes the company has. Walmart said some families are making fewer discretionary purchases as the prices of gas and groceries rise. Abercrombie & Fitch and American Eagle Outfitters both reported a steep jump in inventory levels, up 45% and 46%, respectively, from a year ago from a mix of items not selling and supply chain delays easing."

[Backshop]

Don't A&F and AEO cater more towards the teenage and twenty-something crowd? They are the ones with the least disposable income.

[MidlandMike]

It has been widely reported that consumers have changed spending habits from goods (like what comes in on container ships) to more travel, entertainment and other services.

[BEAUSABRE]

Backshop

Don't A&F and AEO cater more towards the teenage and twenty-something crowd? They are the ones with the least disposable income.

Canary in the coal mine. Or do think eight percent inflation has no effect on peoples' buying decisions?

[greyhounds]

Well, I can't vouch for FreightWaves.  I pretty much think our "Knowledge Source", AKA "The Media", is terrible.  But, they say this:

“Container imports bound for the U.S. have dropped over 36% since May 24. This is a troubling sign for domestic U.S. freight markets that have been benefiting from an unprecedented surge of containerized import volumes over the last 18 months. Since ocean transit times for these inbound container volumes have recently been averaging between 30 and 35 days, we will begin seeing the softer volumes show up at U.S. ports in the first couple of weeks of July.”

- Henry Byers, FreightWaves ocean expert

 

[Shadow the Cats owner]

I can tell you this much.  Around here we are seeing a drop in anything that goes to non food grade spending in our resins.  But when fuel to deliver is almost 6 bucks a gallon for diesel fuel with fuel surcharges at over 2 bucks a mile right now on all deliveries.  Then throw in gas in my area over 5 a gallon and in Chicago over 6 a gallon.  No wonder consumer spending is falling off a cliff.  Why it cost so much to fill up the gas tank you have nothing left to spend.

[blue streak 1]

Shadow the Cats owner

But when fuel to deliver is almost 6 bucks a gallon for diesel fuel with fuel surcharges at over 2 bucks a mile right now on all deliveries.  

 

 

Fuel surcharge of over $2.00 per gallon?  Now that sounds excessive.  6 miles per gallon of diesel at $6.00 so that would be ~ $1.00 per mile for fuel.  Now before Ukraine diesel at $3.00 / gallon reduces a surcharge to ~$0.50 per mile. If pre covid $4.00 up to ~$0.67 per mile. Even given a 100% empty return load would only increase surcharge to $1.00.  But no one except liquid loads would have 100% empty backhaul. Now what the heck?

[Shadow the Cats owner]

Most freight rates are still around 1.50 on a contract basis for long term contracts.  Newer contracts are around 2.50 a mile for stuff that was signed in 2021 even at those rates with fuel spiking as fast as it is and remember there are spots where diesel is going for more than 6 a gallon in CA and spots on the East Coast we are seeing well over 6 approaching 7 bucks a gallon for diesel fuel.  Companies have to stay ahead of their fuel costs or go bankrupt from just trying to run freight down the road.  With the spike in fuel costs in the last 90 days and this has not seen much traction in the MSM but close to 10% of the entire OTR industry has shutdown due to bankruptcy in the carriers.  Smaller carriers nationwide are going belly up and no one cares.  Right now there are 5 mega carriers right on the edge of being forced by their fuel costs to file Chapter 11.  They are Covenant US Express Crete and Schafer and the schocking one for that we have heard is KLLM FFE they are all running in the red all due to fuel costs.  Those 5 carriers listed are almost 20% of the mega fleets in terms of size.  

 

For a truck that gets 7 MPG burning fuel that costs 6.50 a gallon it costs .92 cents a mile for that truck to even turn a wheel.  That is before Maintance costs insurance driver pay or other fees.  BTW DEF which almost all OTR trucks take now except for those trucks that have pre 2012 MY engines in them that is over 8 bucks a gallon to buy when and IF you can find it.  DEF is in very short supply nationwide and not being reported upon.  That is also figured into the freight rates and surcharges that are paid.  Oil for maintance that has jumped over 100% in wholesale cost in the last 6 months for this industry.  HD diesel oil is now almost 40 bucks a gallon in BULK for syn.  Regular is over 25 a gallon.   

[csxns]

Shadow the Cats owner

running in the red all due to fuel costs. 

Charge more to move the freight.

[zugmann]

Just think of an alternate reality where the RRs didn't fangirl over EHH and blindly follow the PSR cult and actually had the people and engines to move more freight.  

 

 

[Murphy Siding]

csxns

 

 

Shadow the Cats owner

running in the red all due to fuel costs. 

 

 

Charge more to move the freight.

 

 

They probably have a lot of longterm contracts they have to honor.

[Convicted One]

Murphy Siding

They probably have a lot of longterm contracts they have to honor.

 

Hey Murph!  Nows the time to stock up on doors, while container rates are depressed. 

[Backshop]

csxns

 

 

Shadow the Cats owner

running in the red all due to fuel costs. 

 

 

Charge more to move the freight.

 

 

When you run freight for Walmart and Amazon, they tell you what they'll pay you.

[Gramp]

We subscribe to local Gannett newspaper online. Received email today. 20% increase end of June.  Good bye subscription. 

[Euclid]

...

[Euclid]

This was all widely predicted, but we were told that the Fed was being guided by the most qualified economists, who said the inflation would only be transitory. 

 

For as bad as this is, I don’t think most people realize how bad it can get.  Most people focus on the shiny objects of food and gasoline, and find the situation irritating.  But it can, and probably will get a lot worse than irritating. 

 

Look for a lot of retail to go over the cliff first.  All links in the supply chain pass the cost onto the next link.  Initially, it is painless if you pass the increase onto the next link.  Each link that receives the passed-on increase happily accepts the increase because they know they can just pass it on further.

 

But, only the retailer cannot pass the increase on to another link that won’t complain.  Instead, the retailers must pass the increase onto their customers.  And the customers do complain, and they reduce their consumption.  So unlike the other links in the chain, the retailer will be injured by attempting to pass the increase onto the customers. 

 

Ultimately, the whole supply chain will fail due the prices they are passing along currently without pain.  But it is the retail links that will fail first. 

 

Numbers indicate that the rate of inflation is now increasing while we were told it would soon be decreasing.  The quicker the rate of increase; the harder it is to stop.  If this totally spirals out of control, the whole economy could go over the cliff.

 

More worrisome is the fact that the architects of this disaster believe that it is only more public spending that can save us.

[Flintlock76]

Gramp

We subscribe to local Gannett newspaper online. Received email today. 20% increase end of June.  Good bye subscription. 

 

We dropped our subscription to the local paper last year.  It wasn't the same paper it was when we moved here in 1987, much less content, news articles regurgitated from the AP, and the local reportage nowhere near as good as it was.  When I asked the wife what the yearly subscription cost (split into payments every six months) was she said $750.

I asked "Are the comics worth $750 a year?"  Needless to say, no.  So good-bye paper.  Just to show how screwed up they are they continued to deliver for two months after we cancelled!  They didn't stop until I sent an e-mail to the publisher saying "Well if you want to keep giving it away..." 

And we don't miss the comics as much as we thought we would.

[BaltACD]

Flintlock76

 

Gramp

We subscribe to local Gannett newspaper online. Received email today. 20% increase end of June.  Good bye subscription.  

We dropped our subscription to the local paper last year.  It wasn't the same paper it was when we moved here in 1987, much less content, news articles regurgitated from the AP, and the local reportage nowhere near as good as it was.  When I asked the wife what the yearly subscription cost (split into payments every six months) was she said $750.

I asked "Are the comics worth $750 a year?"  Needless to say, no.  So good-bye paper.  Just to show how screwed up they are they continued to deliver for two months after we cancelled!  They didn't stop until I sent an e-mail to the publisher saying "Well if you want to keep giving it away..." 

And we don't miss the comics as much as we thought we would.

Have yet to see any print paper offering their subscriptions for OVER $2 a day.