Brace Yourselves

In this week’s Roar: words of caution for supply chains, decent retail numbers, a normal ocean marketplace, declining truck tonnage, and a possible step back for port labor.

The industry is getting a warning that supply chains are in the crosshairs of another upheaval, with the threat of a UPS strike and the possibility of Yellow going bankrupt. If both of those things happen, the results to the supply chain and the economy could be troublesome.

Logistics professionals are being urged to be proactive if the worst happens. This includes preparing by validating with the TSA Known Shipper Program, advising customers to expect delays, and keeping an eye on the developing UPS and Yellow Freight situations.

What’s the reality in the ocean market? While some are talking about the collapse of demand and ocean freight rates, that’s not the full picture. There is no challenging the fact that both demand and rates have fallen considerably in the short term, but when comparing pre-pandemic 2019, Asia to USWC rates are actually 17% higher. Additionally, spot rates on the Asia to Mediterranean trade are 50% higher than they were pre-pandemic. So, keep in mind, context is important.

A new report from the US Census Bureau and the National Retail Federation (NRF) shows a slight improvement in June retail sales. By slight, we mean a 0.2% increase compared to May, and a 1.5% annual increase, with six of the nine retail sectors seeing gains. The NRF states that “the pace of spending is slower, but consumers are still in control of the direction of the economy thanks to the still-growing labor market and a comfortable cushion of savings.” Heading into the second half of 2023, the retail economy is holding steady.

This chart from wsj.com shows the retail industry’s switch to ecommerce may have peaked for now, but it clearly has staying power.

Truck tonnage in the U.S. is still in “recession territory” despite slight gains in May and June. When looking at year-over-year numbers, they continue to decline, but not to the extent they had previously, which, according to some, is a hopeful sign. Additionally, data from the monthly DAT Truckload Volume Index shows some stabilization in May and June, but the sector is closely watching the unfolding UPS-Teamsters drama since capacity could tighten if workers strike.

Negotiations between the British Columbia Maritime Employers Association (BCMEA) and the International Warehouse and Longshore Union (ILWU) Canada have taken some wild turns. After a tentative agreement had been reached ending the previous work stoppage, the union announced a new work action to start this past Saturday, only to rescind that shortly after. So, for the moment, a strike is on hold. Canadian West Coast ports are important points on the American supply chain, with containers passing through them before being shipped via rail to US destinations.

For the rest of the week’s top shipping news, check out the article highlights below.