Chart of the Week: Daily Customs Shipments, Outbound Tender Reject Index – USA SONAR: CSTM.USA, OTRI.USA
This final 2020 edition of the chart of the week combines the two most relevant statistics of the year: maritime import shipments and tender rejection rates. Before the pandemic, the two measures had little connection to each other. In 2019, container imports had time to sit in warehouses as shippers were able to plan and prepare for seasonal purchasing patterns to reemerge, allowing them to more evenly distribute freight across the U.S., putting little pressure on carrier capacity.
About halfway through 2020, the connection between domestic surface transportation capacity and import volumes became much stronger. And it would appear to have plenty of momentum to carry into 2021. Ignoring growth in capacity, which appears to have a longer cycle thanks to driver recruiting issues, transportation demand should keep the market tight into early 2021.
Maritime imports are dominated by China and other Asian countries. Last month the U.S. imported 713,000 shipments from China, with South Korea coming in a distant second with 109,000 shipments. It is important to note these are shipments and not containers. It is safe to say the relationship with China is quite important to the U.S. economy and to transportation and logistics providers who are responsible for moving and storing these goods.
Domestic transportation providers have learned this lesson over the past two years as trade tensions with the People’s Republic escalated under the Trump administration, motivating companies to “pull forward” their orders for the year in 2019 to avoid potential sourcing issues. This had little impact on transportation capacity as most of that freight was placed in warehouses in preparation for a “normal” year — something 2020 was obviously not.
In 2020, a wave of unexpected demand depleted warehouses for many internationally sourced items like electronics, furniture and appliances. The biggest reason for the wave of consumer purchases has been driven by people spending more time at home. Demand for these items has not only increased but blown through “normal” growth curves.
The housing sector has flourished throughout the pandemic. Housing demand increased as people moved out of the cities — no longer having to commute to the office and perhaps needing more space for home offices — and have taken advantage of historically low mortgage interest rates.
After people buy houses, they purchase finishings like furniture and appliances. Retail sales annual growth rates for furniture and related items from retailers such as Ashley Furniture and Haverty’s (NYSE: HVT) averaged over 3.6% from July to November — a big jump from the 1.5% average from the same period last year.
More impressively, building materials and garden equipment that companies like Lowes (NYSE: LOW) and Home Depot (NYSE: HD) specialize in carrying have averaged over an 18% growth rate from May through November after experiencing little to no hit to sales from the pandemic.
The biggest winner economically has of course come from the e-commerce sector of non-store retailers, which has grown at an average rate of over 26% since May. All three of these sectors continue to exceed expectations through the fourth quarter, with only furniture showing signs of slowing in November.
Continued supply chain risks arising from uncertainties with sourcing from China and maritime capacity going for a premium, companies will continue to place orders as fast as they anticipate receiving them until some relief is felt.
The 2021 market may look a lot like 2018 with tight first-half conditions gradually loosening in the second half as vaccines become more widely distributed in early spring and the warmer months start pulling people outdoors and they spend money on travel and services versus goods. Even then a backlog is sure to exist, keeping the market tight into the summer peak months. For better or worse, we can close the books on 2020 this week, hopefully bringing an end to the COVID-19 pandemic in the new year.
Have a safe and happy New Year.
About the Chart of the Week
The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real time. Each week a Market Expert will post a chart, along with commentary, live on the front page. After that, the Chart of the Week will be archived on FreightWaves.com for future reference.
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