But container volumes still going strong this quarter as U.S.-China hash out deal; but first quarter likely to see slowdown.
Good day,
The Federal Maritime Commission’s final report on detention and demurrage fees highlights the fact that ever larger container ships might be creating diseconomies of scale for the drayage industry and shippers. The FMC report says growing ship size means a container “might not be discharged until days after vessel arrival,” depending on where it’s stowed and the work schedule of the particular terminal. Despite the increasing visibility across all aspects of the supply chain, containers go into a “black hole” once they arrive at berth, according to a report from Stifel. Smaller container ships were able to unload containers over one to three days. But today’s mega-vessels may take four to five days to unload, eating into the free time before detention and demurrage fees kick in. Increasingly congested terminals mean less time to move containers, with drayage drivers left with two turns per day, down from three to four turns per day.
Did you know?
U.S. container imports into the U.S. set a new record in October, reaching 2.04 million twenty-foot equivalent units (teu), according to the National Retail Federation, up 9% from September and 13.6% from a year ago. November will only see a small slowdown to 2.01 million teu, the NRF says. As for December, the NRF expects 1.83 million teu crossing U.S. docks, which is still a strong level given the typical slowdown seen for the holiday month.
Quotable:
“If there is a deal to be done we’ll make it. The president wants us to make a deal. But as you say it has to be verifiable. It has to be moderated. It can’t be just vague promises like we’ve seen over the last twenty-five years.”
–U.S. Trade Representative Robert Lighthizer on upcoming negotiations with China on a trade truce.
In other news:
Canadian trucker group wants to double training time
Manitoba plans to implement 120-hour training rule, but group wants 240 hours. (Globalnews.ca)
Largest U.S. oil basin even larger than thought
Latest estimate from U.S.G.S. sees bigger potential in the Permian Basin of West Texas. (Dallas News)
California to require solar panels on new home construction
Mandate with estimated upfront costs of $9,500 to begin in 2020. (Slate)
Warehousing and distribution moves closer to urban shoppers
But with building space tight, tents and parking garages are being enlisted. (Wall Street Journal)
Canadian regulators seek harmonized standards for trucking
Agreement on weight rating for tires seen as first step in bring together federal and provinicial standards. (trucknews.com)
Final Thoughts
Prepare for a holiday hangover . . . in the freight market, according to equity researchers at Deutsche Bank. The well documented pull forward in U.S. container imports through the third and into the fourth quarter mean a “good potential for a negative inflection in freight flows” in the first quarter of 2019, researchers say. The investment bank says the streak of year-on-year growth in container imports will likely be broken this month. The slowdown is more a reflection of tariff-related demand easing as opposed to underlying consumer demand. But the negative outlook for the first quarter is “dominating discussions with investors.”
Hammer down everyone!