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The peak shipping season is winding down as overstocked retailers cancel overseas orders and freight companies lower expectations for heavy freight volumes as the holidays approach.
Typically, in the last quarter of the year, freight carriers, from container lines to parcel operators, increase their profits thanks to strong demand. But a slew of shipping demand measures across the United States are falling, freight rates falling accordingly, leading carriers to cut capacity as a deeper downturn lies ahead.
The rapid reversal of a freight market that was booming at the start of the year, when tight capacity and rising shipping prices brought major profits to the transport and logistics sector, will weigh on profits from this week. Operators are expected to start reporting results based on growth that is already showing signs of slowing.
Trucking Leader JB Hunt Transport Services Inc.
Tuesday night reported that revenue was flat in the third quarter from the prior quarter at $3.84 billion and the company anticipates a weakened peak season. Storage giant Prologis Inc.
is expected to release its results on Wednesday.
“US import volume growth has stalled, particularly for freight from Asia,” said Ben Hackett, founder of Hackett Associates and author of the Global Port Tracker report published by the National Retail Federation. “Recent reductions in carrier shipping capacity reflect lower demand for merchandise from well-stocked retailers, even as consumers continue to spend.”
The NRF report is one of many metrics showing shipping volumes are slowing sharply from August to September, signaling a drop in demand that is rippling through supply chains even as retailers line up for the traditional sales season.
Global Port Tracker report forecasts imports at major U.S. seaports to decline 4% in the second half of the year after rising 5.5% year-over-year in the first six months of 2022 .
Data analysis group Descartes Datamyne says September container imports were down 11% year-on-year and 12.4% from August.
Photo:
Bing Guan/Bloomberg News
Descartes Datamyne, a data analytics group owned by supply chain software company Descartes Systems Group Inc.,
suggests an even steeper decline based on its tracking of incoming trade volumes.
Their report released earlier this month said September container imports, measured in 20ft equivalents, were down 11% year-on-year and down 12.4% from August. , an unusually steep drop in the months considered the peak of peak shipping. season. Container imports from China, where makers of goods including furniture, toys and electronic storage boxes are destined for U.S. retailers, fell 18.3% from August to September.
Many retailers pulled peak season orders earlier this year to avoid a repeat in 2021 when supply chain congestion led to holiday delays and product shortages. Many merchants now face overcrowded warehouses after consumers shifted their spending this summer and fall from household goods, electronics and furniture to travel and restaurants.
The slowdown in imports is already hitting rail volumes. According to the Association of American Railroads, average weekly loads moved in intermodal operations, a combined truck-rail service favored by retailers, fell 4.8% year-over-year in September. Volume was also 5.4% below August levels.
Trucking activity is also showing signs of slowing.
FTR Transportation Intelligence said in a report released Monday via Truckstop.com, a load chart matching truckers and available loads, that spot market activity on the West Coast recently fell to its lowest level since May 2020 and that demand in the Southeast “has fallen sharply”. after recent strength.
The drop in demand leads to an unusual drop in freight rates. DAT Solutions LLC, another load board matching truckers and loads, said the average spot rate for pickup trucks fell from August to September for the first time since 2015.
Container shipping rates which reached record highs last year have also fallen sharply, although they still remain above 2019 levels. This provides relief to shippers after prices soared during the past year which weighed on logistics budgets.
Tom France, Vice President of Logistics at Trane Technologies,
which makes heating, ventilation and air conditioning systems, said last month that truckload, ocean and air freight rates were falling rapidly. “We breathe a sigh of relief as rates come down and capacity is available,” he said.
Mr France said his ocean fares alone had fallen to around $5,000 from $15,000 a year ago. “Talk to me tomorrow,” Mr. France said, “it might be lower.”
Warehouses take over the 303 Loop near Phoenix, a city that leased 16 million square feet of industrial real estate in the first half, as companies look to change how they move goods to avoid bottlenecks supply chain bottleneck. Photo illustration: Adele Morgan
Tim Smith, director of global transportation and logistics at Old Time Pottery, a discount housewares retailer based in Murfreesboro, Tenn., said shipping carriers regularly call to offer contract rates for space on container ships until the middle of 2023.
“Not only do steamship lines inquire about contracts, they aggressively follow up when you don’t respond to them immediately,” Smith said.
Peak shipping season impacts package shipping, such as United Parcel Service Inc.,
fedex Corp.
and others typically handle increasing volumes as the calendar counts down to Christmas. Even this high-profit venture comes with warnings this year.
A Citi survey of shippers this month found that many moderated their outlook, with 22% expecting to ship more this year than last, compared to 38% who expected to ship more this time around. last year. Citi analysts say they expect a “weaker peak season and great uncertainty about the magnitude of demand.”
—Esther Fung and Liz Young contributed to this article.
Write to Paul Berger at Paul.Berger@wsj.com and Paul Page at paul.page@wsj.com
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