News / Volatile mix of demand and capacity will drive up cost of US imports

Eduard Goricev

Cargo owners bringing freight into the US will be hit with higher charges for drayage and intermodal transport as their imports move beyond ocean gateways, warns ITS Logistics.

A rising tide of imports and over-the-road rates is pushing up intermodal volumes, resulting in slower train speeds, looming congestion. and further upward pricing pressure, the company concluded in its latest monthly Supply Chain Report.

“Ocean and rail container drayage markets may not be feeling the market squeeze yet, but shippers should be prepared for tightening  when peak season begins. It is not a question of if inland trucking container haulage rates increase, but when,” warned Paul Brashier, VP of global supply chain.

To begin with, imports have accelerated since May, when US containerised imports rose 6.6% over April, to 2,428,758 teu, according to Descartes Systems’ June Global Shipping Report.

The US National Retail Federation attributes this to an early start to the peak season, as retailers brought in merchandise for the back-to-school campaign earlier than usual. It estimated that container imports went up 6% in June.

Peak volumes have been inflated by front-loading, as importers rushed to bring in their goods ahead of further spikes in pricing. Washington’s announcement of additional tariffs on a raft of origins accused of tolerating forced labour conditions up their supply chains threatens to boost the bill for importers by up to 12.5%.

Those tariffs, that are to be stacked on top of existing levies, target over 60 countries, including Vietnam, Japan, the EU, and Canada.

Another hit looms after the coming quarterly update of the bunker adjustment factor, which is expected to drive up fuel surcharges further.

The rise in imports is colliding with a shrinking trucking industry hit by Washington’s crusade to drive non-domiciled drivers and those with insufficient command of English out of the market.

Even in the slow-demand situation earlier in the year this development tightened capacity and drove up trucking rates, which subsequently accelerated as a result of the fuel price shock. According to one report, dry van spot rates reached an all-time high in the week ending 4 July.

Already in its monthly Port/Rail Ramp Report for May, ITS described a volatile situation not seen since the Coved pandemic, characterised by record truckload pricing, a sharp capacity contraction and rebounding import volumes.

“As the ongoing closure of the Strait of Hormuz pushes fuel costs higher, disrupts ocean carrier operations, and reshores energy exports, global supply chain uncertainty and domestic transportation challenges are converging to create one of the most operationally volatile freight environments in recent history,” the report said.

Predictably the widening gap between truck and rail prices triggered a shift of US domestic flows from road to rail. Intermodal volumes climbed 10% from April to May, with most of the increase playing out in the 550 to 1,500-mile range. For the week ended 27 June, US railways registered a 7% increase in traffic, according to the Association of American Railroads. While total carloads were up 3.3%, intermodal volume jumped 10.1%.

The rise in intermodal volume appears to have taken a toll on train speeds as it caught the rail carriers unprepared, according to one industry observer.

While this raises the prospect of congestion building in the rail network, it also suggests intermodal pricing will be heading north before long, in line with ITS’s prediction of looming rate hikes in drayage and intermodal rates.

The logistics provider is not alone with its take. In its latest market update, Maersk noted that “North American supply chains remain relatively fluid overall, but conditions are becoming more dynamic across key ocean, gateway and inland corridors”.

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