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Nov 01, 2022
The Wall Street Journal in the space of 11 days has published two articles on the drop in freight demand reported by some of the biggest long haul freight companies in the U.S. The trucking firms are raising an alarm of sorts as they have seen demand for their services wane somewhat at a time when they normally are at their busiest.
A piece published on Saturday said that declining demand has led spot market volume to soften, and that may have a ripple effect into longer term contracts that make up the bulk of the business.
“The fourth quarter is generally the peak of the holiday shipping season. However, judging by the feedback from our clients, this peak will be muted versus historic norms,” David Yeager, CEO of the trucking and rail freight services firm Hub Group, told analysts on the company’s third quarter earnings call last week. “Beyond 2022, we do acknowledge the potential for a continued softening economy, but we believe that we are positioned for success as we’ve taken several important steps to improve our resiliency in a down market.”
Hub Group’s volume was down six percent year-over-year in the third and eight percent in October.
“The growth in U.S. import volume has run out of steam, especially for cargo from Asia,” Ben Hackett, founder of Hackett Associates and the author of the National Retail Federation’s Global Port Tracker report, said in a statement. “Recent cuts in carrier shipping capacity reflect falling demand for merchandise from well-stocked retailers, even as consumers continue to spend. Meanwhile, the closure of factories during China’s October Golden Week holiday along with the Chinese government’s continuing ‘Zero Covid’ policy have impacted production, reducing demand for shipping capacity from that side of the Pacific as well.”
The decline in imports has affected cargo shipping, pushing container rates down.
Tim Smith, director of global transportation and logistics at Old Time Pottery, a discount home-goods retailer, told the Journal for an Oct. 18 article that ocean carriers are increasing their calls to get contracts signed through the middle of next year.
“Not only are the steamship lines reaching out inquiring about contracts, but they’re aggressively following up when you don’t get back to them immediately,” he said.
DISCUSSION QUESTIONS: What do declines in cargo imports and freight demand say about the sales outlook for retail over the next six months to a year? How will these developments affect the inflation rate and subsequently merchandising and marketing plans at retail?
“Retailers are going to have to work harder for their holiday sales.”
“The shippers made a bloody fortune during the pandemic. It’s not the end of the world that they’re seeing a slowdown.”
“Tighten your belt a notch, the next several months are going to be tough for many retailers and suppliers.”
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