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The current opinion from shippers appears to be that demand is down 23% compared to previous year, and rates are bottoming at levels compared to lows in May 2020, reports FreightWaves based on trucking research from Bank of America. An expectation of a freight recession is backed by one key indicator that shows a truckers rejection rate dropping from 25.76% in April last year to 9.92% this month. More concerning is that freight is often a major indicator for the general economy, there is worry that this could indicate a forthcoming economic downturn. (More at: FreightWaves, “Bank of America sounding the alarm …” by Racheal Premack, 4/25/2022)

The Asia-U.S container shipping capacity has dramatically changed over the past two years. The capacity has increased 24% this past 12 months as of April compared to prior 12 months, keeping up with the increase of 24.7% in 2021 as well. In addition, the Asia-East Coast capacity has surpassed that of the Asia-West Coast growth by over 7%. Projections are also showing higher Asia-U.S. annual contract rates in 2022 compared to previous year. (See more at American Shipper, “How COVID transformed trans-Pacific container shipping” by Greg Miller, April 20, 2022)

Lockdowns began in Shanghai on April 2nd and in Guangzhou on April 11th according to FreightWaves as reported yesterday. These top Chinese cities are number one and five, respectively, in size measured by urban area population and the largest and forth largest ports in the world. Together, “the two port cities handle nearly three times the amount of cargo that the entire U.S. imports each year.” The Chinese shutdowns are much more draconian than in the west and are expected to send substantial impact around the globe including to American supply chains. (See FreightWaves, “Chinese lockdowns will create shocks …” Craig Fuller, April 18, 2022)

Many are expecting demand in the industry to drop back to 2019, pre-pandemic levels. If this trend occurs along with the increase in costs and supply in recent quarters, there can be a drastic fall in rates.  Craig Fuller, CEO at FreightWaves, points to the potential of hitting a “bloodbath baseline” for trucking companies as he explains, “Assuming that the truck is being driven by an employee driver, spot rates below $2.63 per mile could spell disaster for trucking fleets if that rate persists for long.” (See more at FreightWaves, “Trucking industry will be in trouble if demand drops to pre-COVID levels” by Craig Fuller, April 6, 2022)

Even though the city port is open, the eastern part of the city was under lockdown this past Monday while the west side is planned for lockdown as well on Friday, reports American Shipper this week. Regardless of the port status, workers and drivers will not be available to go to work due the lockdown unless working mobile from home. Manpower shortages and delays on container delivery to ports are expected. (See more at American Shipper, “Shanghai’s 2-stage COVID lockdown….”, Lori Ann LaRocco, 3-28-2022)