07/14/2022 by Greg Massey
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At the start of the year, shippers were paying almost $15,000 (it actually spiked above that in March and April) for a container coming out of China headed for the U.S. As you can see in Figure 1.1, that container rate is continuing to decline, now sitting at almost half of what it was just six months ago. Several factors are at play to help drive these container rates down.
There is a better balance of goods heading out of the U.S. to Asia compared to goods destined for our ports from there. Not having as many empty containers headed either way has helped balance the revenue per ship and thus creates less of a need to “make up” for that empty container that was not profitable on either leg of its journey. Additionally, a combination of the slow down in China’s manufacturing along with a decline in demand for consumer goods has swung the pendulum more towards the shipper’s favor. As we all learned in our Economy 101 class, it’s a simple supply and demand issue.
Interestingly enough, we have seen the freight tender volumes and tender rejection rates in the state of California move almost in lockstep with the flow of imports. As can see in Figure 2.1 below, as import freight flows began to see less demand, the over-the-road truck volume began its descent, and as less freight was available, carriers were not able to be as choosy, and thus freight tender rejection rates fell.
One thing we are keeping a close eye on is the impact of the recent inaction by the U.S. Supreme Court with regards to California Assembly Bill 5, or AB5 as it is commonly known. This was a bill introduced three years ago that set out to define the classification of independent workers, or gig workers, versus traditional company employees.
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