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The Outbound Tender Rejection rate has continued its downward slide since the start of the year, now sitting at just above eight percent. There does appear to be leveling out of that rejection rate as seen in Figure 1.1, and while much lower than the 20 percent and 30 percent rejection rates we were accustomed to seeing throughout last year, eight percent is more in line with what is normal for a balanced freight market.
As more contracted freight is being accepted by carriers, a combination of less freight volume and better-negotiated contract rates, the impact on the spot market continues to push rates down. Van and reefer rates have been steadily declining, but spot rates on the flatbed have remained relatively unchanged over the past year. Advances in manufacturing and industrial output, combined with a still-strong housing market, have helped to maintain that consistency with flatbed-serviced freight.
Many have wondered how the recent global events have impacted ocean shipping, particularly imports into the U.S. Figure 2.1 shows the recent downturn in import activity over the past few months which has been impacted by the war in Ukraine and covid lockdowns in China. Keep in mind the current volume trend is 30 percent higher as compared to pre-pandemic levels, and as China begins to ease lockdowns, the ocean volume will once again begin to flow.
On a positive note, there are encouraging signs with regards to contract negotiations with the International Longshore and Warehouse Union that a new deal could be in place by early July. This would be welcome news as import volumes will be accelerating and a work stoppage would further hamper supply chain efforts on the west coast.
And finally, everyone is wondering when prices for diesel fuel will begin to retreat. As of today, the at-the-pump price for a gallon of diesel fuel is more than $2 higher than this time last year, sitting at $5.50 per gallon (Figure 3.1) with some regions already above $6 per gallon. There are many reasons for the price increases, from the effect of stalemating Russian oil to a lack of refineries to process diesel fuel.
On top of that, diesel fuel also competes with jet fuel for production, so as Americans have begun to travel more, the demand for jet fuel is also increasing. Unfortunately, there is no short-term relief on the horizon, especially as summer travel will further strain oil reserves. Short of the government providing another stimulus or some relief, truckers, and commuters should be prepared to pay higher prices when filling up throughout the summer months.
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Find out what you need to know in the freight market update of May 2022.
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