Radiant's Freight Market Update

This week: U.S. logistics inflation stays high despite drop in costs; New legislation targets freight fraud and cargo theft; Port of Nevada and Union Pacific launch joint intermodal service.

Current Critical Industry Trends

Renewed shipping backups and rising costs amid Red Sea disruptions. Ship backups that plagued global ports during the COVID-19 pandemic are resurfacing, driven by vessel diversions from Houthi rebel attacks in the Red Sea, which have effectively closed the Suez Canal. This has triggered gridlock and soaring costs as the peak shipping season begins. Containerships and bulk carriers are congesting ports in Asia and Europe, extending voyage times and stranding sea containers. Retailers and manufacturers face complicated logistics, with importers particularly concerned about rising freight rates, which have tripled since last year. Additional challenges, such as U.S. tariffs on Chinese goods, Panama Canal drought restrictions, and potential dockworker strikes in the U.S., are further exacerbating supply chain issues.

U.S. logistics inflation stays high despite drop in costs. Despite an 11% drop in U.S. business spending on logistics services in 2023 to $2.4 trillion, logistics inflation remains high due to persistent supply chain disruptions. Although logistics costs have decreased since the pandemic peak, they are still higher than pre-pandemic levels, with the logistics cost to GDP ratio at 8.7%. Challenges such as excess transportation capacity, high inventory levels, and fluctuating freight demand continue to impact the sector, highlighting the need for more flexible and resilient logistics systems.

Ocean

Strong U.S. container imports in May amid East Coast surge. U.S. container imports surged 5.6% year-on-year in May, the highest since the pandemic. This increase follows months of double-digit declines and represents 1.93 million TEU, the highest in 21 months but still 15.5% below the record in May 2021. Notably, East Coast ports saw an 11.8% rise in imports, reversing a ten-month trend favoring West Coast ports, which saw no growth. U.S. exports also grew 4.9%, with Houston and Los Angeles as key export hubs, maintaining a strong trade imbalance favoring imports.

Ports

Port of Nevada and Union Pacific launch joint intermodal service. The Port of Nevada has partnered with Union Pacific to provide intermodal service between Fernley, Nevada, and the Port of Oakland, aiming to reduce truck traffic, lower emissions, and improve shipping efficiency. This new service is expected to attract advanced manufacturing businesses to Nevada, supported by significant investments in EV battery production by companies like Lithium Americas and Tesla.

Hyundai EV plant boosts May cargo volumes at Georgia ports. May cargo volumes at the Georgia Ports Authority surged 22% year-over-year, driven by auto suppliers for Hyundai's upcoming EV plant, according to port President and CEO Griff Lynch. The ports handled 490,330 TEUs, marking the fifth consecutive month of growth. Hyundai’s $5 billion manufacturing campus has attracted 17 suppliers to Georgia, enhancing both container trade in Savannah and vehicle shipments in Brunswick. Port Brunswick saw a 44% increase in auto volumes, handling 80,600 units in April. Further growth is expected in June, with over 320,000 TEUs of import cargo en route to Savannah.

Trucking

New legislation targets freight fraud and cargo theft. The Safeguarding Our Supply Chains Act, introduced by Congressman David Valadao, aims to combat freight fraud and cargo theft through enhanced federal agency coordination. The bill proposes creating a Supply Chain Crime Coordination Center within Homeland Security Investigations (HSI) and a Supply Chain and Theft Task Force led by HSI and the FBI. With $100 million in funding for 2025-2029, the task force will address organized crime targeting U.S. transportation systems. The bill is supported by the American Trucking Associations (ATA) for its potential to protect supply chains and reduce crime.

Study shows female truck drivers face gender harassment and discrimination. A recent study by the American Transportation Research Institute (ATRI) highlights significant challenges faced by female truck drivers, including gender harassment, discrimination, and logistical issues like truck parking shortages and restroom access. Despite these obstacles, research indicates that women are drawn to the trucking industry for its income potential and more prevalent pay parity compared to other fields. Recommendations for the industry include implementing targeted strategies to support and retain women drivers, which could ultimately increase their numbers in this traditionally male-dominated field​.

Rail

Flooding causes railroad bridge collapse in Midwest. A railroad bridge connecting North Sioux City, S.D., with Sioux City, Iowa, collapsed during flooding in the Midwest into the Big Sioux River on June 23. South Dakota Gov. Kristi Noem noted it was the main rail link from her state to Iowa. No injuries were reported as BNSF Railway had stopped operations on the bridge as a precaution. Trains are currently being rerouted.

Air

Volatile air cargo market faces shifting trade dynamics. The air cargo market is experiencing volatility due to economic growth and changing global trade structures, according to Transport Intelligence (Ti). Ti's Q2 Air Freight Rate Tracker reveals a 6.4% decline in Q1 global airfreight volumes, with drops in January and February followed by a 17.4% recovery in March. Year-on-year, volumes rose 7.3%, driven by European, Asian, and North American markets. The Red Sea crisis and booming Chinese e-commerce are key factors behind the demand surge. Despite efforts to reduce reliance on China, its trade influence remains strong. Increased belly freight capacity and growing freighter fleets are meeting rising demand, but the market remains complex and unpredictable.

International

Foreign direct investment in Mexico hits $39B so far in 2024. Foreign direct investment (FDI) in Mexico reached $38.2 billion from January to May 2024, a 35% increase from 2023. The United States led with $20 billion, followed by Germany ($5.7 billion) and Argentina ($4.4 billion). Investments were mainly in manufacturing ($21.8 billion), transportation ($5.1 billion), and trade ($5 billion). Notable investments include Evergo, L&T Precision Corp., and Daikin Industries. BNSF, Utility Trailer Manufacturing, and Doosan Bobcat also announced significant projects in Mexico​.

Technology

Industrial real estate turns to solar panels despite challenges. Industrial real-estate companies are increasingly interested in installing solar panels on warehouse roofs to cut energy costs and reduce emissions, however high installation costs and potential roof damage have made many cautious. Despite challenges, creative deals, like leasing roof space to solar-energy operators, are gaining traction.

Other

China Bans Meat Exports from Port of Oakland. China has banned meat exports from the Port of Oakland due to the detection of ractopamine, a feed additive prohibited in China. The ban affects beef and pork products, potentially disrupting U.S. meat trade and highlighting regulatory differences. The ban underscores ongoing challenges in international agricultural trade, especially regarding food safety standards.

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The Radiant Network's supply chain and logistics updates provide valuable insights on freight trends, customs regulations, global news, economics, tech, and more. The Radiant Network includes the brands Radiant World Trade Services, Radiant Global Logistics, Radiant Canada, Radiant Road & Rail, Adcom, Airgroup, SBA, and Distribution By Air.

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Radiant World Trade Services is a part of Radiant Logistics, Inc. (NYSE American: RLGT), a publicly traded third-party logistics company that provides technology-enabled global transportation and value-added logistics solutions to a diverse account base. They offer comprehensive services including freight forwarding, truck and rail brokerage, warehouse and distribution, customs brokerage, order fulfillment, inventory management, and technology services. Radiant has an extensive network of offices throughout North America and other key markets worldwide.