US West Coast seeing higher demand and prices


There are increasing signs that the logistics sector in the US is returning to a sort of normality and may be facing a degree of price inflation.

Such is the velocity of the recovery that California, in particular, seems to be experiencing a degree of congestion. The Port of Los Angeles released figures on August 18, showing that although year-on-year volumes for the port may have been down 6.1% this represented a marked improvement on the 29.8% fall in May or even the 9.6% seen in June. The port points out that the 856,389 TEU handled in July was the “second-best July in the Port’s history” surpassed only by July 2019.  Los Angeles Executive Director, Gene Seroka, added that “preliminary data for August indicates solid volumes as retailers continue restocking inventories and preparing for the year-end holiday season.”

Anecdotal evidence suggests that this is resulting in shortages for trucking capacity, including the availability of skeletons. This reflects wider issues around changed road freight traffic patterns that are having an impact in the rest of the US. There also appear to be issues around the availability of warehouse labour, which is perhaps more surprising.

The rail sector is also experiencing higher demand, generally for container services and generally out of California. Union Pacific is believed to have made a series of increases in prices with specific surcharges for California traffic in the face of rapidly growing demand, whilst BNSF rates are also believed to be hardening.

The reasons behind the higher demand are not certain. Whilst retail sales seem to be strong, the strength in demand on the West Coast may be influenced by short-term stock-building ahead of peak season or concerns over friction between China and the US. However, these increases come in parallel to increases in rates from, for example, the express parcel carriers. In the short-term North America may see a balance favouring certain well-placed providers who are able to limit the quantity of logistics capacity available and thus drive-up prices in the face of recovering volumes. This would be in-line with trends elsewhere in global markets such as those in container shipping.

Source: Transport Intelligence, August 27, 2020

Author: Thomas Cullen

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