Workers within the American transportation and shipment industries have expressed uncertainty over the state of the market, and national economic conditions.
Their main concern is rooted in inventory hangover, a direct result of congestion in the West Coast Port which has led to subsequent delays, backlogs and decreases to productivity. Despite marine terminals returning to productivity, retailers are still feeling the effects. YRC Freight said in a statement, “U.S. businesses are experiencing inventory overstock at a level we haven’t seen since the beginning of the financial crisis in the fall of 2008”.
Shippers also contributed to oversupply with fears they would be out of stock, and pushed their inventory-to-sales ratios to 1:35 in August. Almost half of shippers surveyed reported their inventories were higher than last year.
The increased inventory-to-sales ratio coincide with the West Coast port incident. A survey conducted by Wolfe Research indicated higher than average level inventories have negatively affected freight volumes in the second quarter of this year. The dragging effect is likely to continue for the rest of 2015. Despite their concerns, most shippers expect inventory levels to remain the same.
Employees are also concerned about struggling domestic factory outputs that are producing low levels of exports. Coupling China’s weakening economy with a slowing national GDP, American transportation and shipment workers are concerned for the industry’s performance.
However, for the first time in five years, American shippers are experiencing a surplus in truckload capacity, along with lower fuel prices, decreasing transportation costs. In Wolfe Research’s ‘State of the Freight’ report, only 11 per cent of surveyed shippers complained of tight truckload capacity, compared to 85 per cent earlier this year, it is the lowest reading since 2010.
No shippers reported less than truckload (LTL) capacity in the third quarter, a decrease from 40 per cent earlier this year.
“This is the first time since 2010 that more shippers cited truckload overcapacity than LTL overcapacity,” Wolfe Research said.
“It’s amazing how quickly the truckload market has gone from tight to overcapacity.”
The increase in capacity is a result of transportation companies ordering a record amount of fleet equipment to boost their services, increased wages 34-hour restart rules, savings from low fuel prices, as well larger inventories.
As a result, the shift from, highway to railway freight has slowed as companies take advantage of more cost effective transport from increased capacity and lower fuel costs. Shawn Tureman, NS’s director of domestic intermodal marketing believes railway transport is losing its share to road transportation.
““Growth has decelerated, and I think part of that is decreasing fuel prices,” Tureman said.
Despite his estimates, shippers’ expectations for growth in the transportation sector in terms of volume growth state for next year are at their lowest in three years. They estimate a 1.5 per cent increase in intermodal volume for 2016.