Coming Down the Pike: No shortfall for port drayage trucking

LTL carrier blog

LONG BEACH, August 2 – Port drayage trucking remains strong despite concerns over declining container shipping rates for ocean carriers in the transpacific trade lane as cargo volumes remain high along the supply chain.

Indeed, the continuing inflow of cargo is boosting not only the port drayage industry that handles imports, but also the less than truckload segment that is now feeding a newly emerging market of “secondary sales”.

According to the Journal of Commerce, there is a disconnect between “Asia imports that hit a record for June, and retailer forecasts of near-record imports in the second half of the year” and falling ocean carrier rates.   

The paper cited maritime shipping consultant Drewry which said the Shanghai to Los Angeles spot rate last week stood at $7,280 per forty-foot shipping container, or feu. 

That was down from $10,520 per feu on January 1, and represents a decline of 28%, suggesting that demand for containers also must be falling. But there is no sign of that happening just yet.

No dip in demand

Cargomatic head of strategy Weston LaBar said that generally the big-box retailers that sell a wide variety of household products that consumers need have not reduced orders and continue to re-stock their inventories.

“We haven’t seen any dip due to a change in orders,” LaBar told JOC. “There are still certain commodities that people want.”

That view is supported by recent reports saying that US retailers are actually “struggling” to find space to store the flood of goods that have swamped warehouses and weighed on their balance sheets.

“Warehouse owners say more retailers are looking to add storage capacity, both for goods now reaching their networks of stores and distribution centers and as they prepare to keep more inventory on hand long-term to guard against stock-outs,” The Wall Street Journal reported on August 2.

The paper said that “inbound shipments are stacking up at seaport docks, filling up warehouses near gateways and clogging distribution networks across the US” and there appears to be no sign of that stopping. 

In an earlier report, the paper quoted Griff Lynch, executive director of the Georgia Ports Authority, which operates the Savannah port, as saying that “We’ve more than doubled the demand that we had in pre-pandemic on the import side.”

The emergence of ‘secondary market sales’

Setting aside the glut of incoming cargo, which represents continued demand for port drayage trucking, there is the added flow of goods that people bought during the pandemic — often online — and then returned. 

In 2021, shoppers returned an average of 16.6% of their purchases, up from 10.6% in 2020 and more than double the rate in 2019, according to an analysis by the National Retail Federation, which represents US retailers, and Appriss Retail, a software and analytics firm.

“It’s unprecedented,” Chuck Johnston, told The New York Times. “I have never seen the pressure in terms of excess inventory as I am seeing right now,” said Johnston, chief strategy officer at goTRG, a firm which helps retailers manage returns.

But this pressure represents new opportunities, too, according to a report by goTRG issued in May, which said that “58% of consumers, especially Gen X, Millennials, and Gen Z, are planning to reduce spending over the next 12 months, creating an opportunity for secondary market sales.” 

Those secondary market sales are essential in the current economic environment where retailers, now in need of space for more incoming cargo, are looking for new outlets. 

It goes without saying that the trucking industry is central to this entire retail process – whether as the port drayage trucking needed to haul those in-bound containers away from container yards or as the less than truckload carriers in taking those returned items to the secondary market sales.