The peak shipping season this fall should be uneventful, with only a modest increase in cargo volume, a temporary spike in freight rates and no real shortages of transportation capacity or equipment to disrupt the supply chain, according to industry experts who spoke at a Journal of Commerce webcast Tuesday.
In fact, the term “peak season” may be almost a misnomer this year, said Jess Dankert, director of supply chain at the Retail Industry Leaders Association. “It will be a bump, but not a towering peak,” Dankert said.
Traffic volumes in the intermodal rail and trucking sectors will also be uninspiring, said Eric Starks, president of FTR Associates. “I don’t see a lot of pent-up demand for trucking,” Starks said.
Intermodal rail, especially on the domestic side, had been a star performer in recent years, but there will be no huge surge in intermodal freight this peak season, Starks said. Domestic will outperform international intermodal, primarily because of a shift of some traffic from over-the-road trucking to rail, he said.
Retailers this year are cautious about stocking up for the holiday shopping season because of changing consumer habits. Some consumers will shop early by using their computers and mobile devices to order merchandise online. Others will shop after the holidays using gift cards.
As a result, retailers are bringing some imports into the country earlier than usual and spreading their shipments out during the summer and fall months. Therefore, the large spike in shipments that used to occur in September and October will be muted this year.
Ocean carriers normally have increased leverage during the peak shipping season because vessel space tightens up and importers are willing to pay a peak-season surcharge to ensure their shipments get on the vessel. This year, however, capacity exceeds demand by a sizable amount.
Dankert said vessel capacity this year will increase about 11 percent as 40 new ships with capacities of 10,000 20-foot-equivalent-unit containers or larger enter the global fleet. However, demand is projected to increase only 3.7 to 4 percent.
Shipping lines that are members of the Transpacific Stabilization Agreement announced a peak-season surcharge to take effect Thursday. If past general rate increases are a precedent, though, GRIs this year resulted in a temporary increase followed immediately by rate erosion.
The picture will be different in the trucking sector as motor carriers adjust to new federal hours of service regulations designed to improve truck safety. Starks said the regulations, which took effect on July 1, would reduce effective truck capacity by limiting driving time.
It is still too early to predict the full effect of hours of service regulations and other regulatory changes, but the limitations should be enough to push capacity utilization close to 100 percent in the active trucking fleet, Starks said. As a result, motor carriers should be able to increase their rates somewhat during the peak season, he said.
Railroads will benefit this fall from increased grain shipments resulting from a much better harvest than last year’s drought-stricken crop. Some grain exports are shipped in containers. Even with a surge in grain shipments, some of which move in containers, the railroads will have sufficient capacity to handle the increased cargo volumes, Starks said.