Tough times ahead for US shippers, FTR warns, as port woes continue

Tough times ahead for US shippers, FTR warns, as port woes continue

FTR Associates predicts “a very tough operating environment in early 2015” for U.S. shippers dependent on congested ports. The typical slowdown in freight tonnage during winter months will offer only a “minor and short-term reprieve” from higher U.S. transportation costs, Jonathan Starks, FTR’s director of transportation analysis, said in a Nov. 24 statement.

“With sustained capacity tightness and fleets now announcing pay increases, the cost to ship goods is expected to remain elevated," Starks said. “Shippers need to be prepared for another year of dealing with tight capacity and increasing rates, no matter the mode. “

The Bloomington, Indiana research firm’s Shippers Conditions Index dropped one tenth of a percentage point in September, the latest month for which data are available, to -6.6. Any reading below zero reflects “a less than ideal environment” for shippers, FTR Associates said in a statement.

That environment worsened over the past year as truck capacity tightened and rates rose. Weeks of congestion at the Los Angeles and Long Beach ports aren’t helping. Shippers are dealing with delays in merchandise arrivals and higher inland transportation costs.

“Recently, concern has moved from capacity on the roads to problems at the ports,” Starks said. “We are seeing potential impacts to retailers Black Friday plans because of the port congestion. To add to the troubles, importers are getting hit with surcharges at the ports,” he said. “They are dealing with delays in getting goods and additional costs on top of that.”

The last time the FTR shipper index was positive was in 2008, in the midst of the worst economic recession in decades. In the past year, no SCI reading has been higher than -6.0.

Though September's reading was an improvement from the SCI reports of February and March, when winter weather bogged down shipments and pushed the FTR index as low as -8.9, it also represents only the beginning of the crisis-level congestion at West Coast ports. Delays peaked in October and traffic was affected by labor slowdowns in November.

“To add to the troubles, importers are getting hit with surcharges at the ports," Starks said. “[Shippers] are dealing with delays in getting goods and additional costs on top of that. If a resolution of the West Coast labor dispute or a winter slowdown in freight doesn’t ease the situation, we could have a very tough operating environment in early 2015.”

Shippers at the National Industrial Transportation League’s annual conference in Fort Lauderdale, Florida, last week said they are working in “crisis management” mode to get goods from the Southern California ports to inland distribution points.  Intermodal operator Hub Group flew 50 truck drivers into Southern California to help clear congestion.

With truckload capacity reportedly tight nationwide, however, there’s not always a lot of room for shippers and carriers to maneuver. “All the networks are in tight capacity,” Ken Hoexter, senior air freight, surface and marine transportation analyst at the Bank of America/Merrill Lynch, said at the NITL event. “Shipping demand is still at very elevated levels.”

“The one thing you’re guaranteed is that you’re going to see price increases,” Hoexter said, referring to truck and rail rates. “What’s unknown is how high they’re going to be.”

Contact Corianne Egan at cegan@joc.com and follow her on Twitter: @CEgan_JOC

Contact William B. Cassidy at wcassidy@joc.com and follow him on Twitter: @wbcassidy_joc