Reibus: The flatbed market takes step toward inflationary rate environment

As we navigate through the first half of 2024, we are seeing early signs of an inflationary rate environment for flatbed shipping, albeit slightly later than anticipated.

Excess supply has lasted longer than expected for both flatbed and dry van, resulting in rates remaining lower than for longer than anticipated. However, with the first (very early) read of the second quarter recorded, we are beginning to cross into an inflationary rate environment.

Dry van market: similar trends with stability

The dry van market is tracking in a noteworthy alignment with the flatbed market. Dry van spot rates are projected to close Q2 within the range of -3% to -1% on a year-over-year basis. Unlike the volatility observed in flatbed rates, dry van rates have maintained relative stability throughout the year thus far.

Several factors could contribute to the current upward trajectory in spot rates. Keep an eye on the following potential accelerators:

Increased diesel prices can directly impact spot rates.
Increased carrier exits could hit supply-and-demand dynamics.
Disruptive weather may upend supply chains.
Changes in U.S. fiscal and monetary policies can influence overall economic conditions, affecting the market.

On the other hand, there are potential decelerators that could drag down rates:

Economic headwinds could make businesses reluctant to invest capital in projects.
Interest rates could cool the economy if rates stay higher for longer.
A decline in diesel prices would lead to lower overall rates as it could keep more supply in the marketplace due to lower overhead expenditures.
A slower rate of carriers exiting the market may stabilize supply-and-demand dynamics.
Global events and geopolitical shifts can introduce uncertainties that may affect the logistics market.

April Rundown

Port of Baltimore Closure: The indefinite closure of the Port of Baltimore will have a lingering impact on supply chains with key nodes in the Northeast. The bulk of the volume that typically ships into Baltimore has been shifted to the Port of New York and New Jersey, Norfolk, and
Savannah. We are still in the early phases. Stay tuned as we continue to monitor the fallout.

Class 8 truck orders: Normalization following a recent peak FTR’s report on Class 8 preliminary net orders for March reveals a decrease of 34% from February and a 4% decrease year-over-year. After maintaining an average level of around 25,000 units for the previous three months, orders appear to be slowing at a typical rate, given the current rate environment for carriers.

CPI accelerates again, dashing rate cut hopes: In March, the consumer price index accelerated at a pace faster than anticipated, signaling an increase in inflation. This development has dampened expectations for any imminent interest rate cuts by the Federal Reserve. This marks the third consecutive strong reading and means that the stalled disinflationary narrative can no longer be called a blip. The persistent rise in inflation suggests that even if there is a cooling in inflation next month, the Fed may exercise caution, making a rate cut in July unlikely. This caution is further compounded by the approaching U.S. election, which will inevitably influence Fed decision-making.

Ocean Transit Indicators

China to Northern Europe: The OTI remained steady at 65 days due to carrier reroutings from the Suez Canal around the Cape of Good Hope.
China to US East Coast: Transit times remain elevated at 62 days as some carriers opt for westward routes around Cape of Good Hope, while others navigate through the Panama Canal despite slot restrictions.
China to US West Coast: After a previous increase, transit times decreased to 36 days, offering a glimmer of relief amidst ongoing challenges.

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