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Hanjin Shipping Bankruptcy Prompts Ripples and Truckload Rates

September 22, 2016 By: Mark Montague, DAT Solutions Tags: Blogs, Fleet Management

Demand for truckload capacity has been steady but unspectacular of late, and through mid-September, rates for spot van, refrigerated and flatbed freight varied little from summertime averages.

In the van market, the national average spot rate was $1.61 a mile in June, $1.62 in July, and $1.61 in August. Not a whole lot to get excited about.

Shippers have benefited from a sense of “normalcy” on the spot TL freight market, which until lately was devoid of big splashes and ripple effects that typically drive contract rates higher.

Then news broke that Hanjin Shipping was bankrupt.

When a shipping company goes bust, it can’t just park the vessels and offload the cargo. Of the nearly 100 ships listed on Hanjin’s latest operating report, dozens are still waiting in the open sea.

With the majority of Hanjin cargo yet to reach West Coast ports, many shippers will have to wait longer than expected for Asian goods. When they finally arrive in October, those rescheduled ships will be competing for berths at a time when intermodal and truckload capacity tends to be tightest.

Already, demand for spot truckload capacity is picking up. Last week, as Hanjin announced that a third of its ships were making their way to port, the load-to-truck ratio surged from 2.3 to 4.6 in the Los Angeles-Long Beach area — among the world’s busiest ports. There was an 18 percent increase in loads week-over-week in the top seven van lanes out of the L.A. market.

What does all this mean? A sharp jump in the load-to-truck ratio usually leads to an increase in the average truckload rate. Keep an eye on these ratios as more Hanjin ships reach ports in October. As they go up, rates are likely to follow.

Further complicating matters, some 500,000 Hanjin containers are stuck in ports and truck yards, occupying chassis that can’t be used for other cargo — including retail goods for the holidays that normally travel by rail or intermodal.

Also, the Midwest and Northwest are reporting strong fall harvests. Refrigerated trailer capacity may be at a premium, which could drive up spot rates for reefers and van trailers. Why vans? With fewer reefers competing for van freight, we can anticipate higher demand and rates for van trailers, too.

Weather events — including floods and hurricanes — tied up capacity in August and September and there is ongoing demand for trucks in the affected areas to help with relief and rebuilding.

After months of smooth waters, the Hanjin bankruptcy is about to send waves through the spot truckload market, probably for weeks to come. I know I’ll be keeping a close watch on load-to-truck ratios and truckload rates, and I suggest you do the same. Truckers who can provide needed capacity and great service stand to reap the rewards.

About the Author: Mark Montague is the senior industry analyst for DAT Solutions, which operates the DAT network of load boards and RateView rate-analysis tool. He has applied his expertise to logistics, rates and routing for more than 30 years. Mark is based in Portland, Ore. For more information, visit www.dat.com.

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