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Good Morning, Good Evening and Good Night,

Whatever time you’re reading this I hope you enjoy and are able to gain insight in the industry of supply chain, logistics, and specifically in this topic: Freight. The sole purpose for me to do this is to spark a conversation with the you in the future and maybe gain perspective of your thoughts and strategies.

At the EOD how we supposed to grow if we don’t share the wealth?

To my friends, family and the folks that are reading this. The last couple months I have been across the world and back, and just two weeks ago I started my career as a Freight Broker @MoLo Solutions. For those who have followed up with the current events and how supply chain has affected our global economy, makes it the talk of how we move commodities and goods more efficiently.

But before we Daiiv into freight let’s just recap on the U.S Economy and where we stand.

WHAT IS PMI?? Manufacturing PMI is a monthly indicator of the health of the U.S. manufacturing sector. The index is based on a data around the country, and it measures a variety of factors: new orders, production, employment, and prices. The PMI in 47.6 in August, up from 46.4 in July. (A reading of 50 or above indicates that the manufacturing sector is expanding, while a reading below 50 indicates that it is contracting.) 

The rising cost of inputs, such as raw materials and energy. Higher costs are making it more expensive for businesses to produce goods, and they are also putting pressure on profit margins. Another factor is the ongoing supply chain disruptions. These disruptions are making it difficult for businesses to get the materials and parts they need to produce goods. As well as demand for manufactured goods is slowing, and that businesses are not hiring at the same pace as they were in previous months. This is also leading to longer delivery times and higher prices. I see this daily shift on price, especially freight going long distances and not getting paid what they were. This makes cost of goods go going up along with prices for materials, parts, and shipping gets strained on businesses bottom lines. We are experiencing the highest inflation rate of 8.6%, which is the highest it has been in 40 years. 

The rising cost of oil is affecting the freight market in a number of ways. It is making it more expensive to transport goods while putting pressure on profit margins for businesses that rely on freight. As well as it is leading to longer delivery times because there is less capacity in the shipping market, as shippers are reluctant to commit to long-term contracts due to the volatility of oil prices. I didn’t realize how much of a global driver freight and oil has towards our daily lives until I really saw the numbers and heard the people on the other side of the phone expressing their pity towards the decline of the market. The transport sector is facing challenges and there is still an ongoing global chip shortage which is disrupting supply chains and causing delays in deliveries. Electric vehicles require more chips than gasoline-powered vehicles, and the demand for electric vehicles is increasing and hopefully soon EV tucks. The chip shortage is expected to continue for at least another year, and it is having a major impact on a variety of industries, including the automotive, electronics, and medical industries. (Check NVDA 1Y chart)

Now there is also a shortage of truck drivers in the United States, and this is making it difficult for trucking companies to find qualified drivers. This is due to a number of factors, including the aging workforce, the long hours and demanding nature of the job, and the lack of attractive pay and benefits. Though these guys drive through all sorts of terrain and weather conditions, they get paid pretty damn well for a load they were able to overhead. Oh! I forgot to mention that the DOT (department of transportation) can also be an inconvenience at times in this industry. You may not see them on the streets, but they are the police for anything that’s getting transported from AB. Their regulations are meant for safety and that’s priority, but you’d be surprised how much people will pay for if the commodity is delivered the next day. Their regulations are becoming more stringent and for trucking companies it’s hard for them to operate and is increase their costs once again. Some trucking companies are going out of business, some are getting consolidated, but the people that are getting squeezed is us…

 

I believe we are in rock bottom conditions and here is data to follow up for it:

▪ The average weekly retail diesel price rose 11.2 cents a gallon, hitting $4.239 on Monday.

▪ This constitutes a$0.472/gallon increase over the past five weeks, including one week when the price was unchanged. However, it is 75.4 cents less than where it was last year at this time.

▪ Saudi Arabia extended their 1M barrel daily reduction production into September

Shipments should rally mid-to-late August in line with back-to-school shopping.

▪Tender rejection remains low, indicating capacity is readily available for the increased contract volume 

▪ Higher acceptance rates paired with lower volumes reduce overall spot market opportunities and drive down spot rates 

I could keep rambling on and have another 10 pages talking about issues and our present economic state, but the point isn’t to bore you, it’s to remind you that supply chain issues are no joke and can easily decide our state of living if done poorly. Labor Day is approaching and historically, rates jump around $0.10/mile around the holiday. Prepare for transit delays, business closings and tighter capacity. For those of you that invest in the markets September is considered a bearish month and this is just a tiny bit that contributes to the whole. 

I will try doing my best for market updates on month on month, or every other month as I am quite busy getting accustomed to my job and new routine. I was inspired by a friend to start doing this and it helped me be more invested in the field of study and learn more about others. If you’ve made it this far, I’d love to hear your thoughts. Feel free to text or email me to discuss further, whether it’s about this topic or something else.

Written by:

-DAIVIK SURESH-