In the March Market Update, we discuss the economic impact felt from the coronavirus crisis across North America.
A CHANGE IN THE CONSUMER MENTALITY
Consumer confidence is expected to be down, as consumers are not comfortable spending money as they once were.
It has been a consumer-spending led economy until the coronavirus (COVID-19) took place.
Whether this is perceived by consumers as an interruption or if it will have a long-lasting effect is unknown.
PANIC BUYING IMPACTS TENDER VOLUME AND REJECTION RATE
Tender rejections are based on the percentage of rejected loads across the United States. Tender rejection rate as of March 1, 2020 was approximately 5%. In just a couple weeks’ time it has shot up to 15.06% and rising. This is due to an increase in volume, which is absorbing van and reefer capacity used to replenish stock after panic buying across the country. The tender rejection rate was 27% back in Q1-Q2 2018, so we’re seeing capacity getting a little tighter.
As far as the DAT posting, spot loads are up 18.2%. Van rate is up 3%, reefer is up 2.1%, flatbed is up 1.1% – most notably in short-haul regional shipments from distribution centers to consumers. Long-haul loads are at risk due to carriers potentially keeping their fleets close to home.
NUMEROUS CLOSURES AND SHUTDOWNS
Both the U.S.-Canada and U.S.-Mexico borders have closed to non-essential travel to further help stem the spread of the novel coronavirus. Several states including California and Illinois have issued a shelter-in-place mandate to help combat the outbreak. More states are expected to follow suit. This mandate encourages residents to remain at home unless they have essential reasons to leave, and prohibits gatherings of more than 10 people. Those whose work is considered essential are also permitted to leave the house. Learn more about essential businesses and activities.
Keeping our commitment to customers and carriers, BNSF Logistics employees are working remotely, and are able to do so seamlessly based on the technologies that power us. Learn more about this here.
SHIPMENTS FROM CHINA ARE INCREASING
Orders made at the beginning of the month are slowly coming across from China. Both lanes from China to U.S. are rising. According to the Freightos Baltic Daily Index, which measures the price movements of 40-foot containers, the west coast lane is up 13%, and the east coast lane is up 7%. The U.S. should see an uptick in port activity soon, as well as an increase in freight volumes.
CLOSING STATEMENT
At this time, as we strive to serve our customers, the current challenges we face lead a path to collaboration in preparation for the eventual easing of restrictions. Plans for a post-lock down increase in volume and the need for elevated levels of capacity in many areas are paramount for near- to mid-term success.