US Manufacturing and Supply Chain Activity Improves in May
RedStone Resource
June 2024
Inside This Edition
USMX and ILA East Coast Port Negotiations Start Ahead of September 30 Deadline
The United States Maritime Alliance (USMX) and the International Longshoremen’s Association (AFL-CIO) are going to be locked in contract negotiation from now until either an agreement is struck or the contract deadline of September 30, 2024. In the prior contract negotiations in 2012 and 2018, the East Coast ports experienced no delays or work stoppages because of those negotiations.
Load-to-Truck Ratios Back to 2022 Levels
Truckload Load-to-Truck Ratios are back in ranges that are the highest on a seasonal basis since 2022. DAT Trendlines released its May data, and it showed that some states were experiencing 5.5 or more loads for every available truck.
Diesel Prices Slipping on Weak Demand
The price of a gallon of diesel was $3.85 a gallon in the first week of June, this was nearly 10 cents lower than prices a year ago. Fuel surcharges as a result are running 2.4% lower than they were a year ago.
Economic Briefing
US Manufacturing and Supply Chain Activity Improves in May
The US manufacturing sector showed improvement in May, the S&P Global PMI rose from 50.0 last month to 51.3 in May. A reading above 50 suggests a sector that is expanding and growing. Notably, new orders improved but it was one of the weaker expansions in new work in some time. Many analysts believe that purchasing managers are trying to get orders for the peak season slightly earlier this year, but they remain cautious and shipment sizes might be smaller overall, even if order frequency increases (more rapid replenishment as sell-through takes place).
In addition, the report showed that input price inflation accelerated for the third month in a row and at the fastest pace since April of 2023. Higher metal prices along with higher maritime transportation costs continue to add to labor cost inflation to keep total production costs much higher than expected (given a weaker demand environment). But manufacturers are also facing some push-back on their selling prices, despite higher operating costs. Significant competition is keeping selling prices muted, which also squeezes manufacturer’s operating margins.
USMX and ILA East Coast Port Negotiations Start Ahead of September 30 Deadline
The United States Maritime Alliance (USMX) and the International Longshoremen’s Association (AFL-CIO) are going to be locked in contract negotiation from now until either an agreement is struck or the contract deadline of September 30, 2024. In the prior contract negotiations in 2012 and 2018, the East Coast ports experienced no delays or work stoppages because of those negotiations.
In fact, as of May 13th, the two parties were still issuing joint statements suggesting that progress was being made on local contract negotiations and that would precede any master contract negotiations. The negotiations affect nearly 85,000 workers spanning the Atlantic and Gulf US ports, those in Canadian Great Lakes Ports, major US rivers, Puerto Rico, Eastern Canada, and the Bahamas according to a USMX/ILA joint press release. The website at the link below will allow supply chain managers to track the latest, official news on contract negotiations.
Transportation Briefing
Load-to-Truck Ratios Back to 2022 Levels
Truckload Load-to-Truck Ratios are back in ranges that are the highest on a seasonal basis since 2022. DAT Trendlines released its May data, and it showed that some states were experiencing 5.5 or more loads for every available truck. California, Nevada, Arizona, Texas, Arkansas, Louisianna, Mississippi, Alabama, Florida, Georgia, and South Carolina had the tightest LTR’s in the country (and at the highest LTR category levels tracked).
When looking forward, it also appears that the start to the summer peak season will bring more intermodal activity as purchasing managers attempt to get out in front of potential higher costs for maritime transportation. Spot TL rates are still 2.4% lower year-over-year, but they had been accelerating between April and May, rising by 1.2% month-over-month. Load posts were still 22.8% year-over-year, but the number of truck posts were down by 36% through the end of May.
Diesel Prices Slipping on Weak Demand
The price of a gallon of diesel was $3.85 a gallon in the first week of June, this was nearly 10 cents lower than prices a year ago. Fuel surcharges as a result are running 2.4% lower than they were a year ago.
Diesel consumption is typically a good indication of semi-truck activity (63% of total US consumption). The US is currently consuming 3.83 million barrels per day in Q1 and projected for Q2 as well. This compares to 4 million in Q1 of 2023 and 3.9 million in Q2 of last year. Looking further ahead, the EIA projects that consumption will return to nearly 4 million barrels per day of diesel by Q3 and Q4 of this year. Retail prices for diesel are still expected to be $3.99 a gallon on average in 2024 but is likely to increase to $4.15 a gallon throughout 2024.
