by Dean Croke DAT Solutions, LLC
February’s overall Logistics Managers Index reading of 75.2 is the second-highest in the history of the index and offers a glimpse into what future demand could look like for the dry van market.
“January’s 3.3% sequential gain makes it 13 consecutive months over 70.0, which we would classify as significant expansion, with no obvious signs of a slowdown on the horizon,” according to Zac Rogers, Assistant Professor at Colorado State University.
“Like January, this month’s growth is driven by rapid growth in Inventory Levels, which are up 9.1 points to 80.2 – crossing the 80.0 threshold for the first time and shattering the previous record of 72.6. This was a complete 180 from the Fall of 2021 when firms struggled to build up inventories.”
The inventory build appears to be a combination of over-ordering to avoid shortages, late-arriving goods due to supply chain congestion, and a softening of consumer spending created a logjam. The LMI report noted that inventory levels were higher in February than in November last year.
We could be seeing a further cooling in demand for dry van carriers as inventories reach peak levels.
“Firms will now have to decide what to do with this unseasonably high inventory. Will they be sold at a discount or stored in increasingly expensive warehouses and backrooms?
Neither option is ideal, and it will be fascinating to observe the different strategies that are deployed over the coming months”, Rogers said.
News of China’s largest city and port going into lockdown will have long-lasting consequences for U.S. imports for the rest of this year.
Supply chain disruptions will likely result in more port market volatility at larger ports, including the Ports of Los Angeles and Long Beach.
Import volumes are down 7% y/y nationally and 11% y/y along the West Coast, where 46% of all loaded containers come from China.