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Geopolitical disruption a threat to freight shippers

The sense of helplessness that shippers and transportation providers may have felt while navigating three years of pandemic-induced supply chain disruption pales in comparison to how rising geopolitical threats potentially affecting US-China trade could upend containerized supply chains.

US importers are under pressure to diversify sourcing away from China like never before, although it’s not yet showing in the numbers. Containerized US imports from China hit a record high in 2021, rising 13.9% to 11.8 million TEU, with 42.4% of imports sourced from China. Through September 2022, shipments from China have grown another 3.6% YoY, accounting for 41.5% of total imports.

Even as disruption tied to the pandemic eases, the specter of geopolitical disruption is growing, according to Daniel Yergin, author and vice chairman of S&P Global. There’s an upheaval in geopolitics, both due to the Russia-Ukraine war and a growing distrust between China and the United States.

Alternative sourcing capacity is badly needed, particularly given that Vietnam and much of Southeast Asia is hitting its limits. There is one scenario where increasing tensions between the US and China doesn’t derail globalization: if India comes on as a low-cost producer.

India has a long way to go in terms of port investment. However, US importers are increasingly tapping India for sourcing. Inbound shipments from the country have risen 12.4% YoY in the first six months of 2022.

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U.S. truck demand rises, but so does capacity

US trucking activity continues to defy forecasts calling for a contraction in demand. A monthly measure of trucking ton-miles rebounded in August and remains above year-ago levels.

The for-hire trucking ton-mile index (TTMI) rose 1.4% on a seasonally adjusted basis in August, after falling 1.4% in July. The index rose 3% year over year.

S&P Global is forecasting a mild US recession starting in Q4 and lasting until Q2 or Q3 of 2023, with economic contraction of less than 1%.

Volumes have remained high even as truckload spot and contract pricing has dropped, a sign that capacity has caught up with demand. The increase suggests recessionary conditions haven’t gripped trucking yet. Industry sentiment has turned negative, but three key indices show robust activity in August.

The American Trucking Associations tonnage index rose 7.4% YoY on a seasonally adjusted basis in August, following a 4.7% increase in July. Additionally, the Cass Freight Shipments Index rose 3.6% YoY in August and 1.9% in July.

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About O’Neill Logistics

O’Neill Logistics is a leading 3PL with operations in Rancho Cucamonga, CA; Savannah, GA; and Newark/Monroe, NJ. We service many verticals including Garments, Fashion Accessories, Footwear, Furniture, Home Goods, & Electronics. Additionally, we offer omni-channel distribution and all value-added services. Lastly, we focus on retail “drop shipment” fulfillment and item-level fulfillment services with same-day service offerings.

O’Neill Logistics has over 2 million square feet of state-of-the-art facilities. Additionally, we offer dray services to support the warehouses and provide distribution to retailers and wholesalers. Our reliable 3PL platform combines sophisticated technology with robust, flexible processing designs and speed-to-market gateway models.

Lastly, we aim to simplify your supply chain. We deliver exceptional service and can optimize your operational performance. Therefore, we aim to build, protect and foster strong business partnerships.