Supply Chain Industry Insights

May 2023

Welcome to the PGL Industry Insights report for May, 2023.

In this month’s report, it appears that in many ways the industry is settling back into a pre-pandemic state. The challenge there is that as you likely recall, 2019 was not a great year for the Supply Chain industries.

FedEx Freight, the less-than-truckload unit of FedEx Corp., plans to close 29 service locations in the U.S. as part of ongoing efficiency efforts. The closures will be completed by August 13, with affected operations consolidated into other locations.

The price benchmark for diesel fuel, used for setting fuel surcharges, has hit a low not seen since early 2022. The drop in diesel prices is attributed to broad macroeconomic factors, including China’s reopening not generating the expected results and limited evidence of crude supply cuts agreed by OPEC+. However, diesel demand and inventories in the U.S. remain relatively near normal levels.

In the labor sector, both WestJet and Norfolk Southern, players in the air and rail cargo spaces, successfully avoided union strikes through negotiations.

The Logistics Managers’ Index reported that transportation capacity continues to expand while rates remain depressed. Transportation utilization showed signs of improvement, moving into expansion territory, and transportation prices contracted at a slower pace compared to the previous month’s all-time low. This could be attributed to warehousing capacity loosening up as inventories decrease in the consumer goods and retail sectors.

Sealed Air, the manufacturer of Bubble Wrap, experienced a significant decline in volume, indicating decreased packaging demand. This, along with decreased demand for boxes has been a good economic indicator in the past, as it is historically sensitive to economic conditions.

U.S. containerized import volumes in 2023 have been tracking alongside 2019 levels, suggesting a return to a pre-pandemic state. However, caution should be exercised in assuming a second-half rebound during peak season, as import volumes may have already bottomed for the current downcycle.

U.S. imports did see upward movement in April, reaching or surpassing 2019 levels, although still higher than pre-COVID inventory-to-sales ratios, monthly imports continue to increase, if not at the rate we would all like to see.

With the latest in supply chain news, the overall feeling is that we’re all bracing for an uncertain 2023 that isn’t going to be the rebound we’ve all been hoping for. In the meantime, PGL will continue to keep you moving, 24/7/365.

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