- • Motor carriers win ruling on chassis choice.
- • Falling fuel prices pull down manufacturing orders.
- • Wholesale sales and inventories were flat.
- • Jobless benefits claims rise sharply.
- • Mortgage rates barely move once again.
- • Diesel prices fall in the latest week.
- • Net revocations in trucking hit a record in January.
- • Trucking companies win ruling on chassis choice.
- • Truck spot rates firm in keeping with seasonality.
- • Intermodal lacks any pre-Lunar New Year bump.
- • Carload starts to slow after a hot start to 2023.
- • Next week’s rail employment data is important.
A Federal Maritime Commission judge this week ruled that chassis agreements requiring motor carriers to use specific chassis providers violate the Shipping Act of 1984 in situations when an entity other than the ocean carrier is paying for use of the equipment. The initial decision of Chief Administrative Law Judge Erin Wirth might not be the last word on the matter, however, as an appeal to the FMC itself would appear likely.
The summary decision stems from a complaint filed in August 2020 by the Intermodal Motor Carriers Conference of the American Trucking Associations against the Ocean Carrier Equipment Management Association, Consolidated Chassis Management LLC, and 11 ocean common carriers. IMCC argued that requiring motor carriers to use OCEMA-member default chassis providers for merchant haulage movements was an unreasonable practice in violation of the Shipping Act.
The initial decision hands IMCC a big victory, but motor carriers did not get quite everything they wanted. IMCC had also asked that the judge invalidate the concept of a default chassis agreement whereby motor carriers would be assigned to a presumptive chassis provider in the absence of a preference otherwise.
“The assignment of a default provider where a motor carrier does not have another preference may serve the interests of the shipping public by ensuring that a system is in place to efficiently assign chassis to containers and incentivizing the efficient flow of cargo,” Judge Wirth said.
The near-term practical effect of the judge’s order is not yet clear as IMCC must propose steps to translate the decision – assuming it is upheld – into specific relief. IMCC is expected to purse the establishment of a “pool of pools” that will allow chassis choice for merchant haulage. The judge said it was unclear whether IMCC planned to seek reparations for past violations of the Shipping Act. The initial decision and other filings in the case are available at https://www2.fmc.gov/readingroom/proceeding/20-14.
As required by Congress in last year’s Ocean Shipping Reform Act, FMC in conjunction with the Transportation Research Board has begun to study and develop best practices for intermodal chassis pools. Congress required FMC to publish those best practices by April 2024.
New orders for non-durable manufactured goods fell 1.9% in December, nearly matching the downwardly revised 2.1% drop in November. However, the bottom-line figure is misleading because the Census Bureau’s data is not adjusted for pricing. New orders for petroleum refineries fell 10.5% in December following an 8.8% drop in November. The only other category to see a new orders decline of more than 0.5% was pesticides, fertilizers, and agricultural chemicals, which were down 2.4%. Only three other categories saw any m/m decrease at all.
As discussed last week, durable goods orders also were skewed by a single category: Aircraft orders. However, in that case, the issue wasn’t pricing but rather a 115.5% surge in orders in December.
Wholesale sales and inventories
Sales and inventories for merchant wholesalers were essentially unchanged in December following a drop in sales and increase in inventories in November. Sales were up 7.3% y/y and 36.4% higher than during the pre-pandemic month of February 2020, although inflation certainly represents a significant portion of the gain.
Inventories substantially outpaced sales over the past year as they were 17.6% higher y/y and 39.3% higher than February 2020. The inventories-to-sales ratio for wholesale held at 1.36, which is the highest since June 2020 and roughly in line with the ratio heading into the pandemic.
First-time and continued claims for unemployment benefits both were up fairly sharply in the latest week. Initial claims increased by 13,000, seasonally adjusted, to 196,000 after falling by 40,000 over the past five weeks. The increase was the largest for a single week since mid-November. Continued claims for benefits jumped by 38,000 to 1.69 million, which is the highest level since just before Christmas. Weekly moves have been more volatile recently than have those in initial claims, but the prior five weeks had seen a net drop of 68,000.
For the third straight week, mortgage rates barely moved. The average rate on a 30-year fixed-rate mortgage ticked up to 6.12% in the latest week from 6.09% previously. Freddie Mac said that interested home buyers are easing back into the market as the spring home buying season approaches.
Diesel and petroleum prices
The national average price of diesel fell 8.3 cents to $4.539 a gallon during the week ended February 6. That decrease is slightly larger than the gain two weeks earlier, leaving the net change in diesel prices over the past three weeks at one and a half cents a gallon. Over the six weeks that ended in 2023, the net change has been essentially zero.
Prices were down in all regions, but the biggest decreases were in the Gulf Coast, Lower Atlantic, and Midwest – each of which saw a drop of around 10 cents. Prices in the Rocky Mountain region were essentially unchanged, and prices in New England were down just over a cent.
Further declines certainly seem possible if inventory levels are any guide. U.S. distillate inventories in the latest week were the highest in exactly one year.