The shipping business delivered mixed blessings in 2014 – and a guarded outlook for 2015. The industry enjoyed increased traffic, both domestically and globally, and signs of positive change to various industry rules and regulations. It also saw fees related to fuel and tariffs increase, even as global oil prices dropped, and signs that 
certain surcharges could continue to rise.
The last year saw stable domestic demand on land, air and ocean shipping. While shipping trends fluctuated at times during 2014, truck tonnage soared to another record in November, rising 4.4% on the strength of solid support from the retail and manufacturing sectors (American Trucking Association). When the final numbers come in, full-year growth should be in the 4% range, down a percentage point from recent history (FTR Shippers Conditions Index). Improved capacity has led to increased trailer orders in the U.S., reaching their second-highest point ever in November, after hitting an all-time high the month prior, reflecting motor carriers’ expectations of strong demand in 2015 (FTR).
Driver compensation reportedly is increasing, ranging from 3% to 13% (FTR), with increases expected to stabilize in the 5% range until the next round of regulatory drag matures late in 2016.
The big story, of course, relates to fuel. Oil prices are down some 60% over the past year, currently hovering well below $50 a barrel, with some analysis expecting prices to drop even further. How has this affected fuel costs? Very little, by some estimates. While gasoline has dropped below $2 a gallon in many regions, diesel and CNG and other clean fuels remain high on stable, even surging demand.
Simply put, shipping demand remains strong, so fuel companies have little incentive to lower prices. That said, some believe lower fuel surcharges may arrive.
Jet fuel prices remain high. Shipping companies and commercial airlines that carry cargo continue to see strong demand. Moreover, many carriers have become attached to, even dependent upon, the fuel surcharges they assess their customers to boost profitability. Even as the price of oil continues to drop, air shippers aren’t enjoying the benefits of lower prices.
On the high seas, new fuel regulations should affect various segments of the industry. The current overcapacity of container ships with loads of 18,000 TEUs or more could shrink as low-sulfur rules lead to the phasing out of older ships, or the retrofitting of engines to low-emission models. In pursuit of greater fuel efficiency, some lines even are sailing more slowly. It may mean ships are at sea longer, but lower fuel consumption means lower prices at the fuel terminal, which likely will not translate to lower fees for shippers.
Across the U.S., surcharges also grew on the ocean side. On January 1, many ports imposed congestion fees of up to $1,000 per container. Expect steamship lines put those into their tariffs – and to see the imposing of such fees to grow.
While they’re not shipping trends, regulatory changes will impact the industry. The Hours of Service (HOS) Restart Change became law. The trucking industry’s long-sought suspension of last year’s changes to the hours-of-service restart provision became reality in the fourth quarter of 2014. The law includes the amendment suspending through Sept. 30, 2015, the requirement that drivers seeking to restart their weekly clocks take off two consecutive periods of 1 a.m. to 5 a.m.
Rail and intermodal will continue to grow. October saw new monthly record volumes for both total intermodal and domestic, with volume increasing seasonally in all sectors, according to reports. While intermodal volume in November shrank slightly, that’s a rarity for an industry that has experienced steady growth for years.
Most recently, CSX opened a $100 million intermodal terminal near Montreal, Quebec, Canada. Even in Ryder’s own backyard, significant new intermodal facilities are changing the landscape near PortMiami and Fort Lauderdale’s Port Everglades. Farther north, a proposed intermodal logistics center has been discussed for 850 acres in western Palm Beach County.
Predicting any market is a tough business – just ask most oil analysts, when they’re not scratching their heads wondering how they missed the industry’s decline. Logistics professionals might want to watch the markets closely, read their industry journals and blogs, and be prepared for what comes down the road.
Melody LePine-Jartz is a Manager for Global TSPD at Ryder.
