Freight Market Insights: A Tale of Two Inventories
The latest Logistics Manager’s Index (LMI) reveals a fascinating dichotomy in inventory levels, hinting at promising freight movement opportunities in early 2025. While overall inventory levels remained flat in December, a closer examination exposes a stark contrast between upstream and downstream inventory levels.
Upstream Inventory Growth: A Story of Caution
Upstream facilities, typically located near port cities, experienced moderate inventory growth in December, with an LMI reading of 57.9. This suggests that companies may have over-ordered in response to concerns such as tariffs. Cities like Phoenix, AZ, and Laredo, TX, have seen accelerated growth in these facilities due to available real estate and proximity to U.S. import gateways.
Downstream Inventory Depletion: A Successful Holiday Season
In contrast, downstream retailers recorded a surprising 33.9 LMI reading, indicating a highly successful holiday shopping season for many companies. This suggests that downstream firms may have underestimated customer demand, leading to inventory depletion.
Implications for Freight Movement
As a result, many downstream firms are likely to spend early 2025 replenishing their inventories, creating opportunities for freight movement. Additionally, the continued strength in intermodal container demand and loaded international and domestic container volumes transported by rail out of Los Angeles suggest a promising start to the year.
Truckload Market in Transition
While the truckload market remains in a state of transition, the loss of market share to intermodal transportation has helped reduce excess capacity, contributing to the first signs of long-term contract rate inflation since 2022. Furthermore, the rise in truckload demand for freight moving less than 100 miles suggests that shippers are relying on rail for long-distance transportation and trucks for shorter, final-leg deliveries.
Consumer Spending: A Positive Note
The American consumer continues to spend, which benefits the transportation sector overall. As the freight market navigates this complex landscape, one thing is clear: demand will not be a concern in early 2025.
Leave a Reply