Cargo owners should brace for a “cliff event” similar to the turmoil in the early days of the Covid pandemic, possibly followed by a surge in traffic, clogging up supply chains, later in the year.
The warning comes in the monthly Port Rail Ramp Index, published by ITS Logistics, which notes that current volumes, albeit elevated, should not cause significant disruption, however.
And statistics published yesterday by China’s customs agency show exports surged 12.4% in March, year on year, far ahead of expectations, with exports to the US up 8.8%, reflecting a rush of cargo owners to move traffic ahead of the tariff deadline.
Elevated volumes due to front-loading are putting some strain on the US intermodal system . The ITS index shows elevated traffic levels at US Pacific and Atlantic coast ports, as well as at rail ramps in both the eastern and western regions.
Despite some pressure and chronically extended transit times for intermodal containers moving east by rail from the west coast, ITS global supply chain VP Paul Brashier expressed confidence that the system could absorb the higher volumes without significant problems.
That said, the US logistics firm advises cargo owners with urgent shipments to avoid intermodal rail lanes, especially from the west coast. Cargo owners have embraced this, not only for lower rates, but also to take advantage of the longer transit times to use it as rolling storage to reduce warehousing costs, said Mr Brashier.
He is more concerned about what is expected to happen once the current front-loading wave has run its course, as tariffs kick in, notably on imports from China. ITS is urging cargo owners to brace for a sharp slump in volumes next month and possibly into June. In its index, the company warns of a “cliff event similar to the impacts felt during the immediate Covid response”.
It warns there are ominous signs pointing to traffic volumes falling off a cliff: the ITS Index cites a recent report on business news channel CNBC showing a steep decline in new freight orders across the US.
According to DataDocks, a global supply chain scheduling system, this month’s scheduled bookings for truck delivery or pick-up have fallen 41% from March levels, and 35% below April 2024. The sharpest decline (61%) was registered in the US north-west, followed by the west (52%) and south-west (48%). Bookings are down 35% in the Midwest, as well as the south-east and 18% in the north-east.
These trends indicate that many companies have stepped on the brakes in their sourcing and adopted a wait-and-see attitude, until they have better visibility about the emerging tariff landscape, said Mr Brashier.
The paralysis won’t be limited to imports from China, he added – “anything outbound to China is pretty much paused or cancelled”.
How long this limbo will last is difficult to predict, as it hinges on a number of factors – from actions of the US administration, to consumer demand, he reckons. He is willing to make one prediction, though: “The longer this trough lasts, the higher will be the likelihood of a sharp surge in import orders that could hit supply chains in a similar manner to what was experienced in 2021-22”.
The index warns: “Similar to the post-Covid period, shippers should be prepared for another heavy import wave later in the year, once inventory pulled forward is depleted and new sourcing options get solidified pending new trade policies.”
This scenario threatens a potential repeat of the disruptions that cargo owners and logistics providers were struggling with three years ago, from congested container terminals and railheads to shortages of empty boxes and chassis.
On a positive note, the industry has learned from that experience, Mr Brashier said, adding that technology had made significant progress since then to allow companies better visibility and improved capacity for faster intervention if problems arise.
Coupled with the uncertainty over how the trade war will evolve, this puts shippers and logistics providers in a dilemma how to balance commitments with the flexibility and risks of ad hoc bookings. Mr Brashier thinks a rise in ad hoc business is probably on the cards, but he warned cargo owners against getting caught in a situation where capacity could be dangerously tight.
“You could see yourself getting upside down in the spot market fairly quickly and not have available contracted capacity to keep the supply chain moving,” he said, urging shippers to strike a balance between both approaches.
