freight volumes are one of the more reliable shadow indicators of a coming recession. --Peter St. Orge, Ph.D.
Maersk is widely viewed as a global trade barometer. --Peter St. Orge, Ph.D.
Soaring bankruptcies, crashing volumes, and mass lay-offs in shipping and freight -- one of the most reliable indicators of recession.
— Peter St Onge, Ph.D. (@profstonge) November 12, 2023
Prices across the eight major shipping routes have plunged by half this year, going from $3,000 per container to just $1,400. One analyst… pic.twitter.com/2J6wq4dTP2
A shipping analyst, Freight Waves, came out with a sobering report showing soaring bankruptcies among trucking and logistics firms as freight volumes crash. In an age where many of us are skeptical about government statistics, freight volumes are one of the more reliable shadow indicators of a coming recession. And keep in mind, we are just 6 weeks from Christmas, meaning this is usually the peak season for shipping. Freight Waves CEO listed out the Red Wedding level of carnage:
30,000 employees out of work when trucking firm Yellow went down, followed by the bankruptcy of $4 billion dollar, VC-backed freight brokerage Convoy.
Air Cargo operator, Western Global went down with $500 million in debt.
Freight broker, Surge, $200 million in revenue slumped.
North Carolina trucking company, Freight Works, took out 200 truckers.
Texas-based, SEL, took out another 125.
California-based and family-owned, Certified Freight, took down 157.
40-year-old Montana trucking company, Meadowlark, left hundreds more jobless.
And Florida-based, Flagship, took out 455.
The list goes on from Vermont to Miami to California to Pennsylvania.
Now, that is just the bankruptcies. The layoffs are on top.
Maersk just laid off 10,000 workers and cut capital expenditure by $3.5 billion. In other words, they'll be running down existing capital. They did this because revenue fell by 50% among plunging freight costs and ships running half empty. Maersk is widely viewed as a global trade barometer, and the layoffs were so big they drove the Eurasia Review to fret about the quote "disintegration of globalization." The prices across the 8 major global shipping routes have plunged by more than half this year, going from 3000 per 40 ft container to just 1400.
Maersk's shipping rates are down 58%.
China's Costco is down 60%, and Japan's Ocean Network Express is down 62%.
A report by Drewry forecasts the entire industry will lose $15 billion next year.
Now this is feeding directly into trucking, which is the last mile. In fact, going by employment, trucking is doing 3x worse than the 2000 recession which was itself much worse than the 2008 recession still not a recession though until Paul Krugman says it is.
"So what's next?" brought to you by Unchained.
For shipping, the near term is pretty bleak with falling prices running into continuing inflation. Some of this was inevitable after the epic pandemic-era run-up. Remember, it was just 2 short years ago that newspapers were jammed with stories of blocked supply chains, Americans driving to Mexico for baby formula or cruising eBay for used washing machines, lest they wash their clothes in a creek. At one point, the Baltic Dry Index, which measures the cost to ship raw materials, hit almost 12,000, that's about 8x normal, that pulled thousands of new workers into trucking and shipping. So Walmart at one point was offering $110,000 starting pay for truck drivers, and it launched dozens of major containers that are only now coming online. That overhang is taking years, so freight analyst Alphaliner estimates shipping capacity will increase 8.2% this year, about 6x faster than demand even as the industry loses billions. In short, shipping says a fairly brutal recession is incoming, while lockdowns once again have whipsawed an industry that millions depend on.
As a recession intensifies, expect more pain.
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