Watch Monday’s show here or check out the full The Stockout playlist here.

Proposed tax cuts expected to boost freight demand

For more on why, check out this one from last week Special election on the state of freight or that of Tuesday article written by Revill and John Gallagher. In short, tax cuts at both the individual and corporate levels should translate into greater economic activity. Additionally, while tariffs have the effect of boosting domestic manufacturing, that production often involves numerous transportation points in the supply chain. This contrasts with imported products, which generally arrive finished.

LTL Carrier Old Dominion Freight Line (NASDAQ:ODFL) is one of several cargo carriers that rebounded in Wednesday’s trading as overall indexes also rise. (Graphic: Yahoo! Finance)

Ocean rates are expected to continue to moderate from currently high levels

Trans-Pacific Ocean spot rates from China to the US East Coast and US West Coast are shown in white and red, respectively. During its webinar, Flexport described the recent volatility in U.S. inbound shipping rates as “extreme” and acknowledged how unusual it is that these rates are at near parity. The price for shipping from China to the US East Coast is typically about $1,000 more per container than from China to the US West Coast. But he did not provide an estimate of when the gap might return to the historical average. Fares on both transpacific routes appear set to fall next year, with capacity likely growing faster than demand. (Map: SONAR: FBXD.CNAE, FBXD.CNAW)

Barring any unforeseen events in ocean demand, ocean capacity is expected to increase faster than demand in the coming years. This was one of the key messages from Flexport’s October 31 webinar. The company expects ocean capacity supply to increase by 8% in 2025, followed by an additional 6% increase in 2026 due to the addition of ships to fleets. If carriers were to fully utilize the Red Sea again, the effective capacity deployed would increase much further. At the same time, demand is expected to grow at around 3% per year, which would be roughly in line with global GDP growth rates, if not slightly higher. I think the election results and more protectionist trade policies create risk for demand expectations, potentially creating another factor in rate pressure.

Other takeaways from the Flexport Ocean webinar include:

• CMA CGM announces its return to the Red Sea and the Suez Canal – see itinerary here. The French carrier seems to perceive risk differently from the rest of the sector, which continues to avoid this area. Shippers whose containers transit the Suez Canal should opt for general average insurance rather than standard insurance.
• If carriers were to return en masse to the Red Sea, schedules would change, making it difficult for carriers to manage capacity via virgin crossings. This could cause rates to fall.
• Carriers avoiding the Red Sea changes seasonal shipping patterns given longer sailing times and longer delivery times. So the impact of Chinese New Year should be expected to occur early this year.

Hub Group expects intermodal fares to increase

A national index of intermodal contract rates in SONAR shows rates moving roughly in line with levels a year ago. (Map: SONAR)

When multimodal carrier JB Hunt released its results in mid-October to kick off the third-quarter earnings season, its management was optimistic about the upcoming reporting season, emphasizing the service levels and capacity that the carrier is able to provide. Similarly, rival Hub Group expressed confidence during its own analyst call last week about rising intermodal contract rates. In response to an analyst’s question, Hub management called pricing “competitive, but rational” and said it expects rates to increase to a magnitude that is not yet clear. The carrier also mentioned seeing disruptions in international intermodal service levels, which is expected to contribute to domestic intermodal volume.
For more details, see Noi Mahoney’s article here.