COVID-19 Effects on Price Per Mile Offered by Freight Brokers for Ground Shipments to and from US Ports
By: Rajat Rajbhandari, PhD, and Mauro Jimenez
Summary
In this study, we analyzed freight broker’s price sentiments of ground shipments in response to import/export fluctuations at the nine major ports in the United States (US) due to COVID-19 (during the period 2019 and 2020). We define the sentiment as the price they offered in various load boards and other platforms to move ground shipments to and from the ports. We analyzed the correlation between total monthly import and export using Twenty Foot Equivalent (TEU) at the ports and monthly averages of offer price per mile to and from the ports based on over 200,000 shipment data.
Following are the major findings from the study:
- There was a lag of 2 to 3 when TEU and offer prices dropped at the east coast ports in comparison to the west coast ports.
- We found a strong correlation between changes in TEUs and offer price per mile, especially at larger ports in both east and west coast ports.
- The data showed a sharp drop in offer price per mile at the peak of COVID-19 restrictions (between March-May of 2020.) compared to 2019. This is consistent with a study performed by McLeod Software and reported in CCJDigital that the freight brokers experienced a drop in profit margins in 2020.
- Distribution of trip distance showed a skewness towards mid-mile trips and a long tail towards long-distance trips.
- The demand during the first three months of 2020 seems to be more focused on the short distances shipments compared to the same period in 2019.
- We found that the average trip distance had dropped significantly in 2020 compared to the same months in 2019 until July. Also, the spread of trip distance within a month has also thinned during 2020.
Objectives of the Study
COVID-19 pandemic created massive disruptions in the already fragile global supply chains. Disruption due to market shutdowns led to unusual fluctuations in the demand for physical goods. Such disruptions are expected to continue even after vaccines become widely available and market shutdowns become less frequent. We believe it is important to study the effect of such a pandemic in the logistics industry to become better prepared for a next one, or any other disruption that could be caused by natural disasters. In our platform, we saw firsthand unusual fluctuation of the price offered by freight brokers.
The objective of this study was to perform a macroscopic analysis of freight broker’s price sentiments in response to import/export fluctuations at major ports in the US.
We did not analyze causations between the drop in import+export volume at the ports and the broker’s offer price per mile.
Study Scope
We limited the scope of the study to include 9 major US ports — 3 in the west coast (Ports of Los Angeles, Long Beach, and Oakland), 6 on the east coast (Ports of New York/New Jersey, Maryland, Virginia, South Carolina, Savannah, Houston). In the future, we will include more ports. We used offer price per mile as a proxy to freight broker’s sentiment and response to the changing market conditions. In the analysis, we included 216,000 ground shipments with origin and destinations within a 50-mile radius of the nine ports. Figure 1 shows the origin-destination of shipment to and from the ports. We did not segregate the shipments by type of equipment, weight, cargo type mainly due to lack of resources and lack of data.
Note: Shipments mapped using Kepler.gl.
Impact of COVID on Global Maritime Shipping
UNCTAD published a report describing the immediate impacts of the pandemic on maritime trade flows, ship calls, and liner shipping connectivity in the first half of 2020. The report characterized the pandemic’s effect on global trade flows as “unprecedented in speed and scale.” The agency estimated global merchandise trade to have fallen by almost 5% in the Q1/2020 and expects a deeper contraction of 27%in the second quarter. For the full year, it estimated a drop of 20%. Globally, the number of port calls by ships dropped by 9% and 17% in Q1 and Q2/2020 respectively. It reported that by the end of Q2/2020 ship calls at the North American ports dropped by 21%.
Year to Year Change in Import/Export at US Ports
We analyzed monthly TEUs imports and exports at nine major US ports for 2019 and 2020. Figure 2 below shows the monthly TEUs volume at 3 west coast ports, Port of Long Beach, Port of Oakland, and Port of Los Angeles. The volume drops in March 2020 at Port of Long Beach and Port of Los Angeles were remarkable, dropping below 2019 during the same month.
Figures 2 and 3 below show changes in monthly TEUs between 2020 and 2019 at the nine ports. The west coast ports experienced the highest drop of 15% in March compared to 2019. The west coast ports experienced a decline in TEUs at least 2–3 months earlier than the east coast ports. The positive change in west coast ports occurred 2 months prior (in July) than the east coast ports. The recovery in the west coast ports was also stronger than the east coast.
Year to Year Change in Broker’s Offer Price Per Mile in General
We analyzed the distribution of offer prices and distances shipments collected in 2019 and 2020 by our logistics platform. Distribution of trip distance shows a skewness towards mid-mile trips and a long tail towards long-distance trips. The difference between the two years is subtle with a slight shift towards medium distance trips in 2020. Additionally, we analyzed the relationship between the trip distance and offer price per mile using time series, as shown in Figure 4. The figure shows that the short spike in the average trip distance during April/May 2020 coincided with the drop in price in the same months.
One of our hypotheses is that the COVID-19 had “broken” the annual seasonality of price and distance. We analyzed the monthly behavior of both trip distance and the offer price per mile using a time series of box plots, as shown in Figure 8. We noticed that the average trip distance had dropped significantly in 2020 compared to the same months in 2019 until July. Also, the spread of trip distance within a month has also thinned during 2020. This indicates brokers were responding to carriers contracting distance they covered. The figure also shows that in 2020, price fluctuations were much higher during the early days of COVID-19 and ultimately smoothing out after July 2020. The demand during the first three months of 2020 seems to be more focused on the short distances shipments compared to the same period in 2019.
Year to Year Change in 3PL Offer Price Per Mile For Individual Ports
We applied a 50-miles radius geo-spatial search to gather (n=216,245) inbound and outbound ground shipments to and from each port. Figures 5 and 6 below show changes in the monthly average offer price per mile between 2020 and 2019 at the nine ports. The west coast ports experienced a slight drop (3%) in May. But in comparison, the east coast experienced a maximum of 26% drop in May. Both coast ports returned to positive territory in June. In future studies, we will analyze the reason for the difference in price drop at the east and west coast ports.
Correlation Analysis of TEUs vs Average Offer Price Per Mile
Finally, we analyzed the correlation between monthly TEUs of import and export at the ports mentioned previously and the average offer price per mile. We used the Pearson Correlation Coefficient to measure the strength of a linear association between the two variables. Needless to say, that correlation doesn’t mean causation, which requires more extensive study. The results show weaker or none existent correlation at small ports compared to the larger ports. This may be explained by several reasons, one of which is the lesser fluctuation of demand at the ports compared to the larger ports.
Future Work
The future work will examine the impact of different factors of ground shipments such as equipment type, trip distance, and availability depending on the location of the road in order to achieve a more robust analysis that could explain the cause of fluctuations in the market.
Furthermore, the addition of more ports to analyze the reason for the difference in price drop at the east and west coast ports. Finally, the addition of traffic status or the broker’s reaction to traffic due to pandemic or unexpected conditions.
We Appreciate Your Feedback
Feel free to send your thoughts and comments at rajat@dexfreight.io.
Follow dexFreight on Twitter, Telegram, LinkedIn, and Newsletter for project updates and announcements.
