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August 17 2020

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4 The Journal of Commerce | August 17 2020 Mark Szakonyi Letter from the Editor A WAVE OF e-commerce volumes is stretching US freight capacity, sharp- ening the divide between the largest shippers and their smaller counter- parts and underscoring the need for importers to diversify their routings — if they can. The e-commerce surge is pushing the bounds of available capacity most sharply in Western intermodal rail, in the cargo holds of freighter and pas- senger jets, and in last-mile delivery. The cargo of Amazon, Walmart, Target and many small and medium-sized e-tailers is soaking up capacity in the truckload and less-than-truckload markets, and fueling a surge of Asia imports. With air cargo rates out of China up at least 25 percent from a year ago, according to the TAC Index, emergency shipping to avoid stock- outs is even more critical. The flood of orders for items purchased online rides atop a wave of inventory replenishment that is further stretching capacity limits. And when space gets tight, it's the smaller e-retailers that get squeezed. In a July 30 second-quarter earnings call, UPS signaled to small parcel shippers to prepare for higher rates and surcharg- es as it looks to align pricing with the value it believes it provides. However, equally concerning for shippers are potential delays as planning for peak holiday season revs up and available carrier capacity gets snapped up. Shippers reported delays and volume caps during April, May, and June as FedEx and UPS struggled to meet service commitments. Ship- pers won't appreciate a repeat during the holiday season. In addition, those shippers that don't score enough capacity will end up paying more for shipping and run the risk of deliv- ery delays. Similarly, in reporting that net sales jumped 40 percent year-over- year in the second quarter, Amazon warned that third-party sellers will find it even harder to get transport capacity as its fulfillment centers are packed and one- and two-day delivery has yet to be fully restored. "We need to build the inventory more for the fourth quarter, and we've run out of space," Brian T. Olsavsk, Amazon's chief financial officer, told investors on July 30. Thanks to unemployment insur- ance payments to help those out of work due to COVID-19, Americans' personal income spiked in June, as reflected in FRED data, said Jason Miller, associate professor of logis- tics at Michigan State University, citing Federal Reserve Economic Data. That extra cash in pockets and bank accounts drove consumers to boost their purchases of patio fur- niture, exercise equipment, home improvement supplies, and other comforts for staying home. Unsur- prisingly, demand for back-to-school and seasonal apparel from Asia is lackluster, forwarders and carriers told The Journal of Commerce. And while the sharp increase in e-commerce volumes may never be seen again due to COVID-19 exac- erbating the swing, the surge raises questions on how the freight shipping industry will adapt to goods ordered online making up a much larger slice of total shipments. Before the pandemic, e-commerce was grow- ing steadily, accounting for 11 to 12 percent of all retail sales, "Is this a per- manent jump or transitory jump that will fall when we get on the other side of the pandemic?" Miller asked. Asian imports on the water In a broader sense, the shipping industry is asking just how sustainable the surge will be. From the ocean side, carriers, forwarders and importers expect eastbound trans-Pacific capacity to remain tight through August, and even if there is a dip in early September, there's the makings of a second peak Maxed e-capacity The Journal of Commerce (USPS 279 – 060), ISSN 1530-7557, August 17, 2020, Volume 21, Issue No. 17. The Journal of Commerce is published bi-weekly except the last week in December (printed 25 times per year) by JOC Group Inc., 450 West 33rd St., 5th Floor, New York, N.Y. 10001. Subscription price: $595 a year. Periodicals postage paid at New York, N.Y., and additional mailing offices. © All rights reserved. No portion of this publication may be copied or reprinted without written permission from the publisher. POSTMASTER: Please send address changes to The Journal of Commerce, Subscription Services Department, 450 West 33rd St., 5th Floor, New York, N.Y. 10001. The Journal of Commerce Executive Editor, The Journal of Commerce and JOC Events: Chris Brooks 609 649 2181, Executive Editor, The Journal of Commerce and Mark Szakonyi 202 872 1234, Managing Editor: Benjamin Meyer 916 716 6272, Associate Managing Editor: Kevin Saville, 212 488 4282, Senior Editors: William B. Cassidy Trucking and Domestic Transportation 202 872 1228, Bill Mongelluzzo, West Coast 562 428 5999, Eric Johnson, Technology 213 444 9326, Janet Nodar, Breakbulk and Heavy Li 251 473 2742, Greg Knowler, Europe +44 7976798770, Turloch Mooney, Global Ports +852 9011 9109, Ari Ashe, Southeast Ports, Intermodal Rail 202 548 7895, Data Analyst: Marcin Lejk , +44 58 741 6270, Shipper Engagement Manager: Dustin Braden, 646 679 3450, Senior Editor, Special Projects: Alessandra Gregory Barrett, 860 248 5238 Associate Editor, Special Projects: Emily DeVoti, Senior Designer: Sue Abt, Associate Production Manager: Kate Binder, 603 346 4680, Designer: Hannah Kidd, +44 203 253 2134, Sales: Cindy Cronin, Associate Director Southeast sales, 954 260 6061 Jean Gibbons, Senior Sales Executive West Coast sales, 706 469 7160 John Knowles, Senior Sales Executive EMEA sales, +44 777 997 4677 Allyson Marek, Senior Sales Executive Northeast sales, 862 754 8012 Alex Remstein, Associate Sales Specialist Reprints/Classifieds/Copyrights, 646 679 3418 Mehdi Smaili, Senior Sales Executive APAC sales, +44 758 140 6491 Judy Welp, Senior Sales Executive Midwest sales, +1 512 284 2878 For Magazine Subscription Customer Service: 450 West 33rd St., 5th Floor, New York, N.Y. 10001 800 952 3839 Vice President, Maritime & Trade, IHS Markit, Peter Tirschwell Executive Director, Media & Events, Maritime & Trade, IHS Markit, Amy Middlebrook Manager, Production, Carmen Verenna Product Manager, JOC, Stephen Lyman ©2020 The Journal of Commerce — All Rights Reserved For more information, visit our website, Continued on page 6

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