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A new report from venture capital firm UP.Partners takes a look at the impact of the freight recession and new developments in the industry.
The freight section of the recently released “Moving World Report 2024” from UP.Partners reviews the current depressed state of the freight market but first drives home the point that the cost trend has been in a downward direction for a long time.
In one of the first slides of the 143-page report, UP looks at the cost of moving freight via various modes going all the way back to 1830. That means, of course, that the 1830 comparison works only for moving freight by sea since other technologies weren’t around then.
But what it shows is that the compound annual growth rate, or in this case, decline rate for every type of freight movement has been on a downward trajectory since they first came on the market.
For example, since 1830, sea freight has declined on average by 3.56% annually. For rail freight, it’s minus 3.92%; for air freight, minus 6.17%; and for space freight, minus 8.16%.
“Technology has given us mobility solutions that our ancestors only dreamed of,” the UP report says.
When the report shifts to current conditions, it opens with a quote from FreightWaves founder and CEO Craig Fuller. “This freight recession is unlike any other in history.”
The report illustrates that the depths of the freight recession trod on some familiar ground, ranging from the Federal Motor Carrier Safety Administration on the number of drivers and companies, to ACT Research data on the price of used trucks, as shown in FreightWaves SONAR.
But as an investor in new mobility technologies, UP also highlights specific developments that it sees as significant. The two that are featured are the Gatik robot truck for middle-mile freight transportation and the Range Energy electrified trailer.
Among some of the highlights of the review of the freight market:
- “Sea freight is faring no better and may have some other issues to contend with.” The report highlights the recent 10,000-person job cut at Maersk.
- Drought-related cutbacks at the Panama Canal and the war-related reductions through the Suez Canal are having a serious impact. As the report notes, the former carries 40% of U.S. container traffic and the latter carries 30% of global container traffic. A map spells out the impact of lower traffic through those passages. Avoidance of the Panama Canal and the Suez Canal for shipments from the U.S. Gulf Coast to Asia turns a 20-day shipment into 32 days.
- China’s shipbuilding capacity is 232 times that of the U.S., “and that’s not a typo,” the report advises readers.
As the report shifts to energy, it notes the paradox that reduced sulfur emissions coming from ocean shipping as a result of the IMO 2020 rule may be contributing to rising global temperatures. Lower ship emissions means less smokestack emissions, and that means there are fewer ship contrails to block sunlight.
“It’s as if the world suddenly lost the cooling effect from a fairly large volcanic eruption each year,” Michael Diamond, an atmospheric scientist from Florida State University, said in the report.
To read about the aviation coverage of the report click here.
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