CHICAGO, Aug. 15, 2019 /PRNewswire/ -- The US Trade Representative's Office announcement that the government would delay implementation of tariffs on approximately $300 billion in consumer goods from China is an additional indicator that the holiday retail season may be stronger than expected. The news is expected to have an immediate impact on the freight futures market, which saw 50,000 miles of contracts for the LA-Dallas lane and 15,000 miles of contracts for the LA-Seattle lane traded in recent weeks.
"The LA-Dallas lane in particular is a strong indicator of freight rates for the holiday retail season and the market has begun to price-in an expected increase of imported goods that will work their way through the domestic supply-chain, as the LA market is the preferred port destination for Chinese manufactured goods," said Kyle Lintner, K-Ratio's Director of Markets. "Currently there is an excess of carrier capacity but if we do see a significant increase in volume, coupled with very little available warehousing on the west coast, it means spot rates are going to begin to climb."
Established in March of 2019, the Freight Futures Market is a tool for shippers, carriers and 3PLs to move their risk from business operation into the financial market, protecting themselves against freight rates that are prone to high volatility from external factors such as weather, construction and tariffs.
"July Retail Sales were up just a bit higher than expected as was the Consumer Confidence index which meant shippers, especially big box stores, could anticipate a healthy holiday season. This perception of greater demand would lead those shippers to take a long position in the market, protecting their transportation spend against rising rates," said Lintner. "I would expect to see considerable volume growth in the freight futures market by sophisticated businesses as this is exactly why it was opened, to hedge against price volatility."
K-Ratio is a full-service risk management firm that provides solutions for shippers, carriers, and 3PLs by implementing aligned strategies to reduce the price volatility associated freight trucking. They provide analysis, advisory, and execution services tailored to meet business objectives and remove price uncertainty. Learn more: k-ratio.com.