In celebration of American Independence Day, The Roundup will not be published next week.

Happy July 4th – God bless the U.S.A.

This week’s Roundup will focus primarily on two issues extremely relevant to the logistics sector: the USPS price hike and the expected spinoff of FedEx Freight. The new rates proposed by the postal service will include an average 25 percent increase for Parcel Select, which allows high-volume shippers to enter packages for regional delivery through the USPS network. FedEx is conducting a strategic analysis of the company’s less-than-truckload segment and its relative value to the company, suggesting that FedEx Freight could be sold or spun off so the company can focus on its parcel and logistics business.

The USPS

On March 23, 2021, the US Postal Service published the Delivering for America plan, a ten-year vision for making the service more efficient, self-sustaining, and high-performing.

As part of the plan, USPS announced a 25% average rate increase on the Parcel Select service. This increase is designed to incentivize partner carriers like DHL eCommerce and Piney Bowes to give them packages earlier in the process rather than just for the final mile. The increase will go into effect on July 14, 2024, and it will likely affect shippers using those services.

Lawmakers are never happy when the postal service raises prices or cuts services, even if they often use the USPS as a poster boy for government inefficiency. Lawmaker intervention has halted a planned network consolidation until 2025. This will give lawmakers time to check the plan’s effect on delivery reliability. The plan seems to be making some progress as second-quarter earnings issued in May saw some signs of improvement while recording another quarterly net loss.

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FedEx Freight

Transportation analysts and experts expect FedEx to spin off its Freight unit as a separate publicly traded company, potentially bringing a windfall to shareholders while boosting other competitors in the carrier’s orbit of the trucking sector. The country’s largest LTL generated $9 billion in revenue over the past 12 months, making the sale of the unit unlikely. However, a spinoff can potentially garner a market capitalization of $50 billion by itself. This is based on the strong performance of FedEx’s rivals in the LTL business. LTL, or Less Than a Truckload, is when shipments from multiple companies are combined on a single truck. FedEx expects a $500 million headwind in fiscal year 2025 from the looming expiration of its U.S. Postal Service air cargo contract. The delivery giant is preparing to aggressively reduce Postal Service-related costs following the contract’s Sept. 29 expiration to minimize the impact to its bottom line.

In anticipation, FedEx has permanently retired 22 Boeing 757-200 freighter aircraft as part of a downsizing campaign to better align the air fleet with slower parcel demand. On September 3rd, FedEx will also close four North Carolina and South Carolina facilities. Those include three Ship Centers in the South Carolina cities of West Columbia, Florence, and Myrtle Beach, plus another Ship Center in Conover, North Carolina.

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Freight and Shipping

Ship backups that plagued seaports during the COVID-19 pandemic are coming back, as vessel diversions because of attacks in the Red Sea trigger gridlock and soaring costs at the start of the peak shipping season. 

After three months in the Port of Baltimore, the Dali cargo ship has finally left and is currently in Norfolk, VA, where repairs are being made so it can return to circulation.  A freight train derailed in Matteson, Illinois, a suburb of Chicago, prompting some residents within a mile of the crash to evacuate their homes.

The per-mile cost of operating a commercial truck has risen to record highs as lower rates and rising costs are straining operators.

Stay on top of everything related to shipping, logistics, and the supply chain while receiving customized service and the best rates. Contact us.

Other News

The American economy expanded at a 1.4% annual pace from January through March, the slowest quarterly growth since spring 2022.

The Port of Nevada has partnered with Union Pacific to provide intermodal service to and from the Port of Oakland. According to a study done by DHL eCommerce, 41% of online shoppers abandon their purchases due to high shipping costs.

Amazon’s market cap exceeded $2 trillion, only the fifth company to reach the milestone. Amazon competitors Temu and Shein are forcing the retail giant to reassess its shipping policy. It seems consumers will tolerate longer shipping times for less expensive products.

A U.S. judge rejected a $30 billion proposed settlement to resolve an antitrust case against Mastercard and Visa over the rate of credit card transaction interchange fees. The battle between banks and retailers over the costs of processing credit card transactions is far from over. Not only could the long-running federal court case over the matter head to trial, but there are multiple attempts to rein in the fees via state and federal legislation.

In Other News

What We Are Reading

Have a great week!

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