As we continue to navigate unprecedented global supply chain challenges, Border States is committed to keeping you updated regarding supply chain impacts, inflationary pressures and other market trends. We are working diligently to provide you with the most current information possible, knowing this information could change at any point.
We continue to see varying degrees of supply chain improvement across the core markets we serve (construction, industrial and utility). Ocean freight rates and transit times continue to stabilize as carriers have adjusted to ongoing environmental and geopolitical issues in the Panama and Suez Canals. While the Francis Scott Key bridge collapse in Baltimore, Maryland, in March is catastrophic due to loss of life and impact on the local Baltimore area, we do not expect much notable impact on port and trucking transit times. Fuel prices remain volatile due to 2024/2025 demand projections having been adjusted down and slower demand for transportation of goods. Ongoing instability in the Middle East, most notably the growing conflict between Israel and Iran, is a key factor in driving these volatile fuel prices. Lead times remain elevated but are improving at a varying rate by market. Most commodities continue to show signs of softening, although ongoing volatility and unpredictability is expected. We are seeing fewer price changes announced from suppliers based on continued economic uncertainty and slowing demand, softer raw material costs and lower freight costs.
The Federal Reserve (the Fed) has made it clear in recent months they want to see further evidence that inflation is cooling before they cut interest rates, with original forecasts anticipating three rate cuts this year. Interest rate cuts would lower borrowing costs for consumers and businesses, potentially increasing economic activity through greater household spending and company investments. The Fed risks a rebound of inflation if it cuts interest rates too quickly, as stronger consumer demand could lead to price increases.
The Consumer Price Index (CPI), which measures the average change over time in the prices paid for consumer goods and services, rose 3.5% in March, with gasoline and housing prices remaining high. While the March inflation reading is down from its 2022 peak of 9.1%, it remains above policymakers’ long-term target of around 2%. This larger-than-expected rise in March, coupled with a stronger- than-expected labor market, raises questions around the likelihood of a rate cut in June with some economists predicting the first rate cut being pushed to September, with the Fed lowering rates just twice this year. The Federal Reserve will meet again Tuesday, April 30–Wednesday, May 1.
Material lead times have been steadily decreasing since April 2023, with March showing a continuation of this trend. A 15% decrease in lead times since April 2023 suggests a positive shift, although they remain higher than pre-pandemic levels. All core markets, including the Utility market, have experienced decreases. Lead time stability, coupled with gradual lead time decreases, allows for smoother operations and more reliable planning. Key categories where we continue to see extended lead times and material availability challenges are noted below.
We continue to collaborate with our national carrier partners to understand trends and impacts in the freight markets. Overall freight capacity remains strong with increasing stability both in ocean and over-the-road transportation.
Border States continues to monitor the situation with the Francis Scott Key bridge collapse in Baltimore after a container ship struck the bridge on March 26. This event is a tragedy due to the tremendous loss of life and will be a significant impact on the local Baltimore area economy; however, we do not foresee any notable impacts on our supply chain. The port of Baltimore is ranked the 15 th largest port based on total volumes, representing about 2% of total U.S. port traffic. It is expected that short-term capacity will be largely absorbed by other East Coast and Gulf ports. We also continue to monitor the potential labor situation with the International Longshoremen’s Association (ILA) — the union representing more than 70,000 dockworkers in Gulf and East coast ports — after their announcement that if a renewed labor deal was not reached prior to expiration on September 30, they would strike.
Raw material prices saw a mix of increases (copper, aluminum, crude oil) and flat to decreasing prices (steel, lumber, resin) since February. While each commodity is impacted differently, interest rate decisions, geopolitical events, fluctuating supply/demand and the Chinese economy are all factors that continue to drive changes and uncertainty in pricing and availability.
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The labor market remains stronger than economists had predicted, with the U.S. economy adding more jobs than expected in March and the unemployment rate decreasing from 3.9% to 3.8%. Data from the Bureau of Labor Statistics showed the labor market added 303,000 jobs in March, more than the 214,000 that were expected. The labor force participation rate, which measures how many people are working or seeking work, increased to 62.7% from 62.5% (a higher labor force participation rate can help reduce inflation- when more people look for work, there is less pressure to raise wages).
While we continue to see improvement in our supply chain, we anticipate seeing ongoing challenges and pressures across all core markets we serve through the balance of 2024.
Even in the face of these ongoing supply chain resiliency challenges, we understand our customers’ work cannot stop — you are unstoppable businesses, and we understand the importance of maintaining your operations while managing your costs.
At Border States, we continue to invest in working inventories, maintaining emergency and storm response inventories in core markets and working diligently to justify that all price increases align with current market conditions. We are focused on more tightly integrating supply chains, improved forecasting and planning with customers and vendors and delivering better insights through technology to ensure your long-term success. Communication and partnership remain key in continuing to navigate the challenges.
Although we cannot control the global supply chain issues, we will continue to be transparent and straightforward with you about the challenges and work closely with our best customers and vendors to navigate these challenges together. If you have additional questions, please reach out to your Border States Account Manager for more information.
