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Freight-market ripples ahead of possible UPS strike

July 12, 2023
A Teamsters strike looms as the current agreement covering more than 340,000 full- and part-timers expires July 31. But shippers might start diverting freight as soon as this week—and the effects could start to show in the beleaguered spot market.

With negotiations stalled and a possible work stoppage by UPS package-shipping workers more than two weeks away, trucking stakeholders said ripples could start to develop in the freight markets as early as this Friday, July 14.

That’s when shippers could need to start diverting freight typically carried by UPS and engage other “purchased-transportation” modes—truckload, less-than-truckload, intermodal, ocean—to compensate for the loss of freight-hauling capacity if a UPS work stoppage happens, Ken Adamo, chief of analytics at DAT Freight & Analytics, told FleetOwner in an interview this week.

Adamo said there’s “a low likelihood” a strike will occur (the last one in 1997 lasted 15 days, cost UPS about $850 million, and sent customers fleeing to rivals such as FedEx and DHL), and if one does transpire, it might last just a few days. But massive disruptions could start soon.

Adamo, a leading observer of freight transportation markets and trends, had a list: the truckload market would struggle to absorb the extra volume, and carriers would be forced to divert significant capacity by declining freight from their regular shippers to haul loads that UPS would typically carry. All the buildup could start by Friday and show in a place vulnerable to volatility: the spot market.

“Shippers are going to get their freight declined from their contract carriers that will pivot to haul UPS freight, so they are going to go to the spot market,” said Adamo, who predicted rates resembling the COVID-19 period “but more acute”—a spike in spot rates perhaps as large as 15% over a short time, about a week.

“Spot rates would be pushed up considerably,” Adamo added. “If it happens, there’s going to be a lot of long nights. Switching costs are going to be high.”

One could argue that the spot market, which analysts such as Adamo’s DAT colleague Dean Croke say has hit a “stagnant bottom,” could use a shot in the arm. But it would be more like a shock, Adamo said, as the spike in spot rates in the event of a UPS work stoppage could be huge, but the dip that would follow that surge could be just as severe and disruptive.

See also: Truckload volumes rebound while spot prices hold

Granted, DAT’s latest data emerges from the historically slow Independence Day holiday week, but national broker-to-carrier spot rates for dry van, refrigerated (reefer), and flatbed for the week of July 2 through July 8 were off only pennies per mile from the doldrums they’ve been in for several months: $2.09 per mile for van ($1.67 without a fuel surcharge) and off 2 cents from the prior week; $2.45 a mile for reefer transportation ($1.99 without fuel), down 5 cents from the week before; and $2.55 a mile for flatbed ($2.05 without fuel), 4 cents lower from the week before, according a weekly report that DAT emails to FleetOwner.

Load-posting activity for the holiday week was down 37.4% on the DAT One network, DAT’s load board, again primarily due to the holiday lull. The number of truck posts on the network fell 19.6% as well as carriers took time off for the holiday or due to a lack of freight, according to the DAT data.

A separate weekly report, Spot Market Insights, by FTR Transportation Intelligence and another load board, Truckstop, confirms the trough that is the current spot market for freight.

Teamsters threaten UPS strike over pay

Contract negotiations between UPS and the Teamsters broke down early in the morning on July 5, with each side blaming the other for walking away from talks.

Union officials said that UPS “walked away from the bargaining table after presenting an unacceptable offer” regarding pay, according to The Associated Press.

UPS stated that the Teamsters abandoned negotiations “despite UPS’s historic offer that builds on our industry-leading pay.”

The Teamsters, who voted last month to authorize a strike if a deal isn’t reached before July 31, represent more than 340,000 UPS package delivery drivers and warehouse logistics workers nationwide.

UPS has met some demands of the Teamsters, which represent more than half the company’s workforce. The company ended a two-tier pay system in which part-time workers were paid $5 less per hour than full-time workers. UPS also included Martin Luther King Jr. Day as a work holiday and agreed to end mandatory overtime on drivers’ days off. And last month, the company decided to equip more trucks with air conditioning equipment starting Jan. 1. Existing vehicles will receive other additions like fans and air vents. The issue has been a sticking point for the union since last summer when reports of UPS workers hospitalized for heat exhaustion entered the news.

Union officials were dissatisfied with the economic package. The Teamsters are bargaining for wage increases, particularly for part-time workers, who union representatives say should have an easier pathway to full-time employment.

UPS stated that its part-time union employees earn an average of $20 per hour after 30 days. However, the Teamsters dispute this.

“That’s not true,” Sean O’Brien, general president of the International Brotherhood of Teamsters, told CNBC. “100,000 part-timers at UPS make less than $20 per hour.”

DePaul University professor and transportation analyst Joseph Schwieterman said UPS and its competitors have been dealing with labor shortages exacerbated by the pandemic.

“UPS’s work is so labor-intensive that they couldn’t keep their core systems running” if there’s a strike, he told the Chicago Sun-Times.

Large retailers have devised ways to bypass UPS in case of a strike, including using freight brokers, Jessica Dankert, VP of supply chain at the Retail Industry Leaders Association, told the Sun-Times.

The shipping company has said it transports roughly 6% of the nation’s gross domestic product and 3% of global GDP. But it has said it has “contingency plans” in place for both the products it is shipping and its members who may strike, UPS told The Hill last week.

Digital Editor Scott Keith contributed to this story.

About the Author

Scott Achelpohl | Managing Editor

I'm back to the trucking and transportation track of my career after some time away freelancing and working to cover the branches of the U.S. military, specifically the U.S. Navy, U.S. Marine Corps, and the U.S. Coast Guard. I'm a graduate of the University of Kansas and the William Allen White School of Journalism there with several years of experience inside and outside business-to-business journalism. I'm a wordsmith by nature, and I edit FleetOwner magazine and our website as well as report and write all kinds of news that affects trucking and transportation.

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