ITS Logistics June Supply Chain Report: Energy Prices and Capacity Challenges Drive Record Transportation Costs

ITS Logistics has released its June Supply Chain Report, highlighting that energy-driven inflation and regulatory capacity constraints have pushed transportation costs to record levels. Despite subdued demand, the Logistics Managers' Index (LMI) for transportation prices reached an all-time high of 96.0 in May, driven largely by fuel costs and tightening equipment availability. This shift is forcing shippers to move away from single-carrier strategies toward multi-carrier and zone-skipping models to maintain cost control during the upcoming peak season.

U.S. inflation reached 4.2% year-over-year in May, the highest in over two years, with fuel prices serving as the primary driver as Core CPI remained lower at 2.9%. This energy-driven inflation is significantly altering consumer behavior, as evidenced by a 26.5% year-over-year increase in retail gasoline sales and a decline in the Conference Board's Consumer Confidence Index. As households prioritize essentials like food and fuel, discretionary categories that typically drive high freight volumes are seeing reduced budget shares, creating a challenging freight mix for the logistics sector as it approaches peak season.

Transportation costs have hit unprecedented levels, with the LMI Transportation Prices reading reaching a record 96.0 in May. Rates for dry van and refrigerated capacity remain well above the five-year historical average, while capacity continues to tighten due to ongoing legislative and enforcement activities at both state and federal levels. Josh Allen, Chief Commercial Officer at ITS Logistics, noted that shippers are paying materially more to move freight despite low demand, a trend expected to persist. This tightening is also visible in the parcel sector, where UPS has closed 23 facilities this year with 27 more planned, and FedEx continues its Network 2.0 consolidation to increase revenue per package.

In the warehousing sector, inventory holding costs surged 9.4 points to 84.1 in May—the highest level since 2022—even as inventory volumes remained flat, indicating that costs are rising independently of stock levels. On the maritime front, U.S. containerized imports rose 6.6% from April to over 2.4 million TEUs, with China-origin imports rebounding sharply by 19.9% month-over-month. Jeff Lolli, VP at ITS Logistics, emphasized that shippers must adopt advanced strategies like multi-carrier networks and inventory positioning closer to demand to mitigate the impact of carrier restructuring and tightening market conditions.