Translogistics Blog

September Industry News and Tonnage Report

September 14, 2017

Written By: Scott McDevitt

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The 12 month rate of change is starting to show a slight bend upwards on both charts (see below).  This is a positive sign but too early to call it a trend.

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The LTL carriers are continuing to report fairly tight capacity which allowed them to give rate increases in 2Q 2017 in the 4.9% range and make them stick.  Additional areas that could be negatively affecting your costs right now that went under the radar:

      • Many items that had a density rating at class 150 have been moved to class 175.  This is an increase of 16.4% in and of itself, however, if you have an FAK in place for 150, but not 175, you’re paying substantially higher and may not know it.  Effective 8/5/17.
      • ABF came out with a “CMC” (Cubic Minimum Charge) fee.  Don’t let the name fool you, it involves a lot more than minimum charge shipments.  Effective 8/1/17.  If history proves out, more LTL carriers will follow with their “CMC” fee.

              *If you’re a TLI customer, both of these have already been addressed for you.

The truckload industry is starting to experience tighter capacity, and is showing signs of more tightness in certain parts of the country (pre Harvey Hurricane).

Recent Freight Trends Research (FTR) conclusions:

    • Participants in the contract market are beginning to report rising pricing on new contracts, although overall metrics show little gain. We expect y/y increases to top 5%, with upside possibility should capacity tightness err on the tight side. Spot market is already showing signs of disturbing stress, up by double digits overall and above 20% in some regions.
    • Note that the historic lags in contract pricing will prevent y/y date from showing major changes until well into 2018.
Although there will be a definite tightness, It appears the “mother of all capacity shortages” will not be occurring:
    • Several important regulatory agendas have been pushed back until at least the early 2020s, although the legislation for the delay in the ELD regulation will not go through (as of 9/7/17).
    • A mild recession is expected to surface in late 2018/early 2019.

Weather related Capacity issues will be real at various times:

    • Hurricanes and Severe Snow Storms
      • There are four broad effects of these disruptions:
        • The most obvious disruption is idle trucks waiting for water to recede from roads and loading docks.
        • The second effect is the extra shipments of relief and construction supplies.
        • The third effect is extra shipments and lower productivity due to out of cycle supply chain demands.
        • Finally, there is slow operations due to congestion, circuity and backed up loading docks.
  • FTR has studied several major weather events, starting with Hurricane Katrina in New Orleans. These weather events show significant pricing effects, highlighted by 7 extra percentage points of annualized pricing for the five months following Katrina in 2005 and a peak of 22% year-over-year spot price increases following the monster winter of 2014.
  • “Look for spot prices to jump over the next several weeks with very strong effects in Texas and the South Central region,” according to Noël Perry, Partner at FTR. “Spot pricing was already up strong, in double-digit territory. Market participants could easily add 5 percentage points to those numbers.”

Conclusion:

Do not take your eye off the ball.  We are in an environment where you could be paying more without even knowing it.

LTL

      • General Rate Increases are usually announced, although as more and more shippers are relying on big brokers with LTL “blanket pricing” (can also be referred to as spot pricing), are they informing their shipper customers as the rates are going up?  Unlikely.
      • NMFC class changes based on density- no big announcements and they tend to fly under the radar for the most part, but could be very costly based on the shippers product mix.
      • LTL carriers creating more “density based pricing” such as the Cubic Minimum Charge (CMC).  Less than a month’s notice for the effective date and somewhat confusing to understand.

TL

      • Short term- certain areas of the country have been experiencing an uptick in spot pricing- mostly the Midwest- prior to the hurricanes.  There will now be more regionalized areas with increases due to storms.
      • Long term- as manufacturing continues to increase (latest ISM of 58.8 is the highest since 2011), contract rates will follow- even if the overall economy appears to have slow growth.

As always, we’re here to help you “make your job easier” and ready to serve.  Your comments are always welcome and if you have any questions or suggestions, please feel free to reach out to me directly: scottm@tli.email

 

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