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ATRI report says motor carriers’ marginal cost per mile rose 6 percent in 2017

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ARLINGTON, Va. — With economic activity strengthening in 2017, the average marginal cost per mile incurred by motor carriers increased 6 percent to $1.69, according to the American Transportation Institute’s 2018 update to “An Analysis of the Operational Costs of Trucking,” which was released Tuesday.

Using financial data provided directly by motor carriers throughout the country, this research documents and analyzes trucking costs from 2008 through 2017, providing trucking industry stakeholders with a high-level benchmarking tool and government agencies with a baseline for future transportation infrastructure improvement analyses.

ATRI said cost increases were broad-based in 2017, with growth in nearly every major line-item over the year.

However, even though the year-over-year average marginal costs per mile increased both in 2016 and 2017, it is lower than it was in 2014, when the costs per mile was $1.703.

Driver wages increased for the fifth consecutive year. The combined cost of driver wages and benefits represent 43 percent of the overall cost per mile.

The ATRI report noted that driver compensation, inclusive of wages, benefits and bonuses, has been the biggest source of cost increases incurred by motor carriers since 2012.

Even when overall marginal costs were declining due to falling diesel fuel prices, increases in driver wages and benefits served as mitigating factors.

At the same time, driver bonuses, while not a marginal cost, have been robust as carriers seek to entice new entrants into the industry, retain their existing workforce, and reward drivers for excellent safety and operational performance.

The driver bonus cost center is growing quickly is in the amount and types of bonuses employers offer to drivers.

A growing majority (62.7 percent) of respondents indicated that they pay drivers some type of financial incentive or bonus beyond wages.

Survey respondents listed their most common incentives and bonuses as safe driving, on-time delivery performance, and additional financial incentives to attract and retain qualified drivers.

Respondents reported paying drivers an average bonus of almost $1,300 for safe driving in 2017, a decrease from the $1,500 paid out to drivers in 2016.  On the other hand, drivers who met the criteria for on-time delivery bonuses were rewarded handsomely in 2017, receiving an

average annual bonus of approximately $2,500, well above the rate of $1,950 observed in 2016.

With respect to future driver compensation, the survey report said that while the freight market in 2017 saw freight demand improvements from 2016, the freight market has boomed in 2018.  With this strong demand for truck transportation, the report said, shippers are experiencing severe truck capacity constraints due in part to the driver shortage.

Numerous reports indicate that carriers have had to increase driver pay and expand benefits packages yet again in 2018 in an effort to recruit and retain truck drivers.  Additionally, a majority of motor carriers now offer sign-on/stay-on bonuses to improve recruitment and retention efforts, while other carriers have been forced to raise their bonus offers to remain competitive.

As a result, the overall compensation package offered to drivers can be expected to improve further in 2018, boosting the related line-item marginal cost centers.

Fuel prices rebounded from decade-lows and the growing cost and sophistication of newer truck models continues to drive up costs for both purchasing and repair and maintenance.

There is a significant variance on fuel costs when broken into fleet size.

Fleets with more than 1,000 power units averaged 31.3 cents per mile while fleets with between 251 and 1,000 power units averaged 31.8 cents per mile.

Those figures compared with an average of 46.1 cents per mile for fleets with 26-100 power units and 43.6 cents for fleets with between 101 and 250 power units.

At the time of the report was released, national diesel prices were $3.26 per gallon, up 23 percent from the average price observed across 2017.

Diesel prices are projected by the EIA to remain near this level for the remainder of the year.

Although fuel prices are known to be highly volatile due to geopolitical concerns and unpredictable supply disruptions, it is clear that motor carriers can expect fuel costs to continue to exert upward pressure on overall line-item marginal costs in next year’s report.

Overall, motor carrier operational costs have now surpassed the 10-year average since ATRI began its annual Ops Costs research.

The average marginal costs per hour increased to $66.65 in 2017, compared with $63.66 in 2016.

ATRI’s 2018 report also includes a new “Industry Sector in Focus” analysis, this year reporting operational costs for tank fleet operators.

“ATRI’s Operational Costs research is such a powerful tool for fleets of all sizes. Better understanding how our costs stack up against our industry peers enables us to implement operational efficiencies and improve our bottom line,” said Dean Kaplan, CEO of K-Limited Carrier.

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Business

DAT: Spot rates weaken as weather clouds a sunny forecast

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This chart shows that both van and reefer rates were down based on a seven-day average compiled on March 16. (Courtesy: DAT)

PORTLAND, Ore. — Just when spot truckload rates and demand seemed ready for an upward swing, they took another hit last week.

With weather disruptions on vital truck routes in the Midwest and Rockies, van and refrigerated load-to-truck ratios slipped during the week ending March 16, said DAT Solutions, which operates the DAT network of load boards:

  • Van: 1.6 loads per truck
  • Reefer: 2.9 loads per truck
  • Flatbed: 22 loads per truck

The DAT load-to-truck ratio measures the number of loads moved on the spot market relative to the number of available trucks. National average rates declined as well compared to the previous week:

  • Van: $1.86/mile, down 2 cents
  • Reefer: $2.19/mile, down 2 cents
  • Flatbed: $2.34/mile, unchanged

Van trends

Spot van volumes remain ahead of March 2018 levels but so far this month demand for trucks is no better than it was in February 2019. Capacity is abundant and spot van rates are drifting: On DAT’s top 100 van lanes last week, pricing fell on 53 and rose on 36. Eleven lanes were neutral.

Where Rates Were Up: With freight markets in the Midwest struggling with unusual weather, there was a ripple effect for supply chains. For instance, the challenge of getting freight into Denver last week led to an 18-cent increase in the average rate from Seattle to Salt Lake City ($1.90/mile). On the other hand, the extra West Coast trucks in Salt Lake City caused rates on the lane from there to Stockton, California, to decline.

What to Watch: Expect a boost in flatbed pricing as the demand to move heavy machinery and construction materials into the region picks up. High demand for flatbeds in the coming weeks may cause van availability to tighten on some lanes.

Reefer trends

The national average spot reefer rate has declined in seven of the last eight weeks. On the top 72 reefer lanes, 26 lanes moved up while 43 lanes fell and three were neutral. We’re waiting on California and Florida produce to pull rates higher.

Where Rates Were Up: Sacramento, California, to Salt Lake City jumped 40 cents to $2.35/mile, possibly due to trouble getting into Denver. In the Midwest, two lanes from Grand Rapids, Michigan, rebounded from last week:

  • Grand Rapids to Madison, Wisconsin, increased 22 cents to $2.58/mile
  • Grand Rapids to Atlanta added 21 cents to $2.71/mile

Where Rates Fell: Many of the prior week’s gainers came back to earth, including Elizabeth, New Jersey, to Boston (down 38 cents to $3.81/mile) and Philadelphia to Miami (off 22 cents to $1.96/mile).

DAT Trendlines are generated using DAT RateView, which provides real-time reports on spot market and contract rates, as well as historical rate and capacity trends. The RateView database is comprised of more than $60 billion in freight payments.

DAT load boards average 1.2 million load posts searched per business day.

For the latest spot market load availability and rate information, visit dat.com/trendlines and follow @LoadBoards on Twitter.

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ACT: Current Class 8 story is big backlogs, slowing orders

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ACT says heavy commercial vehicle markets continue to benefit from key triggers and new technologies, (Courtesy: VOLVO TRUCKS)

COLUMBUS, Ind. — In the release of its Commercial Vehicle Dealer Digest, ACT Research said that recently softer Class 8 orders are attributed to backlogs that are still out about 10 months.

Many of the orders normally booked in the year’s first quarter were actually placed in the rush to get into the queue in the second half of 2018.

The report provides monthly analysis on transportation trends, equipment markets, and the economy.

“The rolling-over of ACT’s dashboard guidance suggests today’s order weakness will transition from ‘too much backlog’ to an equipment supply-freight demand imbalance in the near future,” said Kenny Vieth, ACT’s president and senior analyst. “That said, heavy commercial vehicle markets continue to benefit from key triggers, including still-strong freight rates (being marked-down from record levels) and new technologies, like better fuel efficiency and safety technologies, as well as increased demand generated in the trailer segment for drop-and-hook to keep drivers moving.”

ACT Research is a publisher of commercial vehicle truck, trailer, and bus industry data, market analysis and forecasting services for the North American and China markets. ACT’s analytical services are used by all major North American truck and trailer manufacturers and their suppliers, as well as banking and investment companies.

More information can be found at www.actresearch.net.

 

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ATA truck tonnage index down 0.2 percent in February

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Despite the February decline, the index was 5.4 percent higher than February 2018. (The Trucker file photo)

ARLINGTON, Va. — The American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index was down 0.2 percent in February after increasing 2.5 percent in January. In February, the index equaled 117.4 (2015=100) compared with 117.6 in January.

“After a strong January, I’m pleasantly surprised that the index didn’t fall much last month,” said ATA Chief Economist Bob Costello. “I continue to expect tonnage to moderate like other indicators, including retail sales, manufacturing activity and housing starts. Additionally, the level of inventories throughout the supply chain have increased, which is a drag on truck freight.”

January’s reading was revised up slightly compared with our February press release.

Compared with February 2018, the SA index increased 5.4 percent, down from January’s 5.8 percent gain. In 2018, the index increased 6.7 percent over 2017, which was the largest annual gain since 1998.

The not seasonally adjusted index, which represents the change in tonnage actually hauled by the fleets before any seasonal adjustment, equaled 106.9 in February, 5.7 percent below January’s level (113.3). In calculating the index, 100 represents 2015.

Trucking serves as a barometer of the U.S. economy, representing 70.2 percent of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 10.77 billion tons of freight in 2017. Motor carriers collected $700.1 billion, or 79.3 percent of total revenue earned by all transport modes.

ATA calculates the tonnage index based on surveys from its membership and has been doing so since the 1970s. This is a preliminary figure and subject to change in the final report issued around the 5th day of each month. The report includes month-to-month and year-over-year results, relevant economic comparisons, and key financial indicators.

 

 

 

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