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Cass Index: Despite December declines, transportation shows strong economy

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With all of 2018 in the record books, it is clear that 2018 was an extraordinarily strong year for transportation and the economy, Cass Information Systems said in its December report. ©2019 Fotosearch

ST. LOUIS — December was a month of growing uncertainty and severe declines in the U.S. financial markets as equity valuations fell (the Dow Jones fell from 25,826 on December 3 to as low as 21,792 on December 24), most commodity prices continued to be weak (oil, copper, lumber, etc.), and interest rates declined (after peaking at 3.24 percent on November 8, the 10-year Treasury yield fell from 3.01 percent on November 30 to 2.56 percent on January 3).

Large multi-national companies lowered guidance and blamed slowing rates of activity in Europe and — to a lesser extent — Asia. Trade talks with China continued without resolution, and indications that the Chinese economy is beginning to suffer began to leak out.

But despite all the “hand-wringing” on Wall Street, the transportation economy continues to signal economic expansion, according to the December Cass Information Systems Freight Index Report prepared by Donald Broughton, founder and managing partner of Broughton Capital, a deep data-driven quantimental economic and equity research firm.

“The uninfluenced-by-human-emotion hard data of physical goods flow confirms that people are still making things, shipping things and buying/consuming things, perhaps not at the scorching pace attained earlier this year, but still at an above-average pace,” Broughton wrote.

The report said industry stakeholders were not yet alarmed about the volume of shipments going negative for the first time in 24 months (-0.8 percent in the month of December), in part because December 2017 was an all-time high for the month, and in part because of the stabilizing patterns seen in almost all of the underlying freight flows.

“However, we would be negligent if we did not acknowledge as we did in last month’s report two storm clouds on the economic horizon,” Broughton said.

Those are:

  • The tariffs and threats of even higher tariffs with China, the world’s second-largest economy (even though the latest headlines and tweets suggest that there may be a resolution). Tariffs have throttled volumes in some areas of the U.S. economy, most notably agriculture exports and other select raw materials.
  • The decline in WTI crude in December to as low as $42.50 a barrel. “This did not fall below the marginal cost of production for fracked crude in almost all areas of the U.S., but it made it less profitable and significantly lowered the incentive to drill ever more holes, effectively slowing the rate of growth in the industrial economy,” Broughton said, noting that crude’s recent rally (above $52 in mid-January) gives transportation a momentary sigh of relief. “Continued strength in the price of crude makes us more confident in our positive outlook for the U.S. industrial economy and less worried about global demand,” Broughton said.

“With all of 2018 ‘in the record books,’ it is clear that 2018 was an extraordinarily strong year for transportation and the economy,” Broughton said. “Every month from March to October exceeded all levels attained in all months in 2014 (a very strong year), while February was roughly equal to the peak month in 2014 (June 2014 – 1.201 vs February 2018 – 1.198), which is extraordinary.”

The Cass Expenditures Index is signaling continued overall pricing power for those in the marketplace who move freight.

Demand is exceeding capacity in most modes of transportation by a material amount. In turn, pricing power has erupted in those modes to levels that spark overall inflationary concerns in the broader economy.

With the Expenditures Index up 10.0 percent in December, Broughton said, Cass understood the concerns about inflation, but are comforted by four factors:

  1. Almost all modes of transportation are using the current environment of pricing power to create capacity, which will first dampen and eventually kill pricing power
  2. Spot pricing (not including fuel surcharges) in all three modes of truckload freight (dry van, reefer, and flatbed) has already been falling for six months
  3. The cost of fuel (and resulting fuel surcharges) is included in the Expenditures Index, and the cost of diesel was up 6.6 percent in December (but has been steadily falling in recent weeks, suggesting lower fuel surcharges in coming weeks), and
  4. Whether driven by capacity addition/creation or lower fuel surcharges — or a combination of both (our best guess) — the Expenditures Index was sequentially declining, before sequentially improving slightly (up 1.9 percent in December). The November Index was already down 4.9 percent from its peak in September, and down 2.4 percent from October.

To view the full report, click here.

 

 

 

 

 

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Schneider says it will use its assets to enhance middle mile capabilities

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With its acquisition of Watkins & Shepard Trucking in 2016, Schneider became a provider in first to final mile delivery of over-dimensional goods for omnichannel retailers and manufacturers. (Courtesy: SCHNEIDER)

GREEN BAY, Wis. —  With its end-to-end delivery portfolio, Schneider says it is able to deliver seamless shipping that keeps businesses one step ahead from the first to the final mile. The middle mile, which provides connectivity from and between local last-mile terminals, is equally as important as its first- and final-mile counterparts.

To optimize the movement of freight through its 24 terminal networks across 48 states, Schneider is broadening its middle-mile configuration to include its van truckload and intermodal owned assets, according to Rob Bulick, senior vice president and general manager of First to Final Mile.

With its acquisition of Watkins & Shepard Trucking in 2016, Schneider became a provider in first to final mile delivery of over-dimensional goods for omnichannel retailers and manufacturers.

Schneider now capitalizes on the full force of its broad network for the middle and final mile, with access to more than 10,700 trucks, 22,000 intermodal containers and a suite of technology tools for comprehensive freight management, Bulick said.

Throughout this process, Schneider is able to fully apply its proprietary network optimization system to freight within the middle mile to enhance consistency of the engineered network. An engineered network determines required departure and processing times, expected delivery times and regulates workflow through the terminals.

Schneider’s engineering management tools apply data-driven recommendations to optimize operations and manage the movement of freight through the middle mile. The overall engineered network will also contribute to standardizing pricing and transit, he said.

“Full incorporation of Schneider’s assets into the middle-mile service offering will reduce the number of freight handlings through the terminal network, ultimately reducing product claims. This optimization will also improve driver efficiency and increase consistency in service standards and delivery times,” Bulick said.

Along with middle-mile optimization, Schneider is implementing a standardized delivery day for ZIP codes, creating predictability.

Customers will be provided with the exact transit flow of their shipment, as well as a projected day and time for delivery from ZIP code to ZIP code for a holistic, end-to-end scheduled solution.

“A seamless delivery experience – whether it’s the first mile, the last mile or the miles in between – means there’s a consistent, reliable network working hard for a customer’s business,” Bulick said. “Expanding our middle-mile strength to include Schneider’s owned assets and data-driven network optimizations ensures we’re constantly meeting the high expectations for final-mile delivery that customers and consumers can depend on and trust.”

To learn more about how Schneider’s and Watkins’ end-to-end portfolio of services makes for smooth first to final mile deliveries, visit https://schneider.com/our-services/first-to-final-mile.

 

 

 

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No spring break for spot van, reefer rates

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The map shows the various rate ranges for van load to rate ratios. (Courtesy: DAT TRENDLINES)

PORTLAND, Ore. — National average spot van and refrigerated freight rates slipped again during the week ending April 13 as the number of load posts fell 4% while truck posts increased 3%.

The arrival of produce season in several southern markets failed to make up for the effects of more capacity in the spot market and bad weather across much of the country, said DAT Solutions, which operates the DAT network of load boards.

Here are the national average spot rates:

  • Van: $1.83/mile, 2 cents lower than the March average
  • Flatbed: $2.37/mile, 3 cents higher than March
  • Reefer: $2.15/mile, 2 cents lower than March

Van trends

How soft are spot van rates? Pricing was lower on 76 of the top 100 van lanes last week. Only 23 lanes saw rates rise and one lane was neutral.

Van load-to-truck ratios have not held up after a promising start to April, with the national average sitting at 1.3 loads for every available truck. The good news is that load counts rose nearly 5% in Chicago and Houston, and more than 3% in Los Angeles last week—major markets for spot van freight.

Markets to watch: Outbound rates were down from Los Angeles, Columbus, Ohio, Philadelphia, and Charlotte, North Carolina. Charlotte to Allentown, Pennsylvania, gave up 13 cents to $2.08/mile, and rates fell on two Buffalo-inbound lanes: Columbus to Buffalo, down 19 cents to $2.66/mile, and Chicago to Buffalo, off 19 cents to $2.31/mile.

Reefer trends

Prices rose on 38 of the top 72 reefer lanes last week. Thirty-one lanes were lower and three were neutral. Higher volume in Florida and California was balanced out by lower volume from the Upper Midwest and Texas, which hurt spot reefer pricing overall.

Markets to watch: Lakeland, Florida, volumes spiked nearly 27% last week while the average outbound rate climbed 2 cents to $1.57/mile. Let’s see if Lakeland rates trace the pattern in Miami, where a big jump in volume two weeks ago was followed by a nice gain in the average outbound rate ($1.80/mile, up 13 cents). Meanwhile, several lanes from Florida and California produced strong rates:

  • Fresno, California, to Denver up 40 cents to $2.24/mile
  • Fresno to Boston gained 19 cents to $2.23/mile
  • Miami to Baltimore up 29 cents to $2.00/mile
  • Miami to Elizabeth, New Jersey, rose 15 cents to $1.82/mile

The Imperial Valley is underperforming for reefer freight: last week the average outbound rate from Ontario, California, was $2.51/mile, down 8 cents, on 9% lower volume.

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 loads and rate information, visit dat.com/trendines and follow @LoadBoards on Twitter.

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March used truck sales down 14% from last year

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ACT Research Vice President Steve Tam said slowing growth in the freight market is also a likely contributor to the lower sales of used trucks. (Courtesy: ACT RESEARCH)

COLUMBUS, Ind. — Preliminary used Class 8 volumes (same dealer sales) jumped 25% month-over-month in March, following a modest decline in February, according to the latest preliminary release of the State of the Industry: U.S. Classes 3-8 Used Trucks published by ACT Research. However, the report indicated that longer-term comparisons yielded a 14% decline compared to March 2018.

Other data released in ACT’s preliminary report included year-over-year comparisons for March 2019, which showed that average prices rose 7%, while average miles contracted 2%, and average age was 8% higher.

“We continue to hear from dealers that the lack of inventory is a limiting factor inhibiting sales volumes, an observation corroborated by the current demand and pricing environment,” said Steve Tam, vice president at ACT Research. “Despite the impressive sequential increase, volumes remain well below last year’s year-to-date level. It is important to note that slowing growth in the freight market is also a likely contributor to the lower sales. Truckers may be getting to the point where they have the trucks necessary to meet their needed freight demand.”

ACT’s Classes 3-8 Used Truck Report provides data on the average selling price, miles, and age based on a sample of industry data. In addition, the report provides the average selling price for top-selling Class 8 models for each of the major truck OEMs – Freightliner (Daimler); Kenworth and Peterbilt (Paccar); International (Navistar); and Volvo and Mack (Volvo).

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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