Q2 State of the Freight Report Finds Modest Expectations for Rate Hikes, Predictions for Tighter TL Capacity

Wednesday, 13 June 2012 13:28

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The report is based on survey results from several hundreds shippers received in late Q1 across a wide range of industry sectors, covering dozens of topic areas.

Though the report and data is meant to serve the interests of the investment clients Wolfe Trahan supports, there is always a lot of insight and trends that shippers will also find of interest.

The survey found that shipper expectations for increases in truckload and rail carriage fell a bit from the Q1 survey and came in an modest levels, while expectations for rate increases in LTL rose a bit in Q2 "despite few signs of tight capacity," the report notes.

As can be seen in the chart below, shippers expect truckload rates to rise 2.5% over the next 12 months, while rail rates are expected to rise about 3.0%. We will note that our quarterly analysis of the rail industry based on the earnings reports of the four major publicly traded carriers has shown core rates have actually been up 4-5% consistently for a number of quarters. (See Rail Carriers Kept Rolling in in Q1, While LTL Sector Muddles Along Like Usual.)

Respondents also expect LTL rates to rise 2.5% over the next 12 months, up from 2.3% in the Q4 survey data. (The time period reflects when the data was captured, with the report coming out in the following quarter).

Intermodal rates were expected to rise 2.2%, a rather sharp increase versus expectations for just a 1.6% rise in the Q1 report.

Ocean rates in fact saw the largest swing, going from expectations for a decrease of .4% in the Q4 survey to a rise of 2.1% in this report, and the ocean carriers are in fact reporting they have been able to push through price increases in recent months after a very tough 2011, when all of them lost a significant amount of money.

The solid black circles in the chart indicate the recent peak in shipper expectations for rates, red circles the lowest expectations.

In a bit of a recent trend, the Wolfe Trahan data supports the anecdotal evidence that more companies are or are considering moving production back to US soil - or at least to Mexico. 25% of respondents said they expect to move some production back to the US, and another 18% expect sourcing from Mexico to increase. That versus the 23% that expect more sourcing to China (10%) or other Asian countries (13%). 34% did not expect any changes. The percent expecting greater US manufacturing/sourcing has risen from just 10% in Q1 2011 to 25% in Q12 2012.

Wolfe Trahan says that continued tight capacity in the truckload market is giving TL carriers greater ability to push through higher accessorial charges. 24% of respondents said they were paying more in accessorials (excluding fuel surcharges), versus just 7% who said they were paying less. 69% said accessorial costs were about the same. However that is down from the 76% who said the same in Q3 and 71% in Q4.

(Transportation Management Article Continued Below)

Source: http://www.scdigest.com/ontarget/12-06-13-2.php?CID=5929