Cass and Avondale index shows fluctuation between truckload and intermodal rates

The most recent edition of the Truckload and Intermodal Cost Indexes from Cass Information Systems and Avondale partners showed that rates between the modes were mixed in April.

This pricing data is part of the Cass Truckload Linehaul Index and the Cass Intermodal Linehaul Index, which were both created in late 2011. The indices are based on actual freight invoices paid on behalf of Cass clients, which accounts for more than $23 billion annually and uses 2005 as its base month.

Cass and Avondale said the truckload index “isolates” the linehaul component of full truckload costs from other components such as fuel and accessorials, which in turn provides an accurate reflection of trends in baseline truckload prices.

For the month of April, Cass and Avondale found that truckload rates in April, which measures truckload linehaul rates paid during the month, were up 3.8 percent annually, building on the 5.7 percent annual gain seen in April 2014.

The report’s authors said that with demand increasing and capacity still tight, they expect to see contract rate increases filter into their index at higher levels.

“We would point out that contract pricing (which applies to 95+% of the public carriers’ freight) has been accelerating after a drawn-out bid season last year,” wrote Avondale Partners. “As a result, although spot market pricing has decelerated somewhat (it remains strong), … we see TL pricing increasing between 4% and 9% in 2015, depending on how much rate increase each carrier was successful in obtaining in 2014 and when those rate increases were achieved.”

This sentiment was shared by Mike Regan, chief relationship officer for TranzAct Technologies.

“The only reason truckload rates won’t be higher is that the economy is softer and in relatively weak condition, with GDP shuffling along at 2 or 2.5 percent,” he said. Now, if GDP got to 3 or 3.5 percent, there would be a real capacity crisis. Right now, there are factors weighing into rate increases like carriers raising driver pay, which increases the cost of doing business, along with other factors affecting costs for carrier like the cost of equipment and insurance, as well as general business expenses going up, as well as the demand factor.

For shippers that are doing a good job of managing their freight and transportation processes and are doing things like providing advance notice to carriers can get equipment to them in a timely manner, Regan said that can go a long way towards rate relief.

“If you continue to do business as you have always done business and are not open to making changes, which does not bode well for securing capacity….we think truckload rates over the next 12 months could be up between 4-7 percent,” Regan said. “But by making changes, though, shippers can mitigate those prices, but that requires making changes.”

On the intermodal side, the index explained that total intermodal costs fell 1.9 percent annually in April, on the heels of a 1.6 percent March decrease. Looking ahead, it noted that it expects intermodal rates to further decline, pending drops in diesel and oil prices that could lead to more shippers shifting modes from truckload to intermodal.

“We concede that the extent to which loads can be shifted from domestic intermodal back to over-the-road truck is dependent on trucking capacity, but the ~$0.20 a mile decline in fuel surcharges collected by truckers in the last year (with most of that decline coming in the most recent 4-5 months) has to challenge demand and pricing power for domestic intermodal, especially in shorter lengths of haul,” said Avondale partners.