Cass report shows gains in February, with activity expected to heat up in March and April

Even with the myriad challenges that stemmed from the West Coast port labor disruption, the most recent edition of the Cass Freight Index Report from Cass Information Systems found that both freight shipments and expenditures both showed annual and sequential growth in February.

Many freight transportation and logistics executives and analysts consider the Cass Freight Index to be the most accurate barometer of freight volumes and market conditions, with many analysts noting that the Cass Freight Index sometimes leads the American Trucking Associations (ATA) tonnage index at turning points, which lends to the value of the Cass Freight Index.

Cass said that the problems caused by the West Coast port labor issues served as a driver for an economic slowdown for much of the first quarter, with the expectation that when the Pacific Maritime Association and International Longshore & Warehouse Union’s new contract is ratified, it “will open the floodgates to moving the backlogged freight,” with most industry estimates indicating that will take two-to-three months. Cass added that this situation will lead to “capacity and congestion [becoming] the industry’s buzzwords.”

February freight shipments—at 1.083—were up 0.9 percent annually and up 5.5 percent compared to January. Shipments remained above the 1.0 mark for the 54th consecutive month. Contributing to the shipments were cold temperatures and snow in February that led to higher shipment levels of heating oil and coal and sand, coupled with increases in grain shipments for the first two months of the year. And Cass said that rail intermodal traffic was affected by containers backed up out West, driving a 7.6 percent February decrease, while East Coast ports reaped the benefits of shipper contingency plans, with record January container loadings although there has not been a material shift to other ports. Going forward, with the labor dispute largely settled, Cass said it expects March and April shipment levels to head up. 

Expenditures––at 2.434 in February––were up 4.3 percent annually and up 0.6 percent compared to January. This halts a three-month stretch of declines, and with “widespread rate increase” not yet taken hold and spot rates having been flat or down in February, Cass said that the gains in February are due mainly to gains in freight shipments, while adding that rates are expected to head up in March as rails and truckers “deal with the Herculean task of transporting goods from the West Coast.”

In the report, Rosalyn Wilson, senior business analyst with Parsons, and author of the annual CSCMP State of Logistics report and contributor to the Cass report, wrote that the West Coast port labor situation will cost retailers up to $7 billion in increased carrying costs and lost sales.

“Much of the undelivered freight will be discounted immediately upon receipt because it is no longer in season, which will contribute to mounting inventories,” she wrote. “New orders and production are still strong, as is consumer confidence, so we should expect this slowdown [for the beginning of 2015] to be a temporary blip.

Shippers and carriers maintain that while the next few months will be atypical in terms of dealing with and moving the backlog caused by the West Coast ports situation, things should be closer to normal by the end of May, assuming that service levels are steady and capacity levels are sufficient.

“We believe the poor fluidity at the West Coast ports negatively impacted freight volumes YTD, though we expect volumes to fare better in coming months as the backlog of cargo at the West Coast ports is cleared and the facilities return to near-normal operations in the next couple months,” wrote Rob Samon, Deutsche Bank analyst, in a research note. “Despite West Coast port congestion and a late start to produce seasons, the trucking supply/demand dynamic remains favorable and carriers are garnering solid rate (revenue/loaded mile, net of fuel) increases.”