November truckload and intermodal pricing see gains in November, says Cass and Broughton report

Pricing for both truckload and intermodal freight movements saw another strong month in November, according to data in the most recent editions of the Truckload Linehaul Index and Intermodal Index from Cass Information Systems and Broughton Capital.

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.

Truckload rates, which measure linehaul rates, headed up 8.2% annually to 141.6 in November, which is slightly below October’s 143.4, which set a new all-time record on a nominal basis.

What’s more, this annual gain continues a run of annual gains that began in November 2017. And even though November was lower than October, the report explained that November is still “very impressive given the tougher comparisons” and that it expects continued nominal strength in the coming months, but with slightly lower percentage increases as comparisons grow increasingly tough in the coming months.

And with 11 of the 12 months in 2018 reported, Cass and Broughton said its realized contract pricing forecasts for 2018 in the 6%-to-12% range will more than likely come to fruition.

“We believe this is the strongest normalized percentage level of TL pricing achieved since deregulation,” wrote Broughton. 

The report cited various factors for the ongoing strength in truckload pricing, including: the recent decline in the price of WTI crude oil, coupled with expected continued growth in the industrial economy; an acceleration in the consumer economy; the visibility of equipment (especially dry van and reefers) is now being used to help offset the initial reduction in capacity stemming from the December 2017 ELD federal mandate; and capacity additions, which have come in the form of lower unseated truck counts, as driver pay has steadily increased, lower average age of trucks, and better visibility of small fleet equipment via ELD, among others.

On the intermodal side, the report said that intermodal pricing headed up 10.6% annually in November to 144.4, which was down slightly from October’s all-time high of 147.3. This marks the 26th consecutive month of annual increases, with the three-month moving average at 10.5%.

While tight truckload capacity and high diesel prices had created incremental domestic intermodal pricing power, the report said that with the recent decline in WTI crude from more than $70 a barrel to current levels now under $55, it is now expecting the price of fuel’s positive influence on demand and pricing power for intermodal services to decrease in the coming months.

Another key driver for strong intermodal pricing cited in the report was that “volume is choosing domestic intermodal versus over-the-road.” The reason for this is not due to high diesel prices, but, instead, because of available capacity.

“Truckload capacity is so tight that shippers are choosing intermodal ‘just to get the freight moved,’” Broughton wrote.

What’s more,  the report said that intermodal pricing is catching a tailwind from truckload, explaining there has historically been a high degree of correlation between truckload and base intermodal pricing, and with the recent acceleration in truckload rates, intermodal rates have more “room to run” to continue posting annual percentage gains in the coming months, with the caveat that should diesel prices continue to slip nominal rates could be under pressure.