Subscribe to our free, weekly email newsletter!


Transport Capital Partners survey calls for rates and volumes to expand in tandem

By Jeff Berman, Group News Editor
March 31, 2014

No matter how deep or shallow you read into it, data more often than not does a pretty good job of putting things into perspective, especially in terms of market conditions.

A recent survey from Transport Capital Partners (TCP) explained the current state of various motor carrier market fundamentals in terms of volume and rates, to give shippers an up-to-date snapshot on things as the calendar turns to April.

Given the current state of tight trucking capacity, it is not a huge surprise to see that TCP’s first quarter survey is positive overall due to many factors, including:
-continued optimism for volume growth for the last six quarters;
-74 percent of surveyed carriers citing an expectation of volume growth, with volume expectations up 74 percent from the fourth quarter of 2013 from 44 percent to 77 percent, and volume expectations up 48 percent on an annual basis; and
-continued expectations among carriers expecting rate increases

Regarding rate increases, TCP explained that based on its findings rate expectations are on the same terrain as volume expectations, noting that four out of five carriers expect rates to head up over the next year, which is 62 percent better than the fourth quarter of 2013.

And the firm also said that spot market rages (as also reported by LM) has seen gains over the last two months, due in part to tight capacity and most annual and longer-term agreements being negotiated during that time.

Due to these factors, TCP noted that “the first and second quarter will likely see mid-single digit increases rather than the low single digit growth earlier sentiment by carriers based on carrier comments.”

When based on carrier size, TCP’s findings showed some disparity in terms of how many carriers expect rate gains in the next 12 months. About 85 percent of large carriers (revenues over $25 million) expect rates to climb, whereas about 70 of smaller carriers (revenues under $25 million) felt the same way. When looking at average freight rates over the course of the last three months, roughly 45 percent of smaller carriers and 50 percent of larger carriers indicated rates increases, with a roughly 50-50 split among small and large carriers saying rates were the same, and a scant few on both sides pointing to rate increases.

In a recent interview with LM, TCP Partner Richard Mikes said that even with rates and tight capacity working largely in favor of carriers, increasing driver pay is something which has a causal effect on how carriers view the market.

“You can measure capacity by a number of things,” said Mikes, “but in a tight market if drivers are losing 5 percent of their time that is being conservative—and they then need to be paid 5 percent more. That is a real cost driver and carriers cannot simply hire 5 percent more drivers to drive the same truck. There is a real possibility that some portion of that some capital needs to be allocated to new trucks for future investment and growth. “

Carriers at the moment, explained Mikes, are of the mindset that current conditions really look good, but with the caveat that drivers and driver availability—and CSA and HOS—are the controllers of capacity in the trucking sector.

And with the increased pressure coming from government regulations, carriers really have no choice but to increase driver compensation, which will serve as a major catalyst for rate increases, he said.

With the new HOS rules only having been intact since January 1, Mikes said shippers have been receiving calls from carriers that previously were able to make previous delivery schedules on time and now they are either getting delayed or carriers are being forced to turn down the load.

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

Seasonally-adjusted (SA) for-hire truck tonnage in March was up 1.1 percent on the heels of a revised 2.8 percent (from 3.1 percent) February decline, with the SA index at 133.5 (2000=100). This is off 0.3 percent from the all-time high for the SA of 135.8 from January 2015 and is up 5 percent annually.

Intermodal volume was up 8.1 percent annually at 280,016 containers and trailers. This outpaced the week ending April 11 at 270,463 and the week ending April 4 at 271,127. AAR said this tally marks the second highest weekly output it has ever recorded as well as the first time container and trailer traffic was higher than carloads for a one-week period.

Ocean cargo carrier service reliability across the three core East-West trades hit a five-month peak in March with an aggregate on-time performance of 64 percent, according to Carrier Performance Insight, the online schedule reliability tool provided by Drewry Supply Chain Advisors.

The Airforwarders Association, which represents more than 360 companies that move air cargo through the supply chain, today applauded an agreement reached by Congressional leaders to advance legislation giving the President authority to conclude key global trade agreements.

Despite great opportunity for growth, the logistics market in Latin America is lagging behind other emerging markets thanks in part to its notoriety for corruption, violence, poor infrastructure and government bureaucracy.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA