Truckload and intermodal rates finish 2015 with declines, says Avondale and Cass data

Both truckload and intermodal pricing finished 2015 with lesser gains, according to the most recent edition of the Truckload and Intermodal Cost Indexes from Cass Information Systems and Avondale Partners, which was released last week.

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.

December truckload rates, which measure linehaul rates only, saw a 1.1 percent annual increase, following 1.6 percent and 1.9 percent gains in November and October, respectively.

This remains in range with Avondale’s 2016 truckload rate expectations of 1 percent to 3 percent increases, with the firm citing demand growing softer and capacity becoming more available as the drivers for the expected tempered rate increases.

Avondale added that contract pricing, which it said accounts for about 95 percent of public carriers freight, “has been accelerating after a drawn-out bid season last year,” while spot pricing is now in negative territory.

Other factors cited for lower pricing in the report include:
-the relaxation of the 34-hour restart rule
-several significant pay increases that have allowed carriers to decrease their unseated truck count materially and increases capacity; and
-a steep fall in rig count that has increased the available driver pool while decreasing the demand for industrial freight, among others.

While current pricing is fairly low annually, the report said that they follow strong pricing for the same period the prior year.

Many blamed the harsh winter last year for outsized pricing last winter, even though the tight capacity proved throughout the year to be real and systemic, not temporary and weather-driven. We are impressed with strength on top of strength.

What’s more, industry executives have said that with GDP currently under 2.5 percent rates are likely to remain lower than they would be if the economy was growing at a faster clip.

And were GDP to expand 3-3.5 percent, executives maintain there would be a legitimate over the road capacity crisis, whereas capacity is loose compared to where it was a year ago at this time.

December intermodal rates on an “all in basis” saw a 3.8 percent annual decline. This followed a 2.4 percent November decline, and 3.2 percent and 2.3 percent declines in October and September, respectively.

Looking at 2016, Avondale said that it expects intermodal rates to continue to fall, due to the “dramatic drop in diesel prices and even more dramatic drop in oil takes its toll on U.S. domestic demand.”

And it also pointed out that the intermodal index has slowed down from a pace of more than 3 percent as recently as the second half of 2014, while noting that the extent to which loads can be shifted from domestic intermodal back to over-the-road trucking is dependent on trucking capacity. On top of that it explained that the $0.21 per-mile decline in fuel surcharges collected by motor carriers over the last 18 months challenges demand and pricing power for domestic intermodal, specifically for short lengths of haul.