Broughton and Cass data points to strong end to 2018 for truckload and intermodal rates

Pricing for both truckload and intermodal freight movements saw another strong month in December to finish 2018, 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, increased 7.2% annually to 144.2 (January 2005=100) for an all-time high, marking 2018 as “the strongest year of realized pricing for Truckload since deregulation (Staggers Act of 1980),” according to Cass and Broughton. The previous all-time monthly record was October’s 143.4.

The report stated that the 7.2% increase was very impressive, given the increasingly tougher comparisons and the exclusion of fuel surcharge.

“We expect continued nominal strength in the coming months, but slightly lower percentage increases, as comparisons grow increasingly tough in coming months,” wrote Broughton Capital Founder Donald Broughton in the report. “Our realized pricing forecast for 2019 is now 2% to 5%.”

Broughton also noted that the realized pricing forecast for 2018 of 6% to 12% was achieved, with the Cass TL Linehaul Index in total for 2018 up 8.4% annually over 2017.

Other factors cited by Broughton that are driving truckload pricing strength include:

• continued growth in the industrial economy, paced by the recent decline in WTI crude prices, which are less than $50 per barrel;
• an acceleration in the consumer economy, which is growing at the fastest pace since the 2008-2009 recession;
• the 2017 ELD rule change reduced capacity, but the visibility of equipment is now being used to help offset the initial reduction in capacity; and
• capacity additions that have come in the form of lower unseated truck counts as driver pay has increased, better visibility of small fleet equipment via ELD, and learned methods and the acquired ability to recover lost ELD implementation

On the intermodal side, the report said that intermodal pricing saw an 8.6% annual gain in December, with the index up to 145.8, which is slightly below the all-time high of 147.3 set last October.

What’s more, December’s increase represents the 27th consecutive month of increases, with the three-month moving average through December at 10%.

“Tight truckload capacity and higher diesel prices were creating incremental demand and pricing power for domestic intermodal through much of 2018,” wrote Broughton. “However, with the recent decline in WTI crude from over $70 a barrel to under $50 a barrel, we are now expecting the price of fuel’s positive influence on the demand and pricing power for intermodal services to decrease in coming months.”

Other factors driving intermodal gains identified by Broughton included pricing still catching a tailwind from truckload, as historically there has been a high degree of correlation between truckload and base intermodal pricing, as intermodal uses the price of the over-the-road competing service as an ‘umbrella’ under which it can raise price and still retain or gain volume. 

And tougher comparisons are also on the horizon, too.

“Pricing comparisons are getting tougher as pricing really began to accelerate at this point last year,” he wrote. “Nevertheless, we expect the nominal value of our index to hold steady, unless the price of diesel declines even more dramatically.”