Trucking market acceleration still heading up

A large majority of freight transportation and logistics industry stakeholders, including shippers, motor carriers, 3PLs, brokers, and others, continue to marvel at the overall state of market conditions, especially in the trucking sector.

That comes with good reason, too, especially when considering that, in many ways, the confluence of factors contributing to the current market outlook paint a more than positive picture in various ways.

Some of these ways include a blend of key market indicators and trends, including: tight over-the-road capacity, carrier pricing power, and stable demand patterns.

These things are reflected in data from established freight-based data providers like FTR and Cass Information Services, whose recent monthly data reads continue to reinforce the current era of good times in the over-the-road sector, too.

FTR was direct, explaining that there is a prevailing feeling of optimism, especially among carriers, in the market in the form of the spot market approaching record level rates, an elevated state of freight demand, and decent economic momentum.

But it added that there is reason for caution, too, due in part to the ongoing driver shortage, which forces carriers to turn away loads, coupled with record levels of trucks and trailers ordered in the first quarter that could help to alleviate current capacity pressure. And FTR Chief Intelligence Officer Jonathan Starks noted that: “[t]his can be a challenging time for carriers as they try to balance the short-term and long-term needs of the business. This freight environment won’t stay around forever, and both carriers and shippers will be striving to balance those competing requirements.”

As for Cass, Donald Broughton, principal of Broughton Capital and author of the Cass Freight Index Report explained that both freight shipments and expenditures are displaying accelerating strength on top of increasingly difficult comparisons, adding that volume has continued to grow at such a pace that capacity in most modes has become extraordinarily tight. What’s more, he noted that pricing power has erupted in those modes to levels that spark overall inflationary concerns in the broader economy; however fear of long-term inflationary pressure is moderate given technology provides multiple ways to increase asset utilization and price discovery in all parts of the economy, especially in transportation.

Some high-profile transportation executives offered up their takes on current market conditions on various fronts.

“This is the strongest market I have seen in my 27-year career, especially with the market this strong this early in the year,” said Derek Leathers, president and CEO of Werner Enterprises.” So when you think about the strength of the market, you have to think about seasonality, with January through March usually being a slower period, and it has been anything but that this year. It really…started around mid-year last year and has just continued to build. We saw virtually no drop-off at all from the fourth quarter to the first quarter, with freight activity remaining strong through the year this far. We are very bullish on what we are seeing and very excited.”

As for things that are driving current market conditions, Leathers cited the combination of economic lift and a stronger economy with capacity still being constrained, both through the combination of ELD (electronic logging devices), and the general driver shortage, as well as inventory levels coming in lower than they have in recent years.

“These things have caused steady demand, which we have not seen in a long, long time,” he said.

On the pricing side, Leathers explained that across the industry, pricing in the first quarter increased annually roughly in the 8% range. While that is a large number, he said it essentially puts it back on par, or slightly ahead, of where pricing was back in 2013 and 2014.

“Carriers are getting back to where they were, with a little bit of progress,” he said. “That is evident when looking at the publicly traded truckload group, whose margins have only improved by 1-2% at a time when rates improved by 8%. That is because carriers need that equity to pay drivers, invest in fleets, and invest in infrastructure that supports our shippers.”  

On the less-than-truckload (LTL) side, Old Dominion Freight Line (ODFL) President and CEO Greg Gantt said that GDP growth is helping to lift market conditions, which has helped put ODFL in a better position to grow share and take capacity in a good, strong economy versus an average, or flattish, economy.

“A lot of that is based on price and what our competitors do,” he said. “We have been bullish on pricing and tried to stick to our principles. We have certainly been able to grow our share more in this good economy certainly than in a down economy.”