DC Velocity - February 2015

newsworthy

20 DC VELOCITY FEBRUARY 2015 www.dcvelocity.com The U.S. freight industry, coming off its best year since 2007, is poised to perform even better in 2015, a trend that bodes well for carriers but not for users facing higher rates and scarcer capacity especially in trucking services, according to the author of a monthly index that tracks shipment and spending activity.

Rosalyn Wilson, who writes the analysis for the index, which is published by payment and auditing firm Cass Information Systems, said in a report issued in mid-January that volumes and carrier revenues “will grow steadily” this year, leading to fatter margins for carriers whose profits have been squeezed in recent years by historically subpar demand and by escalating costs. Shippers, however, should brace themselves for continued rate increases as freight demand exceeds supply, particularly in trucking, Wilson said. Truck users will pay more for guaranteed capacity, and truck space may not be available at any price during the year’s peak shipping periods, she predicted.

While truck demand is up, it is still not back to levels recorded prior to 2006, when a prolonged freight recession began, she said. However, carrier costs are much higher today than they were back then. Truckers will act to rectify that imbalance through rate hikes. In turn, consumers will face higher prices for their goods as shippers pass on those rate increases, she added.

Wilson, who also writes the annual “State of Logistics Report,” said in an e-mail that she expects the 2015 report, which is scheduled to be released in June, to follow a similar narrative line. Wilson had forecast in the previous report that 2014 would be the freight sector’s best year in the past seven or eight.

The good news, overall, is that, after several years of dormancy, the industry began to re-invest heavily into improving its operations last year, Wilson said. The result, she said, is that the supply chain is poised to expand and that its nodes are adapting to dynamic situations “more rapidly than we have seen in a decade.” The railroad industry, which has been plagued by erratic service for more than a year due to bad weather, spikes in demand, and inadequate capacity on key traffic lanes, should improve its performance in 2015 as mul-tibillion dollar investments in equipment, infrastructure, and labor begin to have an impact, she said.

As for the December monthly data, shipment volumes measured by the Cass index fell 6. 3 percent in December from November levels, while shipper freight expenditures declined sequentially by 6. 7 percent. Those declines mirrored a slide in December retail sales, which led to a drop in demand, inventories, and the cost of moving and carrying goods, according to the index. Freight expenses also dropped in December due to the rapid and dramatic fall in fuel prices.

Despite the December declines, overall volumes and expenditures hit their highest year-end levels since 2007, according to data from the index. That period coincided with what many believed was the start of the Great Recession.

December 2014 volumes were 4 percent higher than in the same period in 2013, while expenditures were 3. 6 percent higher year over year, according to the report.

The monthly data are based on the $22 billion in annual freight payables that Cass processes on behalf of its clients.

Top analyst: Freight sector to gain
momentum in 2015

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