DC Velocity - November 2016

sure would have been less painful” had Robinson not
pursued this strategy, said John G. Larkin, analyst for Stifel
Financial Corp., an investment firm. Larkin said Robinson
believes that “now is the time to capture share when others
may be hiding under their desk.”
A continued sluggish macro environment, combined
with Robinson’s ongoing share-taking efforts, is likely
to keep its truckload margins under pressure into 2017,
according to Benjamin J. Hartford, analyst for Robert W.
Baird and Co. Inc., an investment firm.

SHIPPERS STILL IN DRIVER’S SEAT

No matter where one looks, the picture is of user-friendly pricing. A monthly index of per-mile truckload linehaul rates declined in September by 3. 5 percent year over year, making it seven consecutive months of declines, according to a late October report from audit and payment firm Cass Information Systems Inc. and investment firm Avondale Partners LLC. Avondale, which analyzes data from freight bills audited and paid by Cass, forecast that rates will rise no more than 1 percent through mid-2017 and could fall by as much as 3 percent until then. The familiar culprit: sluggish demand—save for e-commerce—combined with excess truck capacity.

A separate monthly index from Cass that measures shipments and expenditures—the amount that was spent on freight services—also showed sluggishness. Shipments fell sequentially by 0.4 percent, while dropping 3. 1 percent year over year, the 19th consecutive month of year-over-year declines. Expenditures rose 5. 2 percent sequentially, while dropping 3. 8 percent year over year, Cass said.

The increase in sequential spending is due to higher diesel fuel prices, not firmer rates, Cass said. As evidence, Cass pointed to a monthly index of intermodal linehaul rates showing a 0.7-percent year-over-year decline in September. The index excludes the impact of diesel fuel prices and thus omits fuel surcharges from its measurements.

Consensus is building, however, that the third quarter may have been a cyclical trough, at least as far as truck pricing is concerned. An index of trucking conditions published by consultancy FTR increased in August over July, FTR said, hinting at firmer rates through 2017. However, the improvements are mostly coming from the supply side, with capacity being curtailed in response to sluggish freight demand, FTR said. The economy and freight markets are in a “slow growth phase with unclear direction,” characteristics typical of an economy nearing the end of a prolonged recovery cycle, it said.

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