Trucking boom stalls as freight demand slows
Strong freight demand that has generated windfall profits for trucking companies during the pandemic appears to be fading, as inflation and weakening consumer sentiment slow a rush to restock inventory that has overwhelmed shipping networks. distribution.
Rates in the trucking spot market are falling and analysts have begun to downgrade companies in the sector as truckers prepare to report their first quarter results in a market that signals growing economic uncertainty.
The Cass Freight Index’s measure of domestic shipping demand edged up 0.6% in March from the previous month, an unusual slowdown in growth at the end of the quarter. Freight payment company Cass Information Systems Inc.
said in an analysis of its closely watched index that the freight market is clearly slowing.
At the same time, freight rates appear to be receding from recent all-time highs. Prices for last-minute spot loads in the full-truckload market, which represent a fraction of the market but tend to dominate contract rate trends, decline as transport demand approaches equilibrium with the available capacity of trucks. According to Bank of America, spot rates for full dry van loads, excluding fuel surcharges, have fallen 37% since December and 27% last month. Corp.
“I think it’s fair to say that the days of expected rate increases are pretty much over,” said Avery Vise, trucking analyst at FTR Transportation Intelligence. “It’s a question of how quickly things will normalize. The idea that you can just print money is over.
Bank of America’s measure of trucking capacity available to shippers jumped last week to its highest level since June 2020, while its measure of shippers’ outlook for freight rates fell sharply to the lowest level. since July 2020.
JB Hunt Transportation Services based in Lowell, Ark. Inc.,
a gauge of the U.S. freight market, will kick off sector earnings next week with its first report since the carrier, which offers a range of full truckloads, dedicated shipping services and intermodal operations, reported a net profit of $760.8 million in 2021, including $242.2 million in profits during a booming fourth quarter.
The nation’s largest truckload carrier, Knight-Swift Transportation Holdings Inc.,
which reports earnings on April 20, saw its revenue soar 28.3% last year to nearly $6 billion, including a 42% increase in revenue in the fourth quarter that drove a profit net of $254.6 million.
Profits have capped an increase in trucker earnings during the pandemic as a surge in consumer demand and a rush by retailers to restock shelves at depleted stores has jammed freight networks and sent prices soaring.
Now some shippers who signed expensive contracts as they rushed for scarce capacity are putting those deals aside to seek lower rates in a changing market, said Jeff Tucker, managing director of Haddonfield, NJ, broker Tucker Company Worldwide Inc.
Transportation for larger trucking operators remains in high demand, but “is it going to be as exciting as the past two years going forward?” Maybe not,” Mr. Tucker said.
John Luciani, chief operating officer at A. Duie Pyle, a private LTL carrier, said inflation is reducing the consumer trade that fuels much of trucking demand. The West Chester, Pa.-based carrier’s first quarter was “dull” compared to last year’s robust growth, it said, with volumes growing in single digits year-on-year. the other rather than the double-digit rate expected by the company.
Freight transportation inventories have retreated as signs of a slowdown emerge.
The Dow Jones Transportation Average, which tracks 20 major U.S. companies, including trucking giants JB Hunt and Ryder System Inc.,
is down about 11% from the March 29 peak, compared to a 4% decline in the S&P 500 over the same period.
Bank of America analysts recently downgraded transportation stocks, including truckers Werner Enterprises Inc.,
Schneider National Inc.,
TFI International Inc.
and ArcBest Corp.
citing “deteriorating demand prospects and rapidly falling freight rates”.
Jason Seidl, transportation analyst at investment bank Cowen Inc.,
said headwinds from the impact of inflation and the Russian-Ukrainian war will present challenges for carriers after a period of strong growth. “I think the general tone of earnings coming on the trucking side is going to be a heavy dose of reality from last month,” Seidl said.
Write to Lydia O’Neal at [email protected]
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