Freight volumes in February continued the modest growth trend seen in January, and truckload carriers are poised to begin capturing rate improvements, according to analyst firm Robert W. Baird and Co.
While the company’s Baird Freight Index showed slower in growth in February compared to January, “February results [were] likely impacted by weather, but the general supply/demand trends continue to improve,” according to the company’s most recent report on domestic freight trends.
With truck sales below normal replacement levels for three consecutive years, reduced capacity among truckload carriers has combined with the modest freight improvement to bring supply and demand in that segment near “equilibrium,” the report said. “As 2010 demand grows and capacity additions remain weak, we believe the truckload sector will see pricing growth,” it said.
Indications that spot market rates are already improving is “a positive early indicator for contractual rate improvement as cheaper transportation procurement options become limited,” Baird said. Little additional TL capacity is expected in 2010 “as improved carrier discipline, tight credit conditions, and 2010 engine durability and cost concerns,” are expected to dampen new truck sales.
On the LTL side, “volume and pricing trends, though remaining weak, appear to be finding a bottom,” according to the March report. YRC’s recent capital restructuring should allow LTL’s largest carrier “to remain a going concern through 2010,” removing some aggressive pricing by competitors attempting to gain market share in anticipation of a YRC failure, the analysis reported.
However, Baird’s LTL outlook for 2010 is that excess capacity in that segment will remain at 15% to 20% and “pricing will remain pressured absent industry consolidation and a strong recovery.”
