The healthy outlook for the TL market – based in no small part on a big freight tonnage boost at the close of 2011 – is being tempered by the ongoing increase in diesel fuel prices, according to analysis by Wall Street firm Jefferies & Co.
Jefferies’ transportation analyst Peter Nesvold noted that TL loads surged 10.7% in December on the strength of chemical shipments and demand for flatbed capacity. He also noted that data collected by the American Trucking Assns. (ATA) indicated that for all of 2011, tonnage zoomed up 5.9% over 2010 – the largest single annual increase since 1998.
On top of that tonnage increase, TL pricing remained firm at the close of 2011, Nesvold said, with revenue per mile (net of fuel) up a solid 5.3% year-over-year (yoy) in December, matching November’s gain of the same magnitude.
However, in the short-haul market (less than 500 mi.) pricing deteriorated, contracting 2.1% yoy in December after falling 0.7% yoy in November. Yet dry van pricing overall increased 6.8% yoy after surging 7.5% yoy in November, although Nesvold stressed that his sense is that this strength in pricing was largely concentrated in the medium-haul segment of the market.
According to the ATA data, TL pricing grew 5.8% in 2011 vs. 2010, accelerating from 2010’s 4.5% yoy growth versus 2009.
The major concern for trucking now, however, is the pace of fuel price increases. According to the Energy Information Administration (EIA), U.S. diesel fuel prices increased nearly nine cents a gallon this week compared to the week of Feb. 6, climbing to a national average of $3.943/gal. from $3.856 per/gal. As of now, diesel fuel prices are nearly 41 cents higher per gallon compared to the same week in 2011, the agency noted.
“The weekly diesel consumption data that we track continues to deteriorate,” Nesvold noted. “Home heating oil gets into this data and so the unseasonably warm winter undoubtedly is skewing the results negatively to some degree. Nonetheless, Northeast temperatures have moderated in recent weeks, while diesel consumption continues to decline yoy. While we have not seen confirmation of this deterioration in other data, our view is that this warrants additional caution and selectivity within the transportation space.”
Utilization is another big worry, added Nesvold. While average miles per truck in December inched up 0.8% from the same month in 2010, fleet utilization has trailed year-earlier levels in five of the last seven months.
