A 2.9% decline in February’s for-hire truck tonnage index compiled by the American Trucking Assns. (ATA) isn’t altering the freight forecast significantly for most industry analysts. However, some metrics buried within the overall ebb and flow of cargoes is making some of them wonder if more unevenness in freight volumes lies ahead for motor carriers.
“This decline is something that we expected, especially given what happened with the weather in February,” Eric Starks, president of research firm FTR Associates, told FleetOwner. “We also expect more ups and downs over the next several months as the disaster in Japan begins to create global supply chain issues.”
ATA chief economist Bob Costello echoed Starks’ view, pointing out that the large number of severe winter storms in February probably played a role in that tonnage decline. He added that the 2.9% decline in February’s tonnage index follows a revised 3.5% increase back in January.
Compared with the same month in 2010, tonnage climbed 4.2% in February this year, although this was smaller than January’s 7.6% year-over-year (YOY) increase.
Through the first two months of the year, tonnage is up 5.9% compared with the same two months last year, Costello noted.
“Tonnage is not going to increase every month and in general I’m very pleased with freight volumes early this year,” Costello he said in a statement. “I’m hearing a significant amount of positive news from fleets and that the largest concern continues to be the price of diesel fuel, not freight levels.”
FTR’s Starks also emphasized that fuel prices remain the biggest “wild card” in his firm’s freight forecast. “If we see another $20 spike in the price of oil it will materially impact the [economic] recovery,” he warned. “We’re not seeing true ‘supply-and-demand’ issues when it comes to oil, either. What we’re seeing is a ‘risk premium’ being added to oil prices to account for unrest in the Middle East and other areas.”
Thus it’s the size of any further “risk premium” per barrel of oil that remains the biggest risk to trucking’s health, Starks explained.
However, H. Peter Nesvold, equity analyst with investment firm Jeffries & Co., is becoming concerned about the sudden relative weakness in short-haul truckload pricing, which is generating uncertainty for his longer-term forecast for the TL (truckload) segment.
“Industry-wide pricing remains strong, although the short-haul segment of the industry seems to be struggling versus high-end expectations,” Nesvold said in a research brief. “January and February are typically not good predictors of full-year freight performance. However, we think trends in short-haul need to firm in March and April.”
Nesvold believes loads are actually a more important indicator of volumes for truckload carriers. The YOY growth in loads for large TLs (which post over $30 million in revenue) rebounded in January, increasing 4.7% YOY, although that strength was concentrated in bulk chemical shipments (up 18.7% YOY).
Conversely, dry van volumes continued to fall, contracting 4.7% YOY, even though TL pricing over all is holding firm. Yet though dry-van pricing continues to track at the high-end of Nesvold’s expectations, up 7.1% YOY in January, the short-haul portion of the segment is only seeing a fraction of those gains, advancing only 0.9% YOY in January.
There’s no consensus in the Jeffries brief as to why short-haul pricing is so sluggish—or why it’s contradicting what the firm sees occurring in the 500- to 1,000-mile longer-haul segments of the TL market
“The data relate to insignificant months seasonally, so it's too early to get the bears up,” Nesvold stressed. “However, it will be important for volumes and, to a lesser extent, pricing to improve as the year progresses in order to meet investor expectations.”
FTR’s Starks, however, believes truck tonnage overall is moving in the right direction, albeit slowly and in fits and starts. Therefore, he still paints a positive picture overall.
“We expected a certain amount of ‘choppiness’ to occur where trucking tonnage is concerned,” he stated. “We have never expected tonnage to increase upward in a sharp, smooth line.”