Leaders of some of the country’s largest carriers spent a good bit of their time at this week’s 25th Annual Stephens Investments Conference in Nashville answering the classic parent-on-a-road-trip question.
“Are we there yet?”
The severe freight recession that has caught off guard many an executive and forecaster looks set to continue a little while longer, leaders of FleetOwner 500: For-Hire carriers J.B. Hunt Transport Services Inc., Landstar System Inc., Schneider National Inc., and Werner Enterprises Inc. told attendees of the Stephens gathering.
On the supply side, some carriers are leaving the market, but the exodus hasn’t been large enough to make a clear difference yet. And in terms of demand from shippers, peak season has been a blip at best, and business from retailers appears unlikely to provide a late boost.
“There isn’t anything that looks like salvation there—certainly not from what we’ve seen in the underlying demand,” Werner Chief Commercial Officer Chris Callahan said.
“There’s no excitement out there, whether it’s the parcel carriers, the shippers,” Landstar CEO Jim Gattoni said of the asset-light carrier’s state of affairs. “We’re probably going to get through the year just chugging along at the pace we’re at, which is basically below normal seasonal trends.”
And yet: Like nearly every parent answering that dreaded “Are we there yet?” question, the executives also stressed a few reasons to be mildly optimistic for the first few weeks of 2024. Shelley Simpson, president of J.B. Hunt, said her team is hearing from clients that they don’t expect a significant downturn in the broader economy. And both she and Schneider CEO Mark Rourke said the inventory correction that has helped restrain shipper demand for much of 2023 appears to have run its course.
“So many of our customers, particularly in retail and consumer products, are much closer to where they need to be and want to be,” Rourke said. “Which I think ultimately becomes the catalyst and gets us back into a more normal replenishment cycle.”
If the coming year indeed is a “more normal” environment for carriers, look for carriers to begin clawing back some of the price concessions they’ve had to make in the past year and change. Simpson said the J.B. Hunt team is “not satisfied with our returns” and is starting to engage with customers about recovering some of the inflation the company has had to absorb in recent years.
“Now we’re getting down to timing” when it comes to having conversations about price hikes, she said.
At Landstar, which does most of its business in the spot market, Gattoni said agents are seeing the pandemic-driven trend of shorter-term mini-bids fading. Negotiations, he said, are again focused on 12-month contracts, and with the spot rate often substantially below contract prices, more shippers will shift back to the spot market, helping put a floor under those prices.
Werner’s Callahan told the Stephens conference that he’s mildly confident that the bid season now starting will show that prices bottomed in recent weeks.
“We can probably see [a market turn] from where we’re standing,” Callahan said. But, he added, “we’re going to have some stomach. We’re going to have to be disciplined.”