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Trucking on the sunny side of the street

June 27, 2013
Freight and rates trending up

Things are looking very upbeat for motor carriers on the road ahead. Given a bullish long-term forecast released yesterday by the American Trucking Assns. (ATA) trucking will see a substantial hike in freight volumes. What’s more—and more immediately--  per a “takeaway” issued after a conference call hosted by the Stifel Transportation & Logistics Research, larger truckload carriers are forecast to secure rate increases that outrun the rate of cost increases.

The new edition of ATA’s U.S. Freight Forecast to 2024 projects an overall increase in freight volumes for all modes of over 20% -- and an increase in the amount of that freight moved by trucks.

“The trucking industry continues to dominate the freight transportation industry in terms of both tonnage and revenue,” pointed out said ATA chief economist Bob Costello. He noted that the Forecast projects trucking’s share of tonnage will rise from 68.5% in 2012 to 70.8% by 2024.

According to ATA, over that same time frame, the Forecast calculates that: 

  • Overall freight revenue will grow by 63.6% to $1.3 trillion annually in 2024; and trucking will see its share of those revenues rise to 81% from 80.7% in 2012.
  • Truckload volumes will grow 3.2% through 2018 and 1.1% annually between 2019 and 2024. Less-than-truckload volume should grow 3.5% annually through 2018 and by 2.4% until 2024.
  •  Intermodal rail will continue to be the fastest growing freight mode, growing an average of 5.1% a year until 2018 then slowing moderately to 4.8% annual through 2024.
  • Other modes of transportation, including air freight, waterborne transportation and pipelines will see moderate volume and revenue growth. 
  • Anemic growth for rail carloads of just 1.5% through 2018 and 0.4% from 2019 through 2024 contributing to a decline in market share to 14.2% from 14.8% in 2011.

Focused on near-term conditions affecting truckload carriers, the recent Stifel-hosted conference call featured Richard Mikes, a managing partner of the Transport Capital Partners (TCP) consulting firm, noted John G. Larkin, Stifel managing director.

According to Larkin, the investment conclusions drawn from the call rest on how “flattish demand and flattish supply” are characterizing the current environment. As a result, he said truckload “appears to be right on the cusp of a capacity shortfall.

“Any one of a number of factors could push up demand (e.g., pent-up demand from the delayed arrival of spring this year, the acceleration of the rate of new home construction, the Hurricane Sandy rebuilding effort, etc.) or push down supply (e.g., new productivity reducing federally mandated safety rules, the ever-worsening driver recruiting and retention battle, the failure of small/disadvantaged carriers, etc.) thereby tightening supply and demand even if the economy continues to grow only at a modest 1.5% to 2.0% GDP growth rate or better,” he explained

“With tightening supply and demand, the potential for improved rate increases improves and we think that rate increases will then once again outstrip the rate of cost increases, especially for large, purchasing advantaged truckload carriers,” Larkin added.

Other key findings from the call included that 54% of truckload carriers “still believe that [freight] volumes will grow over the coming 12 months,” that capacity additions to fleets will be “few and far between,” and that “carriers seem to be weaning themselves off brokers, especially the larger carriers.”

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