Chilly Thoughts About Truckload Capacity

By Mark Montague

“Wintry mix” is a weather term that describes a condition where it might be snowing, raining, and sleeting at the same time. All you know for sure is that whatever is falling from the sky, it’s going to be cold, wet, and add at least an hour to your commute.

Freight shippers experienced their own wintry mix during the first quarter of 2014.

A combination of harsh weather and uneven consumer demand made truckload prices and over-the-road capacity hard to maintain and treacherous to predict. At the same time, manufacturing activity picked up. The Institute for Supply Management’s index hit 53.2 in February, up 1.9 points from January and ahead of market expectations. New orders, which anticipate future activity, rose 3.3 points to 54.5.

DAT Solutions saw a 14.3% increase in spot market truckloads moved per day in February compared to January, and freight availability on our load boards continued to build on January’s numbers, achieving unprecedented levels in the middle of the first quarter, typically the quietest time of the year for freight transportation.

What can we learn from the past few months? And what do these conditions mean for trucking in the near future?

Capacity Is Tighter

This winter showed how tenuous capacity can be. As shippers work through a backlog of weather-delayed cargo, spot market freight availability on DAT load boards in February climbed 7.5% compared to January. Spot freight volumes surged 83% compared to February 2013, the highest year-over-year gain for any single month in the 18-year history of the DAT North American Freight Index. Meanwhile, the number of available dry vans posted shrank 7.4% during the first week of March. Demand helped push the national average spot market van rate up 8 cents to $2.07 a mile for the week ended March 8, the biggest increase in the average rate week-over-week since last June.

Intermodal Options

Harsh weather and constrained capacity may have accelerated shippers’ growing demand for rail intermodal services.

For the week ending March 8, U.S. railroads reported moving 274,480 carloads, down 1%, and 244,015 intermodal units, up 3.7%, compared with volumes from the same week last year, according to the Association of American Railroads. In February, intermodal volume grew for the 51st consecutive month, up 1.1% compared to February 2013.

Freight brokers and 3PLs are increasingly being asked by shippers to quote rail intermodal transportation, sometimes at the exclusion of truckload. Trucking companies have struggled with recruiting drivers for jobs that involved extended travel away from home. It’s a big factor behind the shift of long-haul freight from truck to rail. This creates more short-haul business for drayage companies, which have been able to expand and thrive.

That said, it’s evident that the largest truckload carriers are already involved in intermodal in a big way. Just visit an intermodal yard and note the familiar names on the sides of those 53-foot containers, double-stacked on flat cars: Swift, Schneider, and J.B. Hunt, as well as units from refrigerated carriers Marten Transport and Stevens Transport.

Looking Ahead

According to the latest monthly Global Port Tracker report released by the National Retail Federation and Hackett Associates, import volume at the nation’s major container ports was projected to increase 12.4% in March as retailers begin to stock up for the spring and summer seasons.

The big question is where will the capacity come from to move these goods. The largest carriers aren’t adding power units, just replacing older equipment. Small over-the-road fleets are mixing in longer-distance drayage operations, or focusing strategically on lanes and cargo types that don't lend themselves readily to intermodal. In intermodal-competitive lanes with commoditized cargo, however, all-truckload fleets are an endangered species needing to cut costs to the bone in order to remain profitable.

As we move deeper into spring, the weather is far less likely to put the kind of kinks in the supply chain that drive up demand and rates. But the challenges of tight capacity will remain.

Mark Montague is the industry freight analyst for DAT Solutions, which operates the DAT® Network of load boards. He has more than 30 years of experience analyzing rates and routing in the commercial transportation industry. He is based in Portland, Ore. For information, visit www.dat.com.