Cass and Avondale data points to truckload and intermodal rate hikes in December

Truckload and intermodal pricing was up on an annual basis, according to the December edition of the Truckload and Intermodal Cost Indexes from Cass Information Systems and Avondale Partners.

This pricing data is part of the Cass Truckload Linehaul Index and the Cass Intermodal Linehaul Index, which were both created in late 2011. The indices are based on actual freight invoices paid on behalf of Cass clients, which accounts for more than $23 billion annually and uses 2005 as its base month.

Cass and Avondale said the truckload index “isolates” the linehaul component of full truckload costs from other components such as fuel and accessorials, which in turn provides an accurate reflection of trends in baseline truckload prices.

December truckload rates, which measures truckload linehaul rates paid during the month, were up 7.4 percent annually.

The report’s authors explained that with demand increasing and capacity remaining extraordinarily tight, contract rates are expected to increase and drive the index up.

“We would point out that contract pricing (which applies to 95+% of the public carriers’ freight) has been accelerating after a drawn-out bid season,” Avondale Partners wrote in the report. “As a result, although spot market pricing has decelerated somewhat (it remains strong), we are not surprised to see our Index continue to post mid-to-high single digit gains and we expect this to continue into 1Q’15. We are raising our contract TL pricing prediction to an increase of 4% to 9% in 2015, depending on how much [of a rate increase] each carrier was successful in obtaining in 2014 and when those rate increases were achieved.”

As previously reported, the fact that capacity remains tight is not a huge surprise, given the myriad challenges motor carriers are facing, including: the economy; driver hiring, availability, training and retention; demand; and the increasing amount of regulations the industry faces, among others.

The Cass and Avondale report noted that intermodal rates were up 1.5 percent annually in December. In this report, the metric used for intermodal is total intermodal per-mile costs. The report observed that intermodal rates are expected to drop in 2015, due in large part to the “dramatic drop” in diesel prices, coupled with an even more dramatic decline in oil prices, which, in turn, translates into shippers moving intermodal loads back to truckload.

“Our ‘all-in’ index has already started to decelerate from the solid ~3% pace the index had been posting for much of second half of 2014,” wrote Avondale. “We concede that the extent to which loads can be shifted from domestic intermodal back to over-the-road truck is dependent on trucking capacity, but the >$0.15 a mile decline in fuel surcharges collected by truckers in the last 6 months (with most of that decline coming in the most recent month) has to challenge demand and pricing power for domestic intermodal.”

When the Truckload Line haul Index was first introduced in November 2011, Avondale Partners analyst Donald Broughton explained that the objective of this index was to deliver a more timely barometer of truckload pricing than the one provided by the American Trucking Associations (ATA), which does not fully “remove the effect of diesel in its revenue per mile series,” adding that the ATA’  revenue per mile series—on both a seasonally-adjusted or non-seasonally adjusted basis—tracks more closely with Cass’ Truckload Total Cost (per mile) Index, which is more sensitive to changes in diesel than with Cass’ Truckload Line haul (per mile) Index.

He added that whereas the ATA reports truckload pricing roughly 45 days after the end of the month, Cass data is ready to be analyzed three-to-five days after the end of the month.

“The fact that Cass processes [$23] billion in freight bills annually is significant,” Broughton told LM in an interview. “The biggest concern initially when putting this together was protecting confidential information of Cass’ customers, as many of them compete directly with each other and do not want each other to have access to their respective freight spend. Once that was taken care of it is a matter of going through the data and delineating it to strip out accessorial and fuel-related charges.”