Truckload and intermodal pricing declines remain in effect for July, says Cass and Avondale report

The most recent edition of the Truckload and Intermodal Cost Indexes from Cass Information Systems and Avondale Partners, which were released last week, continues to reflect the ongoing stretch of pricing declines for both modes.

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.

Truckload rates, which measure linehaul rates only, dropped 1.6 percent annually in July, marking the fifth straight month of annual declines, following 1.8 percent, 0.6 percent, 2.3 percent, and 1.2 percent declines in March, April, and May, and June, respectively.

Among the reasons cited for the ongoing declines, which in turn have led to still-high capacity, include: driver pay increases, newer and more reliable trucks, over all fleet growth, and an easing of the 34-hour restart rule. 

This pricing forecast decline is consistent with what large carriers are saying about current market conditions.

In its second quarter earnings release, Werner Enterprises reported that the contractual rate market became increasingly challenging as the second quarter progressed.

“An excess supply of industry trucks relative to sluggish freight demand created a market in which customers began to push harder for contractual rate decreases, the company said. “During the recent contractual bid season, we chose to exit from certain contractual business that would have required significant contractual rate decreases for the next year, since we believe that this pricing is not sustainable and that freight market conditions will begin to show improvement during the next year. Based on the current rate and freight market, we believe it may be difficult to sustain rate per total mile on a year-over-year basis, or achieve increases, in the next few quarters.”

Former BB&T Capital Markets Analyst Thom Albrecht wrote in a recent research note that following a dismal period from January through May, there was an improved tone in June, which was followed by moderating demand in July. But to truly say that the market has indeed turned, he explained that both data and anecdotes need to improve in August and September, which, he described as two months that have disappointed every year since 2006, with the exception of 2014.

July intermodal rates on an “all in basis” were down 2.4 percent annually in July, falling for the 19th month in a row. This followed a 1.5 percent drop off in June.

The report indicated things will not change materially on the intermodal pricing front for the foreseeable future, explaining that as contract rates for trucking continue to lose strength and move further into negative territory, it implies even more weakness for intermodal pricing.