Truckload and intermodal rates remain largely unchanged in September, says Cass and Avondale report

Pricing on the truckload and intermodal fronts was largely flat on an annual basis, according to the September 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 $20 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.

September truckload rates were up 0.5 percent compared to September 2011, according to the Cass Truckload Linehaul Index. This was below the 1 percent annual increase in August and the report noted it was flat sequentially for the second straight month, a period which typically shows strong seasonal activity.

It also speaks to the sluggish pace of economic recovery, with manufacturing output down in three of the last four months, lower GDP forecasts, and flat retail sales. What’s more, annual truckload rates were at 2.2 percent and 3.9 percent in July and June, respectively.

Avondale Partners analyst Donald Broughton wrote in a research note that capacity remains constrained due to a variety of factors, including CSA, HOS, EOBRs, tight financing, higher equipment costs, strategic acquisitions, coupled with the fact that “there are not enough trucking companies failing to support stronger pricing growth, especially in the face of slackening demand.”

He added that his firm originally thought 2012 was set up to be a strong year for freight with most economic indicators earlier in the year—especially in the U.S.—showing some of the strongest readings since the economic recovery took hold, but since that time the global economy has weakened, coupled with what he said was continued tax and regulatory uncertainty in the U.S. that have lowered economic output.

Avondale expects truck tonnage to grow 2.6 percent and decline 1.6 percent in the third and fourth quarters, respectively, and it expects full-year pricing gains for 2012 to be in the 3-to-5 percent range.

When the Truckload Line haul Index was first introduced in November 2011, 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 Atta’s 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 $20 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.”

On the intermodal side, the report said intermodal base pricing—not including fuel surcharge—was flat annually in September and was up 1.1 percent from August to September.

Broughton said that while intermodal pricing has remained flat annually over the last two months, the decent sequential improvement, which he described as seasonally normal, is primarily a result of diesel prices being mostly up in recent weeks, while freight has been tepid.

“We believe that the level of tightness in truckload capacity combined with the continued capacity expansion/service improvement by both the rails and intermodal marketing companies (most notably in the East) as well as a slowing overall freight environment may lead to intermodal volumes remaining solid while pricing softens” said Broughton. “Although we do not believe intermodal marketing companies/rails and truckload carriers are engaging in a ‘price war’, we do understand that in a slower macro, shippers are more likely to choose the more economical alternative and/or push back on rate increases.”