Cass, Avondale report points to mixed truckload and intermodal rates for July

The most recent edition of the Truckload and Intermodal Cost Indexes from Cass Information Systems and Avondale Partners showed that truckload and intermodal rates for the month of July were mixed.

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.

July truckload rates headed up and were paced by higher contract rates filtering into the index, according to the report, with average truckload linehaul rates up 3.6 percent annually and 11 percent up over July 2013.

Avondale analysts said in the report that increases for all of 2015 are likely to be between 4 percent and 9 percent.

As for demand, they said that they expect to a “decline in industrial flows, especially those related to oil and gas exploration, to be more than offset by a stronger consumer backdrop,” as well as being “encouraged by the current growth streak in dry van loads, which are currently tracking toward mid-single digit growth for 2015, which would be the strongest percentage increase since 2010.”

Industry executives have said that with GDP currently under 2.5 percent rates are likely to remain lower than they would be if the economy was growing at a faster clip.

And were GDP expand to 3-3.5 percent, executives maintain there would be a legitimate over the road capacity crisis, whereas capacity is loose compared to where it was a year ago at this time.

Among the factors weighing into rate include carriers raising driver pay, which increases the cost of doing business, along with cost of equipment and insurance, as well as general business expenses going up, and demand, too.

July intermodal rates on an “all in” basis dropped 2.9 percent in July, with the report explaining the decrease is in response to falling demand for intermodal as low diesel prices have encouraged mode shifting to truckload. But the report cautioned that shippers’ ability to do this will remain limited by tight trucking demand.

“We have historically observed a high degree of correlation between truckload and intermodal pricing, and know that should truckload rates continue to accelerate in the coming months, intermodal rates would normally follow,” Avondale analysts commented. “That said, this is only true for the base rate and the dramatic drop in fuel surcharges for truckers has to put pressure on domestic intermodal rates, especially in shorter lengths of haul.”