May truckload and intermodal rates both see declines, report Cass and Avondale data

Truckload and intermodal pricing both saw another month of declines in May, according to the most recent edition of the Truckload and Intermodal Cost Indexes from Cass Information Systems and Avondale Partners, which was released last week.

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.

May truckload rates, which measure linehaul rates only, saw a 1.2 percent annual decrease, following 0.6 percent and 2.3 percent declines in March and April, respectively.

As prices have fallen for three months straight, the report explained that “the domestic truckload market continues to face softer demand and excess capacity,” adding that driver pay increases, overall fleet growth, reduction in carrier bankruptcies, and an easing of the 34-hour restart rule are some of the main reasons for the sustained pricing declines.

What’s more, 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 to expand 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.

Stifel analyst John Larkin commented in a research note that freight volumes have been rather soft with little evidence of the normal seasonal uptick. And in addressing the pricing environment he explained that “[s]ome shippers continue to pound on rates/pricing. Some fear that we may be approaching the limit on how far down prices can be pushed without harming the supply of capacity from the smaller carriers.”

May intermodal rates on an “all in basis” dropped 2.0 percent annually, falling for the 17th month in a row, with Avondale saying it expects rates to continue declining for the remainder of 2016, due to the dramatic drop in diesel prices taking its toll on U.S. domestic demand.

Even with domestic container growth possibly growing in the mid-to-low single digits through 2016, the firm said it is dependent upon demand in longer lengths of haul growing fast enough to offset the loss of volume in shorter lengths of haul, especially in the East.

Data recently provided to LM by the Intermodal Association of North America (IANA) founds that domestic container volume for May was up 3 percent annually at 597,177 and on a year-to-date basis through May, they are up 4.6 percent at 2,969,293. 

While domestic container volumes continue to show growth despite an uneven economy, IANA President and CEO Joni Casey said imports and intermodal trailers are driving down volumes, with surplus inventories and over-the-road capacity being possible reasons.