Domestic truck volumes in North America are on a different course than U.S.-bound containerized ocean freight, rising faster year-over-year and showing surprising strength in the teeth of increasingly dire forecasts for the economic recovery.
Some of the largest U.S. truckload carriers — Swift Transportation, Werner Enterprises and Landstar System — saw freight volume increase year-over-year in the third quarter, especially in late August and September, indicating trucking companies and their customers will see some semblance of a peak shipping season.
Swift increased loaded miles 2.9 percent in the third quarter year-over-year, while Landstar said its load volume for the quarter increased 6 percent from a year earlier.
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“In the latter part of August and throughout September, we experienced seasonal strengthening of demand,” Werner said. By the end of the third quarter, “In the aggregate … our daily morning ratio of loads to trucks in our one-way truckload network was nearly balanced.”
“October has been up slightly on a year-over-year basis, and we anticipate volumes increasing from here through the first half of December,” said Richard Stocking, president and chief operating officer of Swift Transportation, the largest U.S. truckload carrier. “We expect there will not be a major ‘peak’ this season but a gradual improvement in volume throughout the fourth quarter.”
That expectation contrasts with The Global Port Tracker, the monthly forecast for containerized imports published by Hackett Associates and the National Retail Federation. The October Port Tracker slashed projections for year-over-year growth in containerized imports this fall to 2.7 percent in September and 2.6 percent in October, from previous forecasts of 11.8 and 9.5 percent.
If Stocking’s confidence in truck freight volumes seems divorced from the decline in containerized imports at the largest U.S. ports, there’s a reason. “Only a small portion of the freight that we haul at Swift passes through the ports of Los Angeles and Long Beach,” he told analysts during an Oct. 21 earnings conference call.
The growth reported by Swift and other truckers is showing up in freight indexes. The seasonally adjusted American Trucking Associations For-Hire Truck Tonnage Index increased 1.6 percent in September from August and 5.9 percent year-over-year. The truck tonnage index fell 0.5 percent in August from July, and increased 4.9 percent from August 2010.
“Truck tonnage isn’t showing signs that we are in a recession,” said Bob Costello, the ATA’s chief economist. “Tonnage is suggesting that we are in a weak growth period for the economy, but not a recession.”
Where is all the truck freight coming from? Despite the importance of imports, much of it is still made, sourced and shipped in the U.S., whether from suppliers to manufacturers or from manufacturers to distribution centers, retail outlets and end customers.
“Manufacturing is still the primary driver” for trucking, said Richard Mikes, a partner with Transport Capital Partners, which monitors carrier business expectations. “It’s inbound raw materials and outbound finished materials.”
That includes increased U.S. exports and surface trade with Canada and Mexico, the value of which was up 17 percent year-to-date as of July.
And U.S. factory output is growing, albeit at a slower pace than last year, the Manufacturers Alliance/MAPI said in its latest quarterly survey. The MAPI composite index for September slipped to 67 from 68 in June, down from its June 2010 peak of 81. But it has been above 50, the level that separates contraction from expansion, for eight consecutive quarters. That factory output helps sustain truckload and less-than-truckload carriers alike. In terms of volume, “We’re 40 to 45 percent industrial products coming straight from manufacturers,” said David S. Congdon, president and CEO of Old Dominion Freight Line. Retail goods “are in the 15 to 20 percent range for us.”
Landstar System, the nation’s sixth-largest truckload carrier, saw freight demand rise across a range of industries in the third quarter, filling trailers well into October. “Growth on the (dry) van side is spread among all of our basic customers. There’s not one segment that jumps out,” Vice President Patrick O’Malley said.
The Jacksonville, Fla.-based company increased net profit 38.5 percent to $30.2 million on a 9.8 percent increase in revenue to $684 million in the third quarter. Total load volume, excluding substitute LTL line-haul business, increased 6 percent year-over-year.
“The growth rate in the number of loads hauled increased each month compared to the corresponding prior-year month as we moved through the quarter,” said Henry H. Gerkens, chairman, president and CEO.
Truckload volume in July and August increased 5 percent from a year earlier and jumped 9 percent in September, another sign pointing to a potential peak.
“The load volume increase in the first several weeks of the fourth quarter has been similar to the increase in September over the same month in the prior year,” Gerkens said in an Oct. 24 conference call with analysts. “As talk of an economic slowdown continues to intensify, Landstar continues to outperform.”
Phoenix-based Swift increased total revenue 13.9 percent to $863.8 million in the third quarter, reporting a $30.9 million net profit. Retail business helped raise the company’s bottom line, as it implemented a distribution agreement with Wal-Mart Stores. “From a customer segment perspective, the retail and discount retail groups have been consistently strong,” Stocking said. “Consumer products and food and beverage segments are also showing favorable trends.”