Freight shipping demand showed resilience in the fourth quarter, as consumers opened their wallets wider and manufacturing activity picked up, pressing retailers to restock inventories.
Although many trucking companies reported a normal seasonal dip in volume after Thanksgiving, others said shipping levels were stronger than usual in December and in January.
That strength is evident in the fourth quarter tonnage and revenue reported by truckload and less-than-truckload carriers. Truckload carriers carefully matched capacity to demand and got better use of existing assets, while LTL truckers benefited from rising demand and tightening capacity.
Trucking companies are poised to exercise greater pricing power in 2011. Rate increases — even general rate increases that sometimes are dismissed as simple discounting mechanisms — stuck in the fourth quarter. LTL revenue per hundredweight was up across-the-board, even at carriers that reported negative numbers in the third quarter. Year-over-year increases in truckload revenue per truck weren’t as high as during the second quarter surge in inventory restocking, but still higher than late 2009.
Truckload capacity remained tight at the end of 2011, but the rate of contraction slowed last year at some larger truckload carriers. After cutting their tractor count 5.5 percent in 2009, five carriers tracked by The Journal of Commerce cut only 0.7 percent of their capacity in 2010. Since 2006, however, their capacity is down a cumulative 17 percent. That indicates much of the trimming was already done when freight levels increased in the second quarter, pushing up truck rates and yield.
Despite strong net orders for new Class 8 trucks, industry observers expect trucking companies to keep a lid on capacity in 2011. January heavy truck orders soared 320 percent year-over-year, according to ACT Research, but most of those orders represent replacement vehicles, what trucking executives call “refreshing the fleet.”
Carriers are shedding older equipment, reducing the average age of their fleets, choosing higher up front costs and equipment reliability over higher maintenance costs and an increased chance of breakdowns.
Shippers have little doubt rates will rise in 2011. In a Morgan Stanley survey, 79 percent of shippers said they expect truckload rates will rise in the next six months.
Similarly high percentages of shippers, 71 percent and 69 percent, also said national and regional LTL rates would increase in the first half of 2011.
Contact William B. Cassidy at firstname.lastname@example.org.