US truckload activity still rising, but moderately: FourKites

US truckload activity still rising, but moderately: FourKites

US truckload volumes rose about 2 percent week over week in August, compared with a higher rate of growth in July, according to FourKites. Photo credit: Shutterstock.com.

US truckload freight volumes continue to grow, but not at the frenetic pace set in July, according to the latest truck activity data from FourKites. That’s a sign shippers are rebalancing supply chains that were severely disrupted in the first months of the COVID-19 pandemic, Glenn Koepke, FourKites’ vice president of network enablement, said in an interview.

Those supply chains may come under renewed strain this week as Hurricane Laura, now a category 4 hurricane, makes landfall along the Texas and Louisiana Gulf Coast Thursday. Hurricane Harvey caused supply chain disruption for weeks after leading to flooding in Houston in August 2017, contributing to a sharp contraction in truck capacity that fall.

Truckload volumes have been rising about 2 percent week over week in August, with some fluctuations, FourKites data show. In the week ended Aug. 26, US truckload volumes were up 1.03 percent from the previous week. In mid-July, however, FourKites said those volumes spiked 8 percent, thanks in large part to consumer retail and e-commerce demand.

“The market is changing every week, but from the demand side of the equation — i.e., shipper volumes — we’ve come back to normalcy,” Koepke told JOC.com Tuesday. “Supply chains are working as best as they can post-COVID.” What’s not yet clear is how well they’ll be working in October, or December, or whether truckload capacity will remain as tight this fall as it is now, he said.

“The questions carriers are asking now are: ‘How long will this [truckload] market remain tight?’ and ‘Who are my customers I need to satisfy?’” Koepke said. “Is this summer a blip in the radar or have we really shifted to a carrier market that could go on for a year or two? That’s something we can’t tell yet. Data will tell the story. We’ll see that very quickly in the next couple of months.”

Better forecasting means more access to capacity

The tightening of truckload capacity has affected shippers differently, he said; large shippers with consistent procurement and carrier management practices are having an easier time securing capacity. “Those who treated carriers fairly in recent years are being treated fairly back,” said Koepke. “They’ve hedged against the capacity constraints and pricing fluctuations.”

Better procurement and carrier management policies are the hedge, he said. “We see shippers giving better freight forecasts to their carriers to help them manage volume fluctuations. Volumes are changing every week, and it’s difficult to plan for them.” Shippers who give carriers better data on future volumes will be more likely to get future capacity, Koepke said.

FourKites collects and analyzes data from 6,000 motor carriers whose trucks it tracks on a daily basis. The Chicago-based technology company’s customers are shippers from multiple industries, including retail, food and beverage, manufacturing, oil and gas, and chemicals and plastics. As much as 80 to 90 percent of the volumes it tracks are contract volumes.

The market data published on its website “is an amalgamation of data from direct customers of ours,” Koepke said. “The majority of our customers are buying capacity via contract rates rather than spot markets.” That provides a slightly different perspective than spot market-based indices, which have shown much higher increases in volume and even tighter capacity.

The Cass Freight Shipments Index, which is weighted more toward truckload and less-than-truckload (LTL) contract freight, increased 4.8 percent sequentially in July from June, but was still down 13.1 percent from July 2019. The monthly index lags weekly data, such as that released by DAT Solutions, which DAT said shows “unprecedented” spot demand for August.

National average spot rates for van and refrigerated freight hit their highest points in nearly two years in the week that ended Aug. 16, according to DAT. The DAT average US dry-van spot rate was $2.19 per mile, up 16 cents from July. The average spot rate was higher on 55 of DAT’s top 100 van lanes by volume compared with the previous week, the load board operator said.

In its most recent data release, DAT noted that inbound spot volume loads have slowed in several warehouse fulfillment freight hubs, including Stockton and Ontario, California; Phoenix; Denver; Joliet, Illinois; Elizabeth, New Jersey; Allentown, Pennsylvania; Indianapolis; and Memphis. “This suggests certain retail inventories have been replenished,” DAT said.

FourKites sees a sign of improved shipper efficiency in substantial reductions in truck dwell time at shipper docks and warehouses. On Wednesday, truckload dwell time across the US was down 6.5 percent from the previous two-week rolling average, the company said. Dwell times were down in 31 of the 46 US states where FourKites had inbound trucking activity data.

“This tells us shippers are getting better at labor planning and at forecasting,” Koepke said. “They’re improving their ability to manage capacity constraints.”

An unbalanced market

Those constraints are real, Koepke said, and they’ve caused pricing power to shift to carriers after more than a year in shipper hands. It’s a market that’s fragmented, however, with exceptionally strong retail demand driven by replenishment after business shutdowns due to the COVID-19 pandemic and sales of physical goods outpacing industrial demand.

FourKites’ latest data show global retail demand for trucking services, including in the US and Europe, up 4.4 percent week over week as of Wednesday, while global manufacturing freight demand was down 0.7 percent. Seasonally adjusted, US retail sales rose 1.2 percent in July from June, and were 2.7 percent higher than in July 2019, according to the US Census Bureau.

Consumer spending increased much more slowly in July than in June, when it rose 8.4 percent, according to the Census Bureau. Unadjusted Census Bureau data, which may be a better barometer in a period of extreme non-seasonal volatility, show a 3.1 percent sequential monthly increase in retail sales in July and a 3.7 percent year-over-year increase.

“There’s a tremendous amount of imbalance [in demand], and that’s the wild card,” Jason Miller, associate professor of logistics at Michigan State University, told JOC.com. “Some sectors are doing well, and others are doing terribly,” he said, citing the automotive and primary metals sectors as examples of sectors with disparate performances.

Higher spot prices are having an impact on truckload contract rates, sending carriers that accepted lower contract rates early in the second quarter back to the bargaining table. “It’s safe to say this cascade is finally starting to carry over enough that you’re seeing carriers in a position to claw back some of the pricing that got hammered by shippers,” Miller said. 

Meanwhile, Hurricane Laura is affecting pricing even before it reaches shore. Spot rates on shipments picked up Tuesday heading to Houston and New Orleans were 14 percent higher on average than the previous seven-day average, Ken Adamo, chief of analytics at DAT, said in a LinkedIn post Wednesday.

The storm could disrupt transportation — from port operations to warehousing and trucking — across the South, but how long and deep that disruption might be won’t be known until this weekend. Unlike Hurricane Harvey three years ago, Laura is expected to move quickly inland and turn east over Tennessee, eventually passing through Virginia and Maryland into the Atlantic. Forecasts on Wednesday called for intense rain along much of that path through Sunday morning, with possible tornadoes in the central South.

Contact William B. Cassidy at bill.cassidy@ihsmarkit.com and follow him on Twitter: @willbcassidy.