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Current State of the Truckload Industry

A recent conference call hosted by Stifel featured Transport Capital Partners Managing Partner, Dr. Richard Mikes. In the call, Mikes suggests that fairly flat demand and supply point to an upcoming capacity shortfall in the truckload industry. Furthermore, tightening supply and demand is increasing the potential for future rate increases. To read the full transcript, click here.

Freight brokerage still important

Freight brokerage is still playing an important role for carriers, reports Bulk Transporter. Despite an increase of brokered freight services in the last three months, 62% of carriers are using fewer brokers than six months ago. Small carriers (under $25 million in revenue) report a higher use of brokers than larger carriers, most likely due to lower lane density and smaller marketing staffs. The article is based on TCP’s recent Business Expectations Survey. Click here to read the full article.

TCP’s Second Quarter Business Expectations Survey will launch on Thursday, May 2nd. If you are a carrier interested in participating, please visit our industry survey page to learn more.

TCP survey says broker usage increases

FleetOwner shares results from Transport Capital Partners’ First Quarter Business Expectations Survey which found that broker usage amongst carriers has increased in recent months. The percentage of carriers using broker freight services increased from 16% in August 2012 to 25% in February of 2013.  TCP Partner Steven Dutro is quoted in the article: “Freight brokers continue to provide loads that improve asset utilization and efficiency as customer demand fluctuates.” Dutro also discusses how the increase in broker services is a reflection of the ebb and flow of seasonal freight. Read the full article.

 

Reflections from the Stifel Transportation Conference 2013

Richard Mikes of Transport Capital Partners (TCP) recently attended the Annual Stifel Transportation and Logistics Conference held in Key Biscayne, Florida, chaired by John G. Larkin, Managing Director at Stifel. About 40 publicly-held transportation and logistics companies were in attendance, presenting information on their firms and trends affecting the industry to a larger than last year investor group. Here are his observations from the conference.

 Truckload Carriers Volumes

The general consensus among the presenting carriers is that volumes began flattening in the last half of 2012 and have not recovered in the seasonally slow first quarter. Retailers remain cautious and inventories are managed tightly. The uncertain economic recovery makes future volumes hard to predict. However, there are bright spots in ag equipment, energy exploration and chemicals with construction showing some life. Dry van business remains slow with the seasonal restocking from clothes to turf supplies/equipment and summer recreational merchandise about to begin.

Efficiency and New Strategies

Companies emphasized ongoing and new initiatives in most areas of operations. Most publicly held truckload carriers are no longer “just truckers” but also offering logistics, transportation management, dedicated carriage, 3PL initiatives, and intermodal options.

Focus included reducing costs, enhancing efficiencies, aerodynamics for equipment, and watching natural gas as a potential game changer. Deeper customer interfaces with cross-selling of the increasingly broader array of services were highlighted by many. Collaborative activities with shippers are gaining efficiencies and other mutual benefits.

Equipment Purchases Cautious by Public Carriers

Publicly held carriers in aggregate have reduced their tractor fleet 20% from pre-recession peak levels and are not gaining tractor count, which is in line with TCP quarterly surveys of both private and public firms showing little fleet addition or interest in expansion. While investors favor “asset light” models, discussions of “someone must own assets” were common.  Small fleets, 6 trucks or less, account for 88% of the carriers. Smaller fleets are pressured by aging tractors and tight credit. New tractors have improved miles per gallon (mpg), but at a high capital cost with used trade-in prices flat for the past year.

Rates

Generally, carriers anticipate single digit increases for rates assuming stable capacity and loads “in balance”. However, we may be subject to a freight spike environment pushing them upward. A shipper panel declined to provide much information on rates. The uncertain economy remains the gorilla in the room as an uptick of 3 to 5% in GDP growth will push higher rates.

Drivers the Constraint?

Carriers mentioned driver staffing issues are becoming more critical for the variety of reasons (demographics, lifestyle, wages, and HOS/CSA regs), and are directly now impacting carrier capacity along with a stable fleet base. Driver wages must, and will, increase, but the only question is timing. If construction ramps up this could be sooner rather than later.

Brokers and 3PL Providers

Volumes have recovered and general outlook is for a slow growth environment. The focus appears to be on small to mid-size shippers along with broadening international exposure and competition. Growth rates of 3PL’s were reported at 11.6% over the past 15 years in North America contrasted with 30% in South America and 15% in Asia Pacific markets. Over the same time dedicated carriage grew 7.5% in the US.

 

Have questions?  Contact Richard Mikes at  239-395-2595 or RMikes@TransportCap.com for more information or to learn more about the Stifel Transportation Conference 2013.

Interested in learning what other carriers are expecting in the coming months?

Click here to participate in TCP’s First Quarter Business Expectations Survey. 

Carriers Using More Brokers

Transport Topics cites a TCP report revealing a sharp increase in the number of motor carriers using brokers over the same month last year. This increase is attributed to the fact that the spot market pays higher than contract rates. Read more here.

Carriers Moving Away from the Use of Brokers

As reported by Bulk Transporter, carriers are moving away from the use of brokers. According to TCP’s First Quarter 2012 Business Expectations Survey, 33% of carriers are using more brokers whereas 67% are using less. Read the full article here.

Carriers Reducing Use of Brokers

Logistics Management uses a recent TCP study to determine that as a percentage of total revenue, carriers are reducing their use of brokers. TCP partners explain their finding in detail here.

Carriers Attracted to Spot Market Due to Higher Rates

TruckingInfo.com reports on the effect of spot market rates on broker usage. Citing TCP data from the past year, TCP partner Lana Batts states that “while some carriers might use brokers to increase freight, TCP believes that most of these carriers are attracted to the spot market due to higher rates.” Read the article here.

Canadian Trucking Alliance Reports on Recent TCP Survey

The Canadian Trucking Alliance reports on the most recent TCP Business Expectations Survey by highlighting the decrease in the use of brokers in the industry. To read more about the future of brokers in the trucking industry, click here.

Carriers Are Reducing Their Reliance on Brokers

“Carriers going without brokers” according to FleetOwner.com which quotes TCP on the recent survey in 2011. Read more.