August Market Report: LTL Updates, Mergers & Acquisitions, and Trend Analysis

August's Market Report includes updates for Truckload, Fuel, LTL, Intermodal, Ocean, Mergers & Acquisitions, and Education.

Some key things to highlight from August's domestic transportation market–a slight rise in dry van spot rates in the truckload market hinted at the end of the freight recession, but smaller fleets and spot carriers faced challenges due to declining rates and rising costs. The EIA diesel benchmark surged, particularly impacting regions like New England, the Rocky Mountains, and California, with potential repercussions for carriers tying fuel surcharges to the national benchmark. The LTL market responded to Yellow's closure with pricing and volume adjustments, with Saia XPO taking over Yellow's business. Rising fuel prices increased LTL costs for shippers but boosted carrier profits through a sliding scale model.

Here's?FreightPlus' COO,?Ben Graeff, with a recap of the Top Three Industry shifts to watch from August's Market Report.

Read below for the individual reports for each mode.?

Truckload

In the Truckload market, dry van spot rates rose from $2.06 in July to $2.08 in August, while the volume remained relatively flat. The spread between spot RPM and contract RPM remained at around $0.76 cents. Given the recent market flatness, it is possible that we have reached the floor of the freight recession and are moving toward an equilibrium point.

Capacity is also exiting the industry. With spot rates declining for over a year, record-high interest rates, and rising fuel prices, smaller fleets in the industry are bearing the brunt of these challenges. Carriers that primarily operate in the spot market are also feeling the pressure. What we are hearing on the carrier side is that more qualified drivers are becoming available, and leased equipment is being returned.

Fuel

In the month of August, the EIA diesel benchmark rose from $4.128/gal to $4.492/gal. Fuel prices have been on the rise for the past nine weeks, increasing by almost 73 cents per gallon, marking the highest level since early February.

The increases in fuel costs have been somewhat regional, with significant rises seen in New England, the Rocky Mountains, and California. This may have a negative impact on carriers in those regions that tie their fuel surcharges to the national benchmark.

As stated in last month's report, it is highly unlikely that we will see a decrease in fuel prices with winter approaching. The forecasted high demand for heating oil in a harsh winter is expected to keep fuel prices at an elevated level. Rising fuel costs may also reduce overall carrier capacity as the already soft freight market struggles to cope with the increasing cost of operation.

LTL

Things have been a little quieter in the LTL market this month as the task of getting to work and cleaning up the disarray caused by the Yellow closure and bankruptcy kicked off. Luckily, the task was already somewhat in motion by the time of their demise, as the possibility of a wind-down was very publicly played out in front of the entire industry. This allowed for contingencies to already be in place or in the process by the time of the Yellow closure.

The initial reaction varied from carrier to carrier, as some took the opportunity to embed surcharges and increases into transactional pricing, handed out pricing increases on existing business, metered or reduced volumes in specific lanes, or employed a mixture of all these strategies.

August numbers reported by public carriers in July and August have helped to tell the story of where the Yellow freight volumes have gone. Saia and XPO both show increased volumes, likely coming from Yellow in large part. There hasn't been much change for ODFL; they remained quite static in their volumes from July and August. As this available market share is reallocated, it's essential to keep in mind Yellow's historically low average weight per shipment, which will also drive down that metric for other carriers in the market as they adopt these accounts.

Overall, the FreightPlus prediction of a 30-45 day timeline to resolve this issue seems to be holding.

The August PPI marker for long-haul LTL experienced its most significant jump since March 2022. This indicates that carriers have been put back in the driver's seat for the time being.

Fuel prices are on the rise again, which means increased overall LTL costs for shippers and incrementally more profit for carriers. During times of higher oil and diesel prices, their revenue from the sliding scale model starts to outpace the cost of fueling their equipment due to bulk and wholesale purchases.

Intermodal

Rail service demonstrated initial improvements during the first quarter and the early part of the second quarter. However, it subsequently reverted to its historical averages, a departure from the typical trend of improving, as weather conditions ease during the second quarter. This inconsistency in service levels has fueled skepticism among shippers regarding the sustainability and long-term achievability of service levels exceeding historical norms. Meanwhile, railcar availability in the intermodal sector has remained persistently high, despite fluctuations in service ranging from historical norms to the stronger levels we saw in the first quarter.

This shows that shippers still lack confidence in the railroads’ ability to sustain the improvements in service or significantly elevate service levels beyond the current sluggish status. Given the competitiveness of the trucking market and lower-than-usual active truck utilization, the lack of substantial improvements in rail service above historical norms will continue to be a challenge to the railroads' ability to increase their volumes and market share. This challenge is expected to persist until a rebalancing occurs, likely sometime late 2024.

Railway Updates:

• BNSF Railway (BNSF) ? Lathrop and Oakland origin lanes were delayed due to low port volume.
• Union Pacific (UP) ? Network remains sluggish throughout the month. Volume and service is expected to continue to rebound post Hurricane Hillary in September.
• Kansas City Southern Railway (KCS) ? Network remains fluid.
• Canadian National Railway (CN) ? Network remains fluid.
• Canadian Pacific (CP) ? Network remains fluid.
• Norfolk Southern Rail (NS) ? Network remains fluid.
• Florida East Coast Railway (FEC) ? Network remains fluid.
• CSX ? Idle containers at inland rail ramp averaging 3 days.

Ocean

The current transpacific peak season has been neither underwhelming nor overwhelming. With 1.91 million TEUs imported in July, it is projected that August import numbers surpassed the 2 million TEU mark. Volumes are expected to remain elevated through October, but only about 6% higher than 2019 import levels, according to the NRF (National Retail Federation). Import volumes in November and December are projected to be 16% higher than 2019 levels, as per the NRF's projections.

As for container rates, spot rates remain healthy compared to current contract rates and pre-COVID pricing. Many spot rate indexes are also showing a decrease from the recent highs of this summer. Rates were elevated primarily due to forced General Rate Increases (GRIs) by carriers and capacity limitations through blank sailings and reduced service offerings. The GRI planned for September 1st was also unsuccessful, as rates have mostly declined since that date.

Mergers and Aquisitions

Schneider National has acquired Massachusetts-based M&M Transport Services, a dedicated contract carrier with 500 trucks and 1,900 trailers in 12 locations across the Northeast, Midwest, and Southwest, primarily serving the retail and manufacturing sectors. This acquisition is expected to boost Schneider's dedicated contract revenues to $1.5 billion in the current year, integrating M&M's financial results into its Q3 earnings within the dedicated operations segment of its truckload segment. Schneider's recent acquisitions, including Midwest Logistics Systems and deBoer Transportation, have strengthened its dedicated segment, which the company has identified as a growth area. M&M Transport will continue operating under its name as a wholly-owned subsidiary of Schneider.

Upcoming Webinar

Join FreightPlus CEO Stephen Aborn , along with our client and carrier partners Colin Christ from Cenveo and Mark Watson from Estes Express Lines , to discuss Building a Fortune 500 Logistics Program as a Middle Market Company.

They'll cover:

• Understand what an effective transportation program looks like and its components:?People, technology, data, and processes
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• Learn about the Managed Transportation Solution: What it is and why it works

Followed by an opportunity to ask any questions you have around effectively transforming your logistics program.

Head to the link here to sign up and receive a link to join us on October 17th at 12pm (ET).

Check out our blog for education on The Importance of Accurate Weight & Freight Class Calculations for LTL, Understanding the Impact of Fuel Surcharges on LTL Shipping Costs, Tips for Efficient LTL Shipping, and more. Head to our website to download the full market report with insights, recaps, and trend analysis.

Thanks to this month's contributors,

Curtis Garrett

Senior Vice President, LTL

[email protected]?

Dan Burke

Senior Manager, Strategic Capacity & Pricing

[email protected]

Connor Kerwin

Capacity Manager

[email protected]

Jeremy Eliades

Capacity Manager

[email protected]