Transportation Market Report (March 2024): Truckload, Fuel, LTL, Intermodal, and Ocean
Jill Clifford
President at FreightPlus | Strategic Planner for Innovative Transportation Solutions | Developing Efficient Transportation Strategies for C-Level Leaders
FreightPlus’ Monthly Market Update, created by FreightPlus subject matter experts, provides detailed and actionable insights into the ever-changing transportation industry. A core FreightPlus principle is providing our partners with data and insights to enable better, strategic business decisions.
Truckload
The truckload (TL) market remains entrenched in a deflationary trend. Despite a moderate month-over month uptick in volume of 1.2% in March, which was somewhat surprising given the anticipation as we approached the final month of the quarter, the market still appears to be at the bottom of this deflationary cycle. However, even with this increase in volume, the end of the quarter was notably quiet.
During the last week of March, volumes slowed down by 2.5% compared to the rest of the month. It's important to note the influence of external factors, such as the Good Friday/Easter holiday falling in the last three days of the month, which likely played a role in this decline in outbound volumes. This holiday period often affects market activity and may have contributed to the subdued end-of-quarter performance.
The subdued end to the quarter was further evidenced by a 1.9% month-over-month decrease in spot rates. Additionally, rejection rates experienced a decline of 96 basis points (BPS) month-over-month. These indicators collectively underscore a market environment characterized by ongoing deflationary pressures.
Fuel
On-Highway Diesel prices were relatively flat throughout the month of March. The EIA benchmark was at $4.022/gal on 03/04, and ended the month at $3.996/gal on 04/01. Although, in the beginning of April, we've seen an increase of 6.5 cents, with the EIA benchmark reading at $4.061/gal on 04/08.
With the diversion of vessels away from the Suez Canal and Red Sea, going around the Cape of Good Hope, we're seeing global demand for oil rise. The EIA came out with a report in March, reporting an increase in demand for bunker fuel globally. The impact on increased demand of bunkering is going to primarily effect middle distillates such as diesel, with demand estimated to rise 230,00 barrels a day.
LTL
In March 2024, the less-than-truckload (LTL) freight market saw notable shifts and developments among key carriers. Saia Inc. reported a significant 19% increase in shipments during February, contributing to an 11% year-over-year rise in tonnage per day. The company's growth trajectory aligns with its plans for substantial investment, with approximately 30% of its annual revenue earmarked for capital expenditures. Saia aims to expand its door count by 12% to 14% in the current year, with a focus on real estate acquisitions and fleet expansion. The positive performance in February builds on the momentum from the previous quarter, indicating a robust start to the year for the carrier.
Old Dominion Freight Line also observed improvements in February metrics, although market conditions continued to reflect softness in the domestic economy. Despite a 3% decline in tonnage, the company reported a 1.2% year-over-year increase in revenue per day for February. With a track record of outperforming market growth rates in previous cycles, the company anticipates leveraging its investments in real estate to capitalize on future opportunities once the macroeconomic environment improves.
XPO, another significant player in the LTL freight sector, witnessed favorable volume trends in February. The carrier reported a 3.5% year-over-year growth in tonnage, driven by a 5.8% increase in shipments. XPO remains optimistic about its full-year outlook, expecting mid- to high-single-digit growth in yields and low-single-digit growth in tonnage. Despite ongoing challenges in the freight market, XPO aims to maintain operational efficiency and improve its operating ratio compared to the previous year.
ArcBest implemented strategies to optimize freight mix and improve yield metrics during February. While experiencing a 14% decline in tonnage, the company focused on replacing transactional shipments with higher-yield freight from core accounts. ArcBest's asset-based unit reported a 3% decline in revenue per day, offset by a 13% increase in revenue per hundredweight. The company's board proposed amendments to facilitate M&A activities, aiming to streamline decision-making processes for potential acquisitions or mergers.
In the backdrop of these market developments, Yellow Corp.'s bankruptcy proceedings continued, with the company seeking legal recourse against claims related to its abrupt shutdown. Despite challenges, the LTL industry remains dynamic, with carriers navigating market fluctuations and strategic opportunities to position themselves for long-term growth and stability. As the year progresses, market dynamics and competitive strategies will continue to shape the landscape of the LTL freight sector.
Intermodal
After a recent surge in intermodal volume forecasts driven by a robust international sector, FTR Transportation Intelligences’ latest forecast has seen only marginal adjustments. Projections now anticipate a 3.4% year-on-year increase in total intermodal movements for 2024, a slight uptick from the previous estimate of 3.3%.
Both domestic and international forecasts remain steady, each experiencing a minor uptick of a mere tenth of a percentage point. However, there's a notable shift in the forecast for international containers, with long containers seeing a strengthening projection while short containers show a slight downturn. An uptick in FTR's Intermodal Competitive Index (ICI), which assesses the competitiveness of intermodal transport versus over-the-road trucking, was primarily fueled by a less adverse rate environment. Additionally, marginally higher diesel prices for truckers contributed to this improvement. January's ICI stood at -3.1%, climbing from December's -5.0%. A baseline of 0 signifies a balance between the two modes.
The outlook for the ICI remains relatively stable with modestly negative readings expected into 2025, reflecting the prevailing weak market conditions in trucking, which offer little hope for a substantial improvement in intermodal transport. While the forecast shows some improvement by the second quarter of the following year, it technically falls short of reaching neutral market conditions.
Intermodal demand continues to surpass earlier FTR forecasts, with the absolute number of movements on the rise, even against straightforward year-on-year comparisons. The bulk of this increase is attributed to the international sector, where more imported freight is being transported intact. Various approaches exist to assess the data's impact, including examining the year-on-year percent change for international movements in specific lanes. However, for a comprehensive analysis, it's essential to disaggregate the data into directional movements within lanes rather than focusing solely on total lane movements. Data from the Intermodal Association of North America (IANA) enables this detailed examination. While there's a noticeable surge in international box movements, particularly from the Southwest, the distortion caused by last year's weakness in the region necessitates a comparison. FTR compared movements from the Southwest to the Midwest and from the Northwest to the Midwest to address this issue. Despite minor changes in both international and total equipment moves in December and January, no significant shift in market share was observed. Furthermore, the absence of an impact from the Suez Canal incident in December underscores FTR's conclusion that volume improvements stem from genuine demand rather than shifts in shipping behavior.
Ocean
One of the biggest stories in the shipping industry this past month was the March 26th collision and collapse of the Francis Scott Key Bridge in Baltimore, MD. The bridge collapse has without a doubt disarranged supply chains on the US East Coast. One Major industry affected by the port closure is US Coal exports. Coal exports from Baltimore are expected to be blocked for the next six weeks or so, per Ernie Thrasher, CEO of Xcoal Energy & Resources. Others, such as Consol Energy, a marine terminal 7 owner in Baltimore, stated there is no definitive timeline of coal exports resuming. Baltimore is the second largest coal exporter in the US, and importing countries affected include India, The Netherlands, Japan, Brazil, and South Korea. Coal in these countries is primarily used for electricity generation and steel production.
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The closure of the port has also impacted Automotive imports and exports. Major players like General Motors, Volkswagen, Ford, Volvo, and Toyota rely on the port of Baltimore for imports and exports. In 2023, the port of Baltimore was the busiest in the US for automotive shipments, handling over 750,000 vehicles. Motor vehicles and parts constituted 42% of the port's imports and 27% of its exports. While there are plans to temporarily shift business to nearby ports like Norfolk and NY/NJ, it's unlikely to fully compensate for Baltimore's import and export capacity.
Surprisingly, the Baltimore bridge collapse has not affected the ocean container market, and rates have remained relatively flat. Volume on the transpacific trade lane has dwindled during the slow season, with rates for Chine/East Asia – North America West Coast starting at $4,754/FEU on 03/01, and falling to $3,294 by 04/05. In the transatlantic trade lane, rates remain fairly flat for North Europe – North America East Coast starting at $1,714/FEU on 03/01, and ending with $1,663/FEU by 04/05. Suez container rates have come back down to reality since the surge back in December related to the Red Sea attacks.
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Thanks to this month's contributors:
Amber Miller - Vice President, LTL
Dan Burke - Senior Manager, Strategic Capacity & Pricing
Connor Kerwin - Capacity Manager
Jeremy Eliades - Capacity Manager
About FreightPlus
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