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Tuesday, February 9, 2021

Logistics Intelligence Brief

Trucking

TFI to take aim at UPS Freight’s unprofitable business

Freight Waves Nate Tabak February 8, 2021

CEO vows quick action to negotiate with customers or ultimately cut them loose after acquisition closes. TFI International plans to aggressively improve margins at UPS Freight after its $800 million acquisition closes by reining in unprofitable business. The plan: renegotiate with customers or cut them loose, CEO Alain Bedard told financial analysts on Monday after the Canadian trucking and logistics company reported fourth-quarter financial results. “There is some freight there that the company does not make any money on,” Bedard said of UPS (NYSE: UPS). “It’s normal because it was part of a global commingling, bundling — whatever word you want to use — for the good of the company, UPS. And if you look at the results of UPS, they are fantastic, but UPS Freight, not so much. So now UPS Freight being stand-alone, they have to stand on their own two feet. There’s some freight, maybe, that [doesn’t] fit the network. So we will have to address that as soon as possible as soon as we get in there — talk to the customer and take action.”

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Inflection point: Contract rates overtake spot rates

Transport Dive Jim Stinson February 8, 2021

Contract rates exceeded spot rates for the first time in seven months during the last week in January, according to DAT, breaking a remarkable run for the spot truckload market. Croke said he expects the trucking and freight markets for the first half of 2021 to be a lot like the latter half of 2020, with consumer demand keeping per-mile rates higher. That means even though contract rates are going up, spot rates won't plummet. "We're seeing support for spot rates around $2 per mile ... which is 56 cents per mile higher than this time in February 2020," Croke said. "[Carriers'] margins are still quite good, given diesel prices are down 35 cents per gallon over the same time frame."

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Freight index edges up slightly to a new post-pandemic high

FTR Transportation Intelligence February 8, 2021

Dry Van • The Dry Van segment was up more than 4% after the prior week’s big jump. The index has not quite matched the postpandemic high set during the week ending January 8, but it is less than 2% shy of that mark. • Current Level: 226.2 // Bottomed at 45.3 week ending 4/24/2020. Current high is 230.0 for week ending 1/8/2021.

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Trucking Failures Surged Last Year Under Pandemic (Subscription Based)

The Wall Street Journal Jennifer Smith February 8, 2021

U.S. trucking company failures nearly tripled in 2020 from the previous year as fallout from the pandemic deepened pressure on smaller operators while well-capitalized bigger truckers held on and found stronger financial footing as the economy reopened. Some 3,140 fleets shut down last year, a 185% jump from 2019, according to transportation industry data firm Broughton Capital LLC. Roughly half of the 2020 failures came in the second quarter, when freight volumes plummeted amid widespread shutdowns aimed at limiting the spread of Covid-19. “We had a record number go out of business in the second quarter and a record number in the month of May,” said Donald Broughton, Broughton Capital’s managing partner. Smaller trucking companies were particularly hard hit, according to the firm’s data. In 2020 the average size of failed fleets was 40% smaller than in 2019, when the shutdowns included Celadon Group Inc., a large national truckload carrier that operated some 3,300 trucks.

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Shippers/3PLs

Peloton will incur 10 times its usual transportation costs as it ships by air, expedited ocean

Supply Chain Dive Shefali Kapadia February 8, 2021

Peloton will incur transportation costs more than 10 times its usual cost per item, CEO John Foley said in a note to customers. The manufacturer aims to expedite bike and treadmill deliveries to consumers frustrated by delayed orders. The company will spend $100 million to speed shipping, including using airfreight, expedited ocean freight, moving containers to less-congested ports and getting products into U.S. warehouses, executives said on the company's earnings call Thursday. Peloton is also investing in U.S. manufacturing capacity to decrease lead times and circumvent costly transportation. It acquired fitness equipment manufacturer Precor and expects to produce Peloton equipment in Precor's North Carolina facility by the end of 2021, executives said.

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Industry

Oil Extends Covid-Comeback Above $61 on Tightening Market

Bloomberg Saket Sundria February 9, 2021

“Fundamentally, we are seeing the pace of tightening picking up, with the additional Saudi cuts in effect,” said Warren Patterson, head of commodities strategy at ING Bank NV. “We are at levels where we should see quite a bit of producer hedging taking place, which should start to provide some resistance.”

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Diesel Surges 6.3¢ for Biggest Weekly Rise Since 2019

Transport Topics Connor D. Wolf February 8, 2021

The nationwide average price of diesel fuel increased by 6.3 cents per gallon, marking the 14th straight week with a gain and the largest rise in nearly 17 months, according to U.S. Energy Information Administration data released Feb. 8. The price of trucking’s main fuel jumped 9.4 cents to $3.081 on Sept. 23, 2019, from $2.987 the week before. It reflected the first gain of at least 6 cents since Dec. 21, when it rose 6 cents to $2.619. Diesel now costs 10.9 cents a gallon less than it did a year ago.

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Technology/Innovation

On the move: trucking lands top talent from Amazon, Big Tech

CCJ Aaron Huff February 8, 2021

The two largest companies in the world, Amazon and Apple, would not have attained their level of success without developing expertise in transport and logistics (T&L). Amazon tacked an e-commerce store onto the world’s most sophisticated logistics business. Similarly, Apple's chief executive, Tim Cook, developed world-class expertise in logistics during his 12 years as the company’s director of fulfillment. Venture capital (VC) and private equity investors see the vital role of T&L in Big Tech companies, but also view the T&L sector as a market ripe with opportunities for disruption.

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Workforce

Job losses constraining US freight capacity as demand grows (Subscription Based)

The Journal Of Commerce William B Cassidy February 8, 2021

Deep job cuts in transportation and logistics last month seemed at odds with strong demand for freight services, as imports continue to surge through US container ports and US business activity expands. The job losses could signal an even tighter trucking market in months ahead, with capacity remaining difficult for shippers to find and contract rates rising. Analysts are split on the direction the US truckload spot market will take, but if contractual trucking capacity is tightened more severely by a lack of drivers, spot rates that began to decline or moderate in January could begin to move upward. That means trucking companies are going to have a harder time filling truck cabs, and shippers finding tractor-trailers, than a first glance at reports based only on seasonally adjusted data might suggest. The 46,200-job gap from January 2020 includes truck drivers and dock workers at for-hire trucking companies, as well as office staff and managers.

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