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Wednesday, February 17, 2021

Logistics Intelligence Brief

Trucking

Truckload rates rising strongly earlier in year after tumultuous 2020

Logistics Management John Schulz February 15, 2021

Rates in the $320-to-$360 billion truckload market will continue their sharp rise this year because of surging demand in some sectors to replace depleted inventory as well as sharply rising costs for carriers. That’s what leading TL executives and analysts are telling LM as they assess the freight market’s largest sector this year. “It’s a good time to have trucks and it’s a good time to have new trucks,” Derek Leathers, vice chairman, president and CEO at Werner Enterprises, the nation’s seventh-largest truckload carrier, told LM. Werner’s fleet of 8,000 tractors is only two years old on average. Its 24,000 trailers average four years. Those truck counts are down about 3.5 percent from this time last year, he said. “Fuel is going up,” Leathers said flatly. “Politics aside, the financial aspect (of the oil industry) is setting the stage for higher rates.” “Tolls are going up, both existing and future,” Leathers added. “But the highest increase is driver pay. There is a lot of pressure on the cost side, and rates are going to have to reflect that.”

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Spot market sets record for volume, imbalance

FTR Transportation Intelligence February 16, 2021

Dry van load volume rose 11.0% week over week. Dry van loads were about 155% higher than the same 2020 week and 173% higher than the five-year average. Volume was about 7% below the record level posted during the first week of 2021. Dry van truck postings were up 2.8%, and the dry van MDI rose to its strongest level since the first week of the year.

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Lessons learned from 2020: Trucking industry analysts on what’s ahead

DAT.com February 16, 2021

The pandemic has turned many aspects of life upside down, and commercial transportation is no exception. In most years, freight under contract represents about 87% of all truckload freight hauled. In 2020, that percentage was closer to 78%. More freight moved on the spot market than ever before, yet the total volume of truckload freight was almost unchanged compared to 2019. Surging e-commerce reoriented supply chains, requiring higher levels of inventory and driving demand for warehouse space and trucks to haul freight.

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Trucking Bankruptcies Surged in 2020 as Pandemic Hits Small Carriers

Transport Topics Dan Ronan February 16, 2021

The COVID-19 pandemic forced more than 3,000 trucking companies out of business in 2020 — a significant leap from about 1,000 the year prior — as the early months of the global health crisis proved too difficult for some in the industry to withstand. A total of 3,140 trucking companies ceased operations last year, according to a report from transportation industry data firm Broughton Capital, up from 1,100 in 2019. And of those that closed last year, slightly more than half — or 1,580 companies — shuttered during the months of April, May and June, when freight volumes plunged amid the widespread economic disruption that pushed businesses to close and put millions of people on unemployment. In May alone, 760 trucking companies closed their doors. “Initially when quarantines were imposed, there was a surge in trucking demand, especially for dry van and reefer, because we had to restock shelves,” managing partner Donald Broughton told Transport Topics. “That kept everybody hoping. But that also faded, and when demand faded, so did spot rates. That plummet in spot rates was so low, no one could operate and turn a profit.”

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2020 spurred record number of fleet failures — but rising new entrant carriers

CCJ James Jaillet February 16, 2021

Some 3,140 carriers ceased operation in 2020, Broughton said, compared to 1,100 in 2019 and virtually none in 2018. Broughton estimated carrier failures last year accounted for about 50,800 trucks being taken off the road, compared to 34,000 the year prior, though Celadon’s December 2019 closure alone accounted for about 3,000 units. The average fleet size of last year’s carrier failure numbers was 16 trucks, down from 22 trucks in 2019, though again that number was slightly inflated by Celadon’s closure. Broughton said the number of carrier failures last year accounted for about 17% of the average spot market capacity on a daily basis, which helped buoy spot rates as freight volumes climbed from June through November. While trucking company failures spiked in 2020, so too did new entrants. As of January 2021, data from the U.S. DOT shows nearly 109,000 registered motor carriers falling under the category of new entrant status (those registered within the past 18 months). That’s the highest of the past five years, up slightly from some 105,200 as of December 2020 and 90,900 as of December 2019.

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Shippers/3PLs

Retail Sales Seen Rising Strongly on Stimulus in January (Subscription Based)

The Wall Street Journal Harriet Torry February 17, 2021

Economists surveyed by The Wall Street Journal estimated that retail sales—a measure of spending at stores, vehicle dealerships, restaurants and online—increased a seasonally adjusted 1.2% in January from a month earlier. The projected rise would follow three consecutive months of declining sales during the 2020 holiday shopping season. Robert Rosener, senior U.S. economist at Morgan Stanley, forecasts the report “will be the start of exiting the worst of the softer data winter we’ve seen,” with the $600-a-recipient stimulus checks distributed in early January the main factor driving an uptick in spending. Grocery, big-box and electronic stores likely benefited in January as households stocked up on essential goods with their stimulus payments. Consumers “continue to spend on things that improve their life at home, this nesting dynamic,” said Sarah Wyeth, a retail analyst at S&P Global Ratings. Retailers like Walmart Inc., Target Corp. and Costco Wholesale Corp. “have so many categories, and consumers are still consolidating shopping trips,” she said.

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Industry

US inventory shortfall drives seemingly ‘never-ending’ peak season (Subscription Based)

The Journal of Commerce Cathy Morrow Roberson and William B. Cassidy February 16, 2021

On store shelves, in warehouses, in trailers and containers, US shippers are coming up short. The sale of goods at many businesses is outstripping available inventory and that will keep pressure on supply chains, constraining capacity and pushing up transportation costs throughout 2021. “This year is going to be the peak season that never ends in many ways,” said Brian Bourke, chief growth officer for freight forwarder and third-party logistics provider (3PL) SEKO Logistics. “We see it getting worse before it gets better, and we don’t see it getting better for a long time.” “One of the challenges is whether the Walmarts of the world want to get inventory-to-sales ratios back to where they were, or settle 2 or 3 percent below where they were?” said Miller. “There will be multiple additional months of restocking, if the goal is to bring it back to where it was.”

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Bid season to determine J.B. Hunt’s intermodal margin target

Freight Waves Todd Maiden February 16, 2021

Expectations around long-term intermodal margins were the main topic at J.B. Hunt Transport Services’ (NASDAQ: JBHT) appearance at the Citi 2021 Global Industrials Virtual Conference on Tuesday. The company’s president and CEO, John Roberts, said management plans to evaluate this season’s bid cycle before making a final determination. On the company’s fourth-quarter call in January, management acknowledged the intermodal segment had been lagging the long-term goal of 11% to 13% in recent years and that future expectations were under review. Roberts believes the key determinants will be the rate increases gained this cycle as well as bid compliance for those rates.

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Diesel Climbs 7.5¢ to $2.876 a Gallon

Transport Topics February 16, 2021

Diesel rose 7.5 cents to $2.876 a gallon, according to Energy Information Administration data released Feb. 16. • The price of trucking’s main fuel has gained 13.8 cents the past two weeks and now costs just 1.4 cents a gallon less than at this time in 2019. • This week’s rise in diesel marks the largest since a 9.4-cent surge Sept. 23, 2019 and just the second of at least 6 cents since Dec. 21, 2020.

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4 charts show the effects of West Coast port congestion and supply chain delays

Supply Chain Dive Matt Leonard February 16, 2021

The ports of Los Angeles and Long Beach have been overburdened with a deluge of container imports over the last few months. As a result, cargo heading into and out of the ports has slowed to a relative crawl, as the ports deal with record-breaking volume alongside a reduction in staff related to the COVID-19 pandemic. This slowdown resulting from high levels of imports has created congestion at terminals and in surrounding areas. These charts show the impact of record imports and congestion at the Southern California port facilities.

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Supply chains divided on plans to increase safety stock, stick with lean methods

Supply Chain Dive Matt Leonard February 16, 2021

A survey of 1,328 supply chain professionals found 46% of them have no plans to increase inventory within the next two years, but 43% are investing in safety stock now with another 11% planning to do so within the next two years, according to the poll results from Gartner's Future of Supply Chain: Crisis Shapes the Profession report. The survey found that 21% of 1,339 respondents considered the availability of safety stock to be a top-three indicator of supply chain resiliency. The top responses to resilience indicators were order fulfillment cycle times not being disrupted (43%), positive consumer feedback (40%) and perfect order fulfillment metric not significantly disrupted (36%). But this doesn't necessarily mean that just-in-time supply chains are going anywhere. The survey found 47% of respondents disagree that lean supply chains will be less applicable in future strategy while 19% agreed and 34% were neutral.

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Government/Safety

Will Biden steer hair-based drug testing to the exit ramp?

Freight Waves John Gallagher February 16, 2021

Proposed federal guidelines for using hair to test for drugs within the trucking industry may not get finalized anytime soon now that the Biden administration is in town. Rolled out in September, the proposal has been unpopular on both sides of the hair-testing issue. Supporters — major trucking companies that are already screening drivers using this method and want uniformity and a level playing field — say the proposal is not strict enough. Opponents — labor unions and small-business truckers — say it goes too far by even introducing the use of hair into the drug-testing equation. But Biden’s strong support from labor in particular could mean slow progress — if any — on a hair testing regime for use by industries regulated by the U.S. Department of Transportation.

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Connecticut Governor Proposes Trucking Mileage Tax

Truckinginfo.com February 16, 2021

Connecticut Gov. Ned Lamont has proposed a mileage tax on tractor-trailer trucks weighing more than 26,000 pounds in order to support the state’s long-term transportation funding. Under the proposal, tractor-trailers would be taxed based on the trucks weight and the miles traveled within in the state, information that will be collected monthly through a new tax system by the Department of Revenue Services, the Journal Inquirer reported. Most trucks would pay between $2.50 and $11.50 to cross the state, according to the CT Examiner. The proposal, which is expected to raise $90 million per year, was met with criticism from trucking advocates, such as the Motor Transport Association of Connecticut. “This is a tax that will slam in-state business, and out-of-state trucking companies are going to evade it,” Sculley told CT Media. “We know that because it happens in other states.”

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