Oct 312011

Hours-of-service revision deadline missed

Posted By: Tom Sanderson
Date Posted:  Monday, October 31, 2011  8:54 AM

The FMCSA acknowledged that it will not meet its October 28 court settlement deadline to issue its final hours-of-service (HOS) rule. The chief proponents of the productivity-killing changes, The Teamsters union and the advocacy group Public Citizen, agreed to extend the deadline. The parties agreed to file their next status report on November 28. The American Trucking Associations and numerous federal government officials including House Speaker John Boehner have urged the Obama administration to withdraw support for the changes. The battle is not over though, and Democrats Boxer (CA), Lautenberg (NJ), and Rockefeller (WV) are lobbying the president to cut back driving hours, erroneously stating that “Fatigue is the primary factor in 30 to 40% of large truck crashes.” It is true that fatigue was a 13% “associated factor” in FMCSA’s crash causation study, but that does not mean fatigue caused the crash. The definition of an ‘associated factor’ is that no judgment is made as to whether any factor is related to the particular crash, just whether it was present.


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Oct 262011

Dry van capacity-demand balance is about average for this time of year

Posted By: Tom Sanderson
Date Posted:  Wednesday, October 26, 2011  7:58 PM

Morgan Stanley's dry van truckload freight index indicates capacity has leveled off somewhat in recent weeks and is at about the 15-year average for this time of year. Dry van capacity is considerably tighter that at this time last year. Capacity had been more readily available than 2010 since the lines crossed in April, but now they have crossed again. Our view is that unless the economy recovers and we experience a fall peak shipping season, we are not likely to see tight capacity for the balance of 2011. The index measures incremental demand for dry-van truckload services compared to incremental supply. The higher the index the tighter is capacity relative to demand when compared to a prior period.

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Graph reproduced with permission from Morgan Stanley. For more information contact: Adam Longson at Adam.Longson@morganstanley.com or Bill Greene at William.Greene@morganstanley.com


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Oct 262011

Diesel rises for second straight week

Posted By: Tom Sanderson
Date Posted:  Wednesday, October 26, 2011  7:50 PM

Weekly retail on-highway U.S. diesel prices increased by 2.4 cents to $3.825 per gallon. This makes 2 straight weeks of increases after 5 weeks of decreases. While diesel prices have dropped from the $4.124 peak in May, they remain 25% above the level from one year ago. The recent low price point for diesel was $2.023 on March 16, 2009. A view of weekly prices over the last 3 years shows much higher prices than seen in 2009 or 2010 (second graph). Diesel prices peaked at $4.771 per gallon in July of 2008 and were above $3 per gallon from September 24, 2007 to November 3, 2008 (over 13 months). Prices have been back over $3 since October 4, 2010 (12+ months). In 2008, diesel exceeded $4 per gallon for 23 straight weeks, compared with 6 straight weeks earlier in 2011. Some forecasters are predicting lower fuel prices, but because of the weak dollar and commodity inflation, it still seems likely to me that we will see $4 diesel before we see $3 diesel.

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Oct 262011

Multi-unit housing starts show strong growth in September

Posted By: Tom Sanderson
Date Posted:  Wednesday, October 26, 2011  2:27 PM

Housing starts jumped to 658 thousand in September from 572k in August (seasonally adjusted annual rate) with single unit structures totaling 425 thousand. The growth was in multi-unit structures as single unit structures only increased by 7k. Total starts reached a low mark of 477k in April of 2009, while single unit starts bottomed out at 360k in January of 2009. Housing starts remain far below the average of just over 1.5 million per year over the last 40+ years, and even farther below the 2.2 million peak of the most recent housing boom. Total starts have been under 1 million (SAAR) for 39 straight months, far longer than in previous housing recessions, averaging only 604k during this stretch. Since 1968, the U.S. population has grown from 200 million to over 300 million. Low housing starts not only impact transportation demand for building products but also for appliances, furniture, and other related items. The vertical bars represent recessions.

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Oct 192011

Better highways and bridges or yet another federal government agency?

Posted By: Tom Sanderson
Date Posted:  Wednesday, October 19, 2011  9:45 AM

The Obama administration push for a federal infrastructure bank is getting a lot of press these days as proponents argue that we will put people to work and improve our highways and bridges. What’s not to like? Well in fact, both the federal and many state governments already have infrastructure banks or programs that perform the same function. At the federal level we already have the Transportation Infrastructure Finance and Investment Act (TIFIA) which provides loans and loan guarantees for highway projects. At the state level,33 states already have infrastructure banks, one example being Oklahoma which started its bank in the 1990s but has yet to fund a project. 

So what would we get with the new federal infrastructure bank that would provide loans and loan guarantees to state and local governments for broadly defined “infrastructure” projects, not just highways and bridges? A new government entity supervised by a board of seven people selected by the president with an initial capitalization of $10 billion and an expected annual budget of $270 million, and it will take a year to set up. This is the Fannie Mae model applied to public works. How well has that model worked out in housing?

We need better highways and bridges. We also need a new highway financing bill to replace SAFETY-LU, which expired over two years ago and has now been extended eight times. We do not need yet another federal agency led by a politically appointed board deciding who gets the cookies from the federal cookie jar.


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Categories: Highway funding
Oct 182011

First Mexican carrier approved for cross-border transportation

Posted By: Tom Sanderson
Date Posted:  Tuesday, October 18, 2011  4:04 PM

The FMCSA approved one Mexican carrier to operate into and out of the U.S. and has a second carrier is on hold for further safety investigation. The approved carrier is Monterrey-based TRANSPORTES OLYMPIC DE MEXICO S DE RL DE CV, DOT#: 555188. Before anyone gets too excited about either (a) a welcome relief to the upcoming shortage of truck capacity in the U.S. or (b) the loss of U.S. jobs to Mexican truckers and degraded safety on our highways, I point out that the carrier has a grand total of 2 tractors, 2 drivers, and 4 trailers.

The great news for the U.S. economy is that the Mexican government suspended the remainder of  its retaliatory tariffs on U.S. exports to Mexico based on the U.S. finally honoring its NAFTA commitment to open our southern border in the same fashion our northern border has been open to Canadian-based truckers for many years. On the one hand, it is truly a remarkable show of faith by the Mexican government to suspend the tariffs based on one company with 2 trucks being allowed to operate into and out of the U.S. On the other hand, one has to wonder about our self-inflicted damage associated with cancelling the pilot program and dragging our feet on sorting this issue out if this is all it took to have the tariffs suspended making our exports more competitive to Mexican consumers.

The Teamsters and OOIDA may have let one carrier slip through but they are protesting the second carrier, Tijuana-based GRUPO BEHR DE BAJA CALIFORNIA SA DE CV, DOT#: 861744 and the FMCSA has obliged by holding off approval while conducting additional reviews of inspections and vehicles. You can read the details in the Federal Register. This carrier operates 3 straight trucks and 4 tractors, so it is easy to understand the Teamsters’ concerns about job losses for U.S. drivers.


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Categories: Mexico cross border trucking
Oct 132011

Diesel prices inch downward for 5th straight week

Posted By: Tom Sanderson
Date Posted:  Thursday, October 13, 2011  10:29 AM

Weekly retail on-highway U.S. diesel prices decreased by 2.8 cents to $3.721 per gallon. This is the lowest weekly diesel price since February 28. While diesel prices have dropped from the $4.124 peak in May, they remain 21% above the level from one year ago. The recent low price point for diesel was $2.023 on March 16, 2009. A view of weekly prices over the last 3 years shows much higher prices than seen in 2009 or 2010 (second graph). Diesel prices peaked at $4.771 per gallon in July of 2008 and were above $3 per gallon from September 24, 2007 to November 3, 2008 (over 13 months). Prices have been back over $3 since October 4, 2010 (12 months). In 2008, diesel exceeded $4 per gallon for 23 straight weeks, compared with 6 straight weeks earlier in 2011. Some forecasters are predicting lower fuel prices, but because of the weak dollar and commodity inflation, it still seems likely to me that we will see $4 diesel before we see $3 diesel. In the 23 weeks since the 2011 peak of $4.124, diesel has fallen by 40.3 cents per gallon. In 2008, in the 23 weeks following the peak, fuel dropped by $2.40 all the way down to $2.37 per gallon. It is hard to get excited about the current price decrease.

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Categories: Diesel fuel prices
Oct 132011

Big shortage of refrigerated capacity

Posted By: Tom Sanderson
Date Posted:  Thursday, October 13, 2011  9:56 AM

Morgan Stanley's refrigerated truckload freight index shows very tight capacity. The index was up and down through Q2 and early Q3, but is now at a highpoint not only for 2011 but for for the series. Refrigerated capacity is very tight relative to all of the reference years. The pricing environment in this segment clearly favors the carriers at this point. The index measures incremental demand for refrigerated truckload services compared to incremental supply. The higher the index the tighter is capacity relative to demand when compared to a prior period.

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Graph reproduced with permission from Morgan Stanley. For more information contact: Adam Longson at Adam.Longson@morganstanley.com or Bill Greene at William.Greene@morganstanley.com


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Categories: Morgan Stanley capacity and demand graphs
Oct 132011

Auto sales surge in September

Posted By: Tom Sanderson
Date Posted:  Thursday, October 13, 2011  9:45 AM

Annualized seasonally adjusted U.S. sales of domestic and foreign autos and light trucks totaled 13.044 million in September; the first month since April over the 13 million mark, and up from just 12.1 million in August. Using our 3-month moving average, sales are up 7.7% from the prior year. The industry's hoped for 2011 sales of 13 million plus seems extremely unlikely at this point. Annualized sales averaged 13 million for the first four months of 2011, but only 12.1 million for the last five months. High unemployment, stock market gyrations, $4 gas, and worries about a double-dip recession are all working against an auto sales recovery. Auto sales remain about 22% below the average annual sales of 16.7 million from January of 2001 to December of 2007, before sales started to decline in 2008. The low point for sales were the first six months of 2009, when annualized sales averaged 9.621 million. It is clear from the data that the $3 billion Cash for Clunkers program did nothing but reward people for buying cars later or earlier than they had already planned. Our graph shows a 3-month moving average of seasonally adjusted annual rates to smooth out some of the month-to-month volatility.

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Categories: Auto sales and assemblies
Oct 072011

Housing starts fall back below 600k annual rate

Posted By: Tom Sanderson
Date Posted:  Friday, October 07, 2011  9:39 AM

Housing starts decreased to 571 thousand in August (seasonally adjusted annual rate) with single unit structures totaling 417 thousand. Total starts reached a low mark of 477k in April of 2009, while single unit starts bottomed out at 360k in January of 2009. Housing starts remain far below the average of just over 1.5 million per year over the last 40+ years, and even farther below the 2.2 million peak of the most recent housing boom. Total starts have been under 1 million (SAAR) for 38 straight months, far longer than in previous housing recessions, averaging only 602k during this stretch. Since 1968, the U.S. population has grown from 200 million to over 300 million. Low housing starts not only impact transportation demand for building products but also for appliances, furniture, and other related items. The vertical bars represent recessions.

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Categories: Housing starts, sales, and inventory
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