Carrier Financial Performance

  • Carrier Rate Graphs

    TL rates remain under downward pressure

    - by Tom Sanderson

    TL rates remain under downward pressure

    Stephens Inc. released their Q4 2016 update on publicly traded TL carriers reporting that rates per loaded mile excluding fuel surcharge decreased by 1.7% over the same period last year, but increases 4.0% from Q3 of 2016. The most recent three quarters have seen year-over-year price drops, following 24 consecutive quarters of year-over-year TL rate increases.  TL rates fell more than normal between Q4 of 2015 and Q1 of 2016 and have not fully recovered since then.

    For the full year 2016, TL rates declined 1.0%, the first full-year decline since 2009. Stephens expects rates to rise 1-2% in 2017, with downward pressure on rates in the first half of the year, followed by rate increases in the second half of the year. Unless freight volumes surge, I am not sure we will see any increases until very late in the year.

    Quarterly data shows how weak TL pricing has been for the last 4 quarters (second and third graph). The data does not necessarily represent the entire TL industry as the publicly traded carriers tend to be larger and more successful in general, so smaller carriers may be feeling even greater rate pressure.

    Average length of haul fell to 566 miles in Q4 from 594 in Q4 2015. For the full year, LOH fell from 620 miles to 578 miles. This is an interesting trend given how weak the domestic intermodal market was in 2016. It is likely indicative of  more fundamental supply chain network changes (more DCs, closer to customers) than modal shifts from TL to intermodal. Revenue per tractor per week was down from Q4 2015 and for the full year, but remains high by historical standards. Miles per tractor per week were up very slightly year-over-year for Q4 and the full year, which is surprising given the decline in length of haul. Mileage utilization remains well below historical averages due to shorter lengths of haul and tighter hours of service regulations.

    stephens tl q4 16

    stephens tl q4 16 qtr

    stephens tl q4 16 qtr b

    stephens tl q4 16 loh

    stephens tl q4 16 rev per trac

    stephens tl q4 16 miles per trac

    Graphs reproduced with permission from Stephens Inc. For more information contact: Brad Delco at brad.delco@stephens.com or Scott Schoenhaus at scott.schoenhaus@stephens.com

  • Carrier Rate Graphs

    LTL yields up modestly in Q4 and for full year 2016

    - by Tom Sanderson

    LTL yields up modestly in Q4 and for full year 2016

    Stephens Inc. reported that LTL yields (revenue per hundredweight) increased by 1.5% from Q4 2015 to Q4 2016, and increased by 0.2% from Q3 2016. The year-over-year percentage increase for Q4 was the lowest Q4 increase since 2009. The LTL rate index hit another new all-time high point (series began in 1996) in Q4, indicative of pricing discipline by the large LTL carriers. For 2017, Stephens is expecting low single-digit LTL rate increases. That seems like a good estimate to me.

    For the full year 2016, LTL yields were up 2.4%, compared with 5.9% growth in 2015. LTL yields dropped in Q4 of 2013 and Q1 of 2014, before resuming their post-recession climb, but that climb was interrupted in Q1 of 2016 as rates dropped from Q4 of 2015 (second graph).

    Tonnage (graph 3) was up only 0.1% in Q4 ‘16 over Q4 ‘15 for the group of carriers reported on by Stephens. For the full year 2016, tonnage was down 0.5% after falling by 0.4% in 2015, indicative of the softness in the freight market for the last two years. Weight per shipment (graph 4) was down 0.2% year-over-year in Q4, and down 1.4% for the full year, likely due to plentiful TL capacity taking more of the heavier weight LTL shipments. Note that rate per hundredweight is higher at lower shipment weights so the weight drop is responsible for some of the yield increase.

    From their previous Q4-2007 peak level, LTL rates dropped 11.2% to their trough in 2010 but have now surged 26.7% from Q2 ‘10 to the current all-time high. Despite the improving trends, the challenges facing LTL carriers remain apparent as the current pricing levels remain only 12.5% over the previous peak in 2007 despite the realization of significant cost increases over that 9-year period. Some of the capacity issues that impact the TL segment, like CSA and Hours-of-Service rules, are not as relevant to the LTL segment. Industry concentration and consolidation does provide LTL carriers better pricing power than is the case for TL carriers.

    Stephens LTL q4 16

    Stephens LTL q4 16 qtr

    stephens ltl q4 16 tonnage

    stephens ltl q4 16 wgt per ship

    Graphs reproduced with permission from Stephens Inc. For more information contact: Brad Delco at brad.delco@stephens.com or Scott Schoenhaus at scott.schoenhaus@stephens.com

  • Carrier Rate Graphs

    Stephens data shows TL rates declining year-over-year

    - by Tom Sanderson

    Stephens data shows TL rates declining year-over-year

    Stephens Inc. released their Q3-2016 update on publicly traded TL carriers reporting that rates per loaded mile excluding fuel surcharge decreased by 2.1% over the same period last year, and were unchanged from Q2 of 2016. The most recent two quarters have seen year-over-year price drops, following 24 consecutive quarters of year-over-year TL rate increases.  TL rates fell more than normal between Q4 and Q1 and have not rebounded since then. It seems unlikely that Q4 of 2016 will see the same kind of upward TL pricing movement as was seen in each of the last two years.

    Stephens expects continued TL rate pressure as we enter bid season, but does think that rates may start to rise in the second half of 2017. Quarterly data shows how weak TL pricing has been for the last 3 quarters (second and third graph). The data does not necessarily represent the entire TL industry as the publicly traded carriers tend to be larger and more successful in general, so are also more likely to successfully raise rates.

    Average length of haul fell to 573 miles in Q3 from 609 in Q3 2015. This is an interesting trend given how weak the domestic intermodal market has been in 2016. It is likely indicative of  more fundamental supply chain network changes (more DCs, closer to customers) than modal shifts from TL to intermodal. Revenue per tractor per week was down from Q3 2015 but remains high by historical standards. Miles per tractor per week were up year-over-year, which is surprising given the decline in length of haul. Mileage utilization remains well below historical averages due to shorter lengths of haul and tighter hours of service regulations.

    TL Q3 16 rates

    TL Q3 16 rates qtr

    TL Q3 16 rates qtr b

    TL Q3 16 lohTL Q3 16 rev per tractor

    TL Q3 16 miles per tractor

     

  • Carrier Rate Graphs

    Stephens LTL rate index hits all-time high on modest Q3 gains

    - by Tom Sanderson

    Stephens LTL rate index hits all-time high on modest Q3 gains

    Stephens Inc. reported that LTL yields (revenue per hundredweight) increased by 1.0% from Q3 2015 to Q3 2016, and increased by 2.0% from Q2 2016. The year-over-year percentage increase for Q3 was the lowest since 2010. The LTL rate index hit a new all-time high point (series began in 1996) in Q3, indicative of pricing discipline by the large LTL carriers. For 2017, Stephens is expecting low single-digit LTL rate increases.

    For the full year 2015, LTL yields were up 5.9%, but the average quarterly year-over-year increase in 2016 is only 1.4%. LTL yields dropped in Q4 of 2013 and Q1 of 2014, before resuming their post-recession climb, but that climb was interrupted in Q1 of 2016 as rates dropped from Q4 of 2015 (second graph).

    Tonnage (graph 3) was up 0.7% in Q3 ‘16 over Q3 ‘15 for the group of carriers reported on by Stephens. For the full year 2015, tonnage was down 0.4%, indicative of the softness in the freight market in 2015. Weight per shipment (graph 4) was down 1.6% year-over-year in Q3, likely due to plentiful TL capacity taking more of the heavier weight LTL shipments. Note that rate per hundredweight is higher at lower shipment weights so the weight drop is responsible for some of the yield increase.

    From their previous Q4-2007 peak level, LTL rates dropped 11.2% to their trough in 2010 but have now surged 24.8% from Q2 ‘10 to the current all-time high. Despite the improving trends, the challenges facing LTL carriers remain apparent as the current pricing levels remain only 10.8% over the previous peak in 2007 despite the realization of significant cost increases over that 9-year period. Some of the capacity issues that impact the TL segment, like CSA and Hours-of-Service rules, are not as relevant to the LTL segment. Industry concentration and consolidation does provide LTL carriers better pricing power than is the case for TL carriers.

    LTL Q3 16 yield

    LTL Q3 16 yield b

    LTL Q3 16 tonnage

    LTL Q3 16 wgt per ship

    Graphs reproduced with permission from Stephens Inc. For more information contact: Jack Waldo at jwaldo@stephens.com or Brad Delco at brad.delco@stephens.com.

  • Ocean Freight

    Ocean rates surge on Hanjin receivership filing

    - by Tom Sanderson

    Ocean rates surge on Hanjin receivership filing

    West coast ocean spot market rates increased $593 (51%) to $1,746 on September 2, while east coast rates increased $757 (45%) to $2,441. The dramatic jump in spot market rates was driven by the August 31 receivership filing of Hanjin Shipping, the South Korean ocean carrier accounting for 8% of eastbound Transpacific trade volume and the 7th largest ocean carrier in terms of total capacity. Spot rates also spiked on July 1, with west coast rates up 61% and east coast rates up 19% in anticipation of August general rate increases. Rates had drifted slightly lower since the July 1 increase until the current spike. With two significant spikes, west coast spot rates are $290 (20%) above prior year levels and at their highest point since May 2015. East coast spot rates remain $231 (9%) lower than prior year despite two significant jumps over the summer.

    The spread between east and west-coast ports declined from a peak of $2,937 on 2/27/15 to $682 on 12/25/15, then immediately jumped back up to $1,037, but had since declined to $531 on 8/26 before jumping up to $695 after the Hanjin filing. The premium drops below $1,000 at some times, but typically not for very long. This year has been an exception as the spread has been below $1,000 for most of the year.Carrier’s clearly exercised their market power during the strike as shippers diverted freight to the east coast, but now even after recent increases, spot rates have corrected to levels considerably lower than those preceding the strike.

    The SCFI reflects spot market rates for the Shanghai export container transportation market.

    image

  • Carrier Rate Graphs

    LTL rates rise faster than TL rates in Q1

    - by Tom Sanderson

    Stephens Inc. reported that LTL yields (revenue per hundredweight) increased by 3.1% from Q1 2015 to Q1 2016, but decreased 0.9% from Q4 2015. The first quarter percentage increase was lower than any quarterly increase in 2015. For the full year 2015, LTL yields were up 5.9%. LTL yields dropped in Q4 of 2013 and Q1 of 2014, before resuming their post-recession climb, but that climb was interrupted in Q1 as rates dropped from Q4. Weight per shipment was down 2.2% year-over-year in Q1, likely due to plentiful TL capacity taking more of the heavier weight LTL shipments. Note that rate per hundredweight is higher at lower shipment weights so the weight drop is responsible for some of the yield increase.

    The LTL rate index remains just off its high point (series began in 1996) indicative of pricing discipline by the large LTL carriers. Stephens estimates that LTL rates will increase in the low-mid single digits in 2016. Tonnage was up 0.4% in Q1 ‘16 over Q1 ‘15 for the group of carriers reported on by Stephens. For the full year 2015, tonnage was down 0.8%, indicative of the softness in the freight market in 2015.

    From their previous Q4-2007 peak level, LTL rates dropped 11.2% to their trough in 2010 but have now surged 23.3% from Q2 ‘10 to the current near all-time high. Despite the improving trends, the challenges facing LTL carriers remain apparent as the current pricing levels remain only 9.6% over the previous peak in 2007 despite the realization of significant cost increases over that 9-year period. Some of the capacity issues that impact the TL segment, like CSA and Hours-of-Service rules, are not as relevant to the LTL segment. Industry concentration and consolidation does provide LTL carriers better pricing power than is the case for TL carriers.

    LTL Q1 16

    LTL Q1 qtr

    LTL Q1 16 tons

    LTL Q1 16 weight per ship

    Graphs reproduced with permission from Stephens Inc. For more information contact: Jack Waldo at jwaldo@stephens.com or Brad Delco at brad.delco@stephens.com.

  • Carrier Rate Graphs

    TL rates under pressure in Q1

    - by Tom Sanderson

    Stephens Inc. released their Q1-2016 update on publicly traded TL carriers reporting that rates per loaded mile excluding fuel surcharge increased by 1.1% over the same period last year, and decreased 4.4% from Q4 of 2015. Last quarter marked the twenty-fourth consecutive quarter of year-over-year TL rate increases, but the smallest year-over-year increase since Q2 2010.  TL rates fell more than normal between Q4 and Q1. Contractual pricing is still seeing modest increases, while spot market rates are down.

    Stephens expects Q2 2016 to increase from Q1 levels but less than the historical average 1.4% increase, and I concur with that estimate. The dramatic decline in fuel prices year-over-year has significantly lowered fuel surcharges, but that does not have any downward impact on linehaul rates. Quarterly data shows larger rate increases in the six quarters preceding Q4 ‘15, with Q4 dropping to a level more similar to what was seen in 2012 and 2013, and Q1 dropping even further.  The data does not necessarily represent the entire TL industry as the publicly traded carriers tend to be larger and more successful in general, so are also more likely to successfully raise rates.

    Average length of haul fell to 588 miles in Q1 from 651 in Q1 2015  Revenue per tractor per week was down from Q1 2015 but remains high by historical standards. Miles per tractor per week were down year-over-year and remain well below historical averages due to shorter lengths of haul and tougher hours of service regulations.

    TL Q1 16TL Q1 16 qtr

    TL Q1 16 qtr b

    TL Q1 16 LOH

    TL q1 rev per truck


    TL q1 16 miles per truck

  • Ocean Freight

    Spot market ocean rates have small rebound

    - by Tom Sanderson

    West coast ocean spot market rates increased $64 to $852 on June 3, while east coast rates increased $63 to $$1,685. East and west coast spot market oceans rates both rose for the second consecutive period but remain very low compared with historical levels. There was an extraordinary spike on 12/31/15, when west coast rates ($1,518) jumped 98% and east coast rates ($2,555) jumped 76%, but since then rates have trended down significantly. Both rates remain slightly higher than they were just before the year-end spike.

    The spread between east and west-coast ports declined from a peak of $2,937 on 2/27/15 to $682 on 12/25/15, then immediately jumped back up to $1,037, but has since declined to $833 on 6/3. There is not likely to be much more convergence as the premium drops below $1,000 at some times, but typically not for very long. Carrier’s clearly exercised their market power during the strike as shippers diverted freight to the east coast, but now spot rates have corrected to levels considerably lower than those preceding the strike.

    The SCFI reflects spot market rates for the Shanghai export container transportation market.

    image

  • Carrier Rate Graphs

    LTL yields rise 7.0% in 2015

    - by Tom Sanderson

    Stephens Inc. reported that LTL yields (revenue per hundredweight) increased by 4.1% from Q4 2014 to Q4 2015, and were up 0.8% from Q3 2015. Q4 was the weakest of the year in terms of annual yield growth: 8.0% year-over-year in Q1; 6.4% in Q2; and 5.5% in Q3. The fourth quarter percentage increase was the second largest gain for Q4 over the last 9 years. For the full year, LTL yields were up 7.0%. LTL yields dropped in Q4 of 2013 and Q1 of 2014, before resuming their post-recession climb. Weight per shipment was down 2.4% year-over-year in Q4, likely due to TL to LTL mode shifts in 2014 due to tight TL capacity in Q4 2014. Note that rate per hundredweight is higher at lower shipment weights so the weight drop is responsible for some of the yield increase.

    The LTL rate index is now at its high point (series began in 1996) indicative of pricing discipline by the large LTL carriers. Stephens estimates that LTL rates will increase in the low-single digits in 2016. Tonnage was down 1.5% in Q4 ‘15 over Q4 ‘14 for the group of carriers reported on by Stephens. For the full year 2015, tonnage was down 0.8%, indicative of the softness in the freight market in 2015.

    From their previous Q4-2007 peak level, LTL rates dropped 11.2% to their trough in 2010 but have now surged 24.4% from Q2 ‘10 to the current all-time high. Despite the improving trends, the challenges facing LTL carriers remain apparent as the current pricing levels remain only 10.5% over the previous peak in 2007 despite the realization of significant cost increases over that 8+-year period. Some of the capacity issues that impact the TL segment, like CSA and Hours-of-Service rules, are not as relevant to the LTL segment. Industry concentration and consolidation does provide LTL carriers better pricing power than is the case for TL carriers.

    Stephens LTL q4 15

    Stephens LTL q4 15 qtr

    Stephens LTL q4 15 tons

    Stephens LTL q4 15 weight

    Graphs reproduced with permission from Stephens Inc. For more information contact: Jack Waldo at jwaldo@stephens.com or Brad Delco at brad.delco@stephens.com.

  • Ocean Freight

    Ocean spot rates continue to fall

    - by Tom Sanderson

    West coast ocean spot market rates fell $121 to $884 on March 4, while east coast rates fell $179 to $$1,804. East and west coast spot market oceans rates have dropped off significantly from the extraordinary spike on 12/31/15, when west coast rates ($1,518) jumped 98% and east coast rates ($2,555) jumped 76%. Spot rates remain volatile but are still at far lower levels than at the conclusion of the west-coast port strike. East coast rates are down 62% while west coast rates are down 54% year-over-year. From the peak rate of $5,049 per FEU on February 13, 2015, east coast rates have fallen 64% to $1,804, a drop of over $3,200. The west coast peak was the same week at $2,265 per FEU. Those rates have dropped about the same on a percentage basis (61%) to $884, a drop of about $1,400.

    The spread between east and west-coast ports has declined from a peak of $2,937 on 2/27/15 to $920 on 3/4/16. There is not likely to be much more convergence over very many weeks as the premium drops below $1,000 at some times, but not for very long. Carrier’s clearly exercised their market power during the strike as shippers diverted freight to the east coast, but now spot rates have corrected to levels considerably lower than those preceding the strike.

    The SCFI reflects spot market rates for the Shanghai export container transportation market.

    image

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