Pasted below, please find our Friday Freight note. We distribute this product via email each Friday mid-day, so clients have some freight reading material to make their weekends truly worthwhile! Your feedback is always appreciated if you have any suggestions.
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Our WR Transport Index surged 8.5% last week, materially outperforming the 3.2% rise in the S&P 500 and modestly outperforming the 7.4% rise in the XLI. The asset-light Forwarders (+10%) and the TLs (+9%) performed best as the micro-cap truckers – CVTI and USX – finally participated in the group’s outperformance this year, while the non-asset Forwarders (+4%) relatively lagged.
Our 13th Annual Virtual Transport & Industrials Conference takes place this week on 5/19-21, and we have over 80 Transport, Airline, and Multi-Industry companies scheduled to present and/or host 1x1 meetings.
The who’s who of transportation will gather via GoToMeeting links at our 13th Annual Virtual Transport & Industrials Conference this week on May 19-21 (R.I.P. Marriott East Side). We’ve got over 80 transportation, airline, and multi-industry companies presenting and/or hosting 1x1 meetings.
We spoke with a mid-sized private LTL and TL carrier about recent LTL and TL demand and pricing trends. This trucker's LTL shipments declined 22% y/y in April, while TL miles declined 12% y/y, both in line with most public LTL and TL comps. This carrier noted that his volumes with his core contracted customers are down even more, and he’s had to backfill his trucks in the spot market at spot rates that are 25%-30% below his contractual rates. Our contact received a loan as part of the Paycheck Protection Program on May 8, and that source of funding will run out by the first week in June. With that funding, he has been able to keep his employees on the payroll and give 15% bonuses to drivers and maintenance workers. But when that funding runs out after 8 weeks, this carrier won’t be able to keep moving freight at such heavily discounted spot rates.
Quote of the week: “Most days, the Post Office sends one truckload of mail to the domestic regional sorting facility in Michigan. But, on the week before holidays, we see a surge. On Valentine’s Day, we send two trucks. On Christmas, four, packed to the brim. And if history is any guide, we see some spillover into a fifth truck on Mother’s Day… the mother of all mail days".
We spoke with a retailer about TL capacity & pricing trends and broader demand trends amid coronavirus. Given state-wide shutdowns across the country, this shipper closed almost all of its stores in late March and switched to curbside pickup. Since then, e-commerce sales spiked over 100% y/y and overall volumes fell to around 50% of normalized levels. Last week, this retailer started allowing shoppers in select stores by appointment only and more recently opened a majority of its stores with a maximum number of shoppers allowed in at any given time. And over the past week, volumes are returning closer to more normalized levels. From a trucking capacity standpoint, our contact continues to see TL tender acceptance rates close to 100%. In terms of pricing, this shipper reduced his TL contract rates high-single digits y/y starting in March after 3%-5% reductions last year.
Our WR Transport Index bounced back nearly 11% in April, underperforming the S&P 500 by 210bp but outperforming the XLI by 180bp. Transports are now down 12.6% YTD, basically right in line with the S&P 500, but materially outperforming the XLI by over 1,000bp.
We spoke with a private freight forwarder about international freight trends. Overall volumes for our contact are down ~20%, with ocean imports in the U.S. down even more and ocean exports holding up relatively better. Given the weak volume environment, our contact estimates that ocean carriers have reduced schedules by 20%-25% with a spike in blank sailings, so even though demand is down so much, ocean rates are holding relatively steady. This forwarder noted that some medical freight that would normally travel by ocean has shifted to air. However, other shippers that typically use airfreight have shifted to premium ocean freight because airfreight rates out of China are just too high in the $15-$20/kilo range.
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