February Tonnage Up 3.6% Despite Severe Storms

This story appears in the March 24 print edition of Transport Topics.

Truck tonnage rose 3.6% last month, achieving growth despite recurring winter storms and extremely cold weather that hampered fleets, American Trucking Associations reported last week.

The year-over-year increase to 127.6 in the advanced seasonally adjusted index relates to a 2.8% increase over January, when even worse weather caused a 4.5% drop from December. Tonnage over the first two months of 2014 is 2.3% higher than the corresponding period last year.

“It is pretty clear winter weather had a negative impact on truck tonnage during February,” said ATA Chief Economist Bob Costello, as trucking strived to move a backlog of freight built up during January. ‘We have a hole to dig out of from such a bad January, but I feel like we are moving in the right direction again.”

It is a good sign that tonnage rose in February despite the bad weather during the month, Costello said, setting the stage for further improvement.

“The fundamentals for truck freight continue to look good,” he said. “Several othereconomic indicators also snapped back in February. I remain optimistic for 2014.”

Among the economic indicators that improved in February, factory orders were up 0.8%, and retail sales improved 0.3%. Auto and other sales also rose.

One unresolved question is how much improvement in tonnage and strong spot market trends were due to weather and how much was tied to the economy.

“People are trying to ascertain what happened outside of the weather, but it is very, very difficult,” Costello told Transport Topics.

One indicator of severity was FedEx Corp.’s 20% drop in operating income because of winter’s inclement weather. Others also are reporting similar conditions.

Last month, Arkansas Best Corp. reported tonnage and revenue growth but cautioned that both business measures would have been 3 percentage points better if the weather was better.

Shipments arranged through DAT’s load board were 15% to 20% higher in January and February than last year, said DAT’s Mark Montague, manager of industry pricing. March continues that trend with shipments 10% higher than last year for the most recent week, he added.

DAT attributes the increase to a combination of freight managers searching for available trucks in a weather-disrupted market and underlying improvement in the economy.

BB&T Capital Markets analyst Thom Albrecht, in a March 18 report, recounted comments from fleets and shippers, such as one fleet that delivered a few loads for nearly $10 a mile. That is five times the current truckload spot dry van rate compiled by DAT, even after a 10 cent-per-mile increase over four weeks.

Not everyone is as optimistic, however.

“At the end of the day, 2014 is likely to be similar to the prior couple of years, wherein rates rise, but modestly, [and] costs rise to gobble up much of the rate increases,” Stifel Nicolaus analyst John Larkin wrote in a report.

Albrecht’s report said some shippers told him that C.H. Robinson Worldwide, the largest freight broker, was reneging on some commitments and that some carriers are insisting on rate increases above bids awarded less than a month ago.

“C.H. Robinson has not changed our enterprise strategy and continues to be focused on growth, which we achieve by serving our customers and contract carriers,” said Chris O’Brien, senior vice president. “Honoring our commitments to those customers is an obvious core part of our short- and long-term growth plans.”

“The outlook for tighter capacity is more real than it has been in some time,” said Paul Newbourne, senior vice president of operations at Armada Supply Chain Solutions, which manages food shipments to restaurants.

“A number of carriers are saying they are becoming more selective in the type of freight they choose,” said Newbourne, who advocates improved collaboration to help ease capacity pressure.

While markets are expected to stabilize when the weather improves, Newbourne said during a March 14 webinar, “We are headed into a capacity-constrained, higher-rate environment” in the second half of 2014.

“This is the freight season,” said Ken Harper, director of marketing for DAT, commenting on March trucking activity. “We had an exceptional winter, followed by the traditional seasonal uptick that starts now and goes into the summer.”