Strong Demand, Weather Woes Straining Capacity, Fleets Say

This story appears in the Feb. 17 print edition of Transport Topics.

MANALAPAN, Fla. — Trucking capacity is under great strain this winter due to a combination of improving demand and severe weather, creating hope among fleets there is enough underlying strength to carry into spring and beyond.

That was the key message from more than a dozen fleets and shippers speaking last week here at the Stifel Nicolaus transportation conference, representing the truckload, less-than-truckload, bulk and refrigerated sectors.

“From a freight standpoint, it is a good time to be a trucker,” Chad England, CEO of C.R. England, said Feb. 12. “February is typically our worst month. This [increase] is far stronger than last year. It’s more than just the weather.”

Reasons cited for the capacity squeeze have multiplied since a busy holiday season and have been exacerbated by winter storms. Speakers attributed it to stronger demand, coupled with a rising pace of fleet failures and trucks idled because of limited driver supply.

Actual statistics will be revealed when American Trucking Associations releases the January tonnage index this week. However, the tightening capacity has spawned tales of spot-market loads moving at $5 per mile — or more than double typical rates — and drivers turning down $4,000 for a 550-mile run into the Northeast for fear of having equipment stranded there by expected heavy snow.

“The demand is there,” said Butch Bingham, CEO of Bulkmatic, a bulk hauler based in Griffith, Ind. “I don’t think it is just a function of a compressed holiday season. We anticipate [demand] will be strong through the year. There are not enough drivers and not enough trucks.”

Heartland Express turned down 12,000 loads during January, triple the number not hauled in the same month of 2013, said Chief Financial Officer John Cosaert.

“Even with the weather aside, demand seems to be coming along,” said Paul Will, Celadon Group CEO. “Most fleets are feeling pretty good about where we are headed.”

At the same time, Will cautioned that it was not yet clear how much of the demand improvement was caused by economic factors or reduced fleet capacity.

“We have had a strong January and February to date,” said Derek Leathers, president of Werner Enterprises. “It’s a multithemed story — partly the weather and partly a small uptick in the economy.”

Leathers cautioned it is too soon to be sure how much improvement has been seen independent of weather.

“There was momentum that carried over into January,” said Knight Transportation President Dave Jackson, who added weather was an unknown factor. “It feels like there is more opportunity out there. I don’t know if it is a function of supply and some pickup in demand.”

David Mee, CFO of J.B. Hunt Transport Services, also focused on weather, particularly in Chicago. That region is the hub for rail services used by Hunt for intermodal, which constitutes its highest revenue and profit sector. “January was a nightmare,” Mee said. “It is too soon to tell what the impact will be” in terms of potential lost business.

“This year, we didn’t have a falloff [after December],” said Billy Hupp, chief operating officer of Estes Express. “Hopefully, this is just better news about the economy.”

Also in the LTL sector, Arkansas Best Corp. said its ABF Freight System unit would have raised revenue 4-5%, and that weather shaved 3 percentage points off that total between Jan. 1 and Feb. 10. And weather cut 3 percentage points off a tonnage increase that would have been 3-4% higher without the storm’s effects. The result was $6 million lower operating income so far in the quarter, the company said in a regulatory filing.

“There is a lot of freight for January and February,” said Jerry Moyes, chairman and founder of Swift Transportation.

Swift President Richard Stocking said both the company and customers are excited about 2014, though shippers are nervous about capacity they haven’t been able to find.

On the shipper side, Jeff Shoemaker, group manager of transportation for The Clorox Co., said, “The trucks just disappeared in the Northeast and Midwest. There is so much weather impact that [it is] hard to discern” how much of the capacity squeeze was caused by storms.

Mark DiBlasi, CEO of Roadrunner Transportation, said the capacity constraints from an improving freight market “will lead to much better pricing than we have enjoyed over the past several years.”