January Storms Cut Tonnage 4.3%

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

Severe winter weather ravaged trucking in January, driving down December tonnage by 4.3%, the greatest month-to-month decline in two years, American Trucking Associations announced last week.

Despite the drop in the trade group’s index to 124.4 in January from 130.0 in December, tonnage rose 1.3% on a year-over-year basis. That was the smallest year-over-year increase in at least one year.

“Like most economic indicators, truck tonnage was negatively impacted by bad winter weather in January,” said ATA Chief Economist Bob Costello. “January wasn’t just one storm, it was several across a large part of the country. The back-to-back nature of these storms has been the problem.”

Economic indicators such as a 16% drop in housing starts reflected temperatures far below average in two-thirds of the continental United States, as measured by the Commerce Department. Those weather troubles snagged all corners of a trucking industry that achieved 6.3% tonnage growth last year, the best improvement pace in 15 years and almost triple the 2.3% increase in 2012.

While the most recent tonnage total was hurt by weather, there were multiple indicators that underlying January freight trends were sound.

“I’ve heard from many fleets that freight was good, in between storms,” Costello said. “The fundamentals for truck freight still look good.”

While the underlying market may be solid, the 4.3% decline in January from December was much steeper than the 0.8% decline in December from the record 131.0 in November of last year.

Celadon Group, C.R. England, Swift Transportation and Werner Enterprises as well as other speakers at the Stifel Nicolaus investor conference Feb. 11-12 in Florida said the freight market was improving, though the extent of improvement was obscured by the weather.

“It continues to be one body slam after the other,” said Tommy Hodges, chairman of Titan Transfer, as bad weather has combined with regulatory limitations from the new hours-of-service rule to hurt utilization.

“We have plenty of business,” Hodges said, “but we can’t get to destinations for pickups or deliveries because often the driver has used up his hours along the way. It’s a worst-case scenario.”

The delays cause particular problems later in the week as available hours dwindle, he added.

Hodges said weather-related challenges have ranged from the Northeast and upper Midwest to the Southeast, with particular challenges on interstates leading to and from Atlanta, a crossroads of commerce.

“The weather has been horrible,” said Gary Salisbury, CEO of Fikes Truck Line, particularly in the Arkansas-based carrier’s core Southeast operating environment.

Only about 80% of the fleet was operating for several weeks, he said, before 95% was back on the road earlier this month.

Fortunately, Salisbury said, Fikes didn’t have any weather-related accidents, adding, “I will trade that for a little lost revenue anytime.”

“January has presented some challenges for us in our operating regions, no different than any other carrier,” said John Simone, CEO of USA Truck. “We’ve had customer closures making it difficult to get the efficiency we needed. In turn, our fuel costs are going up from more idling and also our maintenance operating costs.”

The weather had financial consequences, too.

Arkansas Best Corp. said in a regulatory filing earlier this month that bad weather reduced tonnage and revenue improvement by 3 percentage points and shaved $6 million off its quarterly operating income at its ABF Freight System unit. Otherwise, revenue would have been up 4% to 5%, and tonnage would have been flat or up 1%.

While no other fleets disclosed the specific financial impact, Costello outlined the difficulty when freight is disrupted by weather.

“Drivers are getting stuck in areas for a day or two and thus everything is getting backed up — and this has happened multiple times. Since trucking is governed by hours-of-service rules, a driver can’t really do extra to make it up,” he said.

Costello added, “As a result, more shippers are going to the spot market to try to get the backlog of freight moved, and spot market rates have jumped as a result.”

Spot market loads rose 56% in January over the same month of 2013, according to the Trendlines report from DAT, a load-board operator. The report also showed a sharp increase in loads that shippers and brokers hoped to move relative to the number of available trucks.

The ATA official also noted that “January and February are the slowest months of the quarter. March is the busiest month, so this could have been worse.”

The not seasonally adjusted index, which measures actual tonnage hauled, was 122.3 — which is 1.7% better than January of last year, but 0.3% below December.

ATA’s annual revision process reset the 2013 percentage increase upward from 6.2% and the tonnage record from the previous 130.9 reading.