JBF Transportation Bulletin February 2019

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The JBF Transportation Bulletin 
February 2019 | Commentary By Mike Mulqueen, JBF Consulting




Global economics, freight markets and technological innovation all impact your supply chains and logistics operations.  Last year’s capacity shortage is still fresh in everyone’s mind and new challenges/opportunities seem to spring up daily. 

To keep our clients informed, JBF Consulting will be curating freight logistics information in a quick and easy-to-read monthly briefing.  We will source content from leading industry analysts as well as provide our own take on our primary area of expertise, namely logistics technology.  

As this is our initial bulletin, we are only releasing this to our direct client network. Please feel free to reach out with any feedback, comments or suggestions you might have.

We also encourage you to subscribe to this newsletter to receive future editions beyond the initial release. Sharing is encouraged!

JBF Summary

While we can all agree that the market outlook for truck freight transportation is significantly better than a year ago, to what extent is still in question.

Spot rates have come down significantly as have the YoY “loads to trucks” ratios across equipment types.

Additionally, tender rejections for contracted freight are not nearly as high as they were last year and the most recent Shippers Condition Index report from FTR indicates the environment, from a shipper’s perspective, is the best it has been since August, 2016.

Regardless of the capacity/demand situation, shippers should not use the changing macro-economic landscape as the impetus to return to a mercenary approach to rates.

In 2017 and 2018, there was renewed talk of shippers truly partnering with carriers; to become a “Shipper of Choice.” We hope that was not “just talk” but will instead lead to meaningful dialogues that seek to address long-term operating inefficiencies that needlessly drive up costs.

Provided below is an aggregation of recent analysis provided by industry and economic analysts that aim to provide our clients with a snapshot into the North American freight markets.

Table of Contents

Spot Van Rates Poised for a Rebound

Source: https://www.dat.com/blog/post/spot-van-rates-are-poised-for-a-rebound

The load-to-truck ratio rose 3.5% to 4.8 loads per truck. Demand appears to be poised for a rebound, and rates may have hit bottom for the season.

The recent increase in oil prices also gives us confidence that a spot market thaw is imminent. West Texas Intermediate crude has risen to $56 per barrel, spurring new activity in Texas oil fields. The rising trend will likely continue to generate additional freight volumes there and throughout the country as soon as spring arrives.

Last week, the top 100 high-volume van lanes turned positive, by an ever-so-slight margin. Rates rose a minuscule 0.2% or three-tenths of a cent per mile, but that ends a streak of weekly losses going back to early January. Of those 100 lanes, 47 lanes had higher rates, while prices fell on 40 lanes. The other 13 lanes were unchanged compared to the previous week. That “lucky 13” was a record high number of neutral results for this bellwether report, which suggests that the spot market has already found the bottom. 


The biggest increases last week were in markets that usually have weak pricing:

  • Seattle to Spokane jumped up 31¢ to $3.54/mile, due to snowstorms that closed some of the major highways, on and off during the week
  • Denver to Albuquerque recovered 12¢ to $2.00/mile, after a sharp drop in the previous week
  • Denver to Houston also added 12¢ at $1.37/mile, which is still not a great rate


Pricing was stable on most other lanes, with a couple of noteworthy declines:

  • Chicago to Buffalo rates fell 16¢ to $2.54/mile, which could just be a tough comparison to the previous week when both cities recovered from major snowstorms
  • Los Angeles to Denver lost 12¢ at $2.22/mile — this could also be weather-related


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How Much Lower Will Freight Rates Fall?

source: https://www.dat.com/blog/post/how-much-lower-will-freight-rates-fall
Has money been a little tighter for your business lately?

If you’re a small carrier or owner-operator, you’re not alone. Freight rates have been in decline since the calendar flipped to 2019. Prices are typically down during this part of winter, but there are signs that rates could thaw soon.

 The good news is that volumes have been firming up this month. On the top 100 van lanes, February volumes so far have outpaced both 2017 and 2018, and the number of lanes with higher rates versus lower rates was fairly balanced last week.

That said, rates out of most of the major markets are well below where they were a month ago. Outbound prices picked up from the Northeast, though. Rates out of both Philadelphia and Allentown, PA, were up 3%.

All rates below include fuel surcharges and are based on real transactions between brokers and carriers.

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  • Philly to Boston jumped up 16¢ to $3.43/mile
  • Allentown to Boston was also up 14¢ to $3.62/mile
  • Out West, Denver to Oklahoma City added 14¢ at $1.38/mile
  • Stockton, CA to Portland, OR was up 13¢ to $2.63


We saw some spikes in prices out of Chicago two weeks ago as a result of that blast of Arctic weather, but those rates started to fall back to earth last week.

  • Chicago to Detroit was down 22¢ at $3.13/mile
  • Chicago to Columbus lost 12¢ at $2.79/mile
  • The lane from Denver to Albuquerque is still one of your best bets for getting out of Colorado, but that lane lost 15¢ last week at $1.88/mile


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More Dovish Monetary Policy May Restore Business Confidence

Source: https://www.conference-board.org/data/usforecast.cfm
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By the end of January, businesses breathed a sigh of relief after a turbulent month featuring the longest government shutdown in US history.  In addition, the Federal Reserve statement at the end of January signaled to many that the bank may not raise interest rates at all during 2019, which helped stock markets recover lost ground and eased fears of recession.

 Still, the economy is likely to slow during 2019 back towards its medium-term two percent trend. The effect of fiscal stimulus measures will fade during 2019. Global growth prospects in mature economies, especially in the Euro Area and China, are slowing.

Furthermore, more rapid wage acceleration domestically could reduce firm profitability. Expect the economy to slow to 2.2 percent growth by the second half of this year compared to more than three percent during the first three quarters of 2018.

While the government shutdown lasted five weeks, it ended before doing lasting damage to the US economy. With 800,000 federal workers spending more than a month furloughed or working without pay, 0.3 percent of GDP growth was likely lost across the final quarter of 2018 and first quarter of 2019. These losses were centered in discretionary consumption categories because workers faced cash shortfalls which may not be recovered later.

Businesses too were disrupted as they were unable to avail themselves of government services.

 Currently, the Federal Reserve views the risk of inflation accelerating as muted. But a pickup in inflation measures is a distinct possibility as the US economy continues to perform well, particularly labor markets. If wages continue to rise, supporting consumer demand and placing pressure on prices, the Fed may increase rates during the second half of this year. 

Businesses, therefore, must watch wage and inflation data warily to see if the Fed may reconsider its policy shift.

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A Measure of Market Fluctuations in Per-Mile Intermodal Freight Costs

As the nation’s largest payer of freight bills, Cass manages $28 billion annually in freight spend, enabling us to compile meaningful data that serves as an indicator of transportation industry trends. The Cass Intermodal Price Index® is a measure of market fluctuations in U.S. domestic intermodal costs. Cass partners with securities analyst firm Broughton Capital LLC, who provides the analysis we offer each month.

 January 2019

Despite the ongoing decline in diesel prices, intermodal pricing (all costs included) increased 3.6% sequentially and 6.8% YoY to hit an all-time high in January 2019.

On a nominal basis, the index rose to 151.0, easily surpassing the previous record high of 147.3 established in October. January marked the 28th consecutive month of increases, and brought the three-month moving average to 8.6%.

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Source: https://www.cassinfo.com/freight-audit-payment/cass-transportation-indexes/intermodal-price-index
Source: https://www.cassinfo.com/freight-audit-payment/cass-transportation-indexes/intermodal-price-index

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US National Diesel Prices

Souce:  https://www.eia.gov/petroleum/gasdiesel/
US Diesel prices remain relatively flat YoY with national prices staying within a .40 cent range.  In the past month, diesel prices have risen slightly over 2% or 8 cents / gallon.
Souce:  https://www.eia.gov/petroleum/gasdiesel/
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FTR’s Shipper Condition Index

After a basically neutral reading in November, FTR’s Shipping Conditions Index (SCI) moved into positive territory in December.

The December SCI measure at 1.7 was the strongest for the index since August 2016.

After a short weakening period in the first quarter of 2019, the SCI is expected to maintain the December level through the balance of the year.

The unusual dual positive readings in December for measuring both Shippers Conditions as well as Trucking Conditions were primarily driven by improved freight volume and lower fuel prices without much change in freight rates, according to Todd Tranausky, vice president of intermodal.

“Stable fuel prices, a turn in rail service levels, and loosening truck capacity have combined to create a favorable environment for shippers seeking to move freight,” Tranausky said. “The situation is forecast to continue for much of 2019, as fuel prices remain stable and economic conditions hold firm.”

Source:  https://www.thetrucker.com/ftrs-shippers-conditions-index-for-december-highest-since-august-2016/

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Ocean Demand Drivers and Freight Rates

The long-haul mainlane trades, which are critical for the overall health of the container shipping market, are in for what could become a tough year with several pitfalls.

Trade tensions between the US on one side and China and Europe on the other, are coming in on top of a tendency for traditional consumers of containerized goods in the West to show signs of being ‘saturated’ – at least in Europe, it seems. If this tendency is here to stay, very real problems will prompt liners to rethink their strategy – not just cause, yet another update of the network. 

 Lower demand on mainlane trades is also likely to have an impact on the part of intra-Asian trade lanes that benefits from exports to Europe and North America.

 February is a slow month and this year will be no different. The only real question will be, to what extent? Growth in the first 11 months of 2018, was the slowest recorded in the past decade for intra-Asia at 3.8% (Source: Clarksons), except for 2015 when the global market was hurt by a weak demand growth rate.  

 Freight rates on many intra-Asian trades have been steady throughout 2017-2018, which is very positive in a market which is growing at continued slower pace. The big question remains, how steady will they be, going forward when extra-Asia trades weaken?

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Source:  https://www.hellenicshippingnews.com/container-shipping-the-many-pitfalls-in-the-coming-months-will-decide-the-fate-of-the-year/
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Ocean Container Outlook

European containerized imports look likely to be stuck with demand growth of no more than 2% for years to come. That means the long-hauls into northern and southern Europe, where Ultra Large Containerships are perfectly suited to reap the benefits of economies of scale, will suffer unless cascading is accelerated.

 This gloomy outlook seems certain for 2019 and is likely to be extended, if consumer behavior does not change dramatically from that experienced in the past four years, the exception being 2017. (Demand growth on the Far East to Europe trade lane: 2015: -3.2%; 2016: 2.9%; 2017 4.5%; and 2018 (estimated) 2.2%).

 All the US east coast ports are now fully equipped with cranes to cater for Ultra Large Containerships. As a result, we saw strong import growth into the US via this route in 2017 (10%) and again in 2018 (8%). More cargo is likely to follow this trend, away from the more crowded options of the US west coast. Despite this, BIMCO forecasts overall imports into the US will be lower in 2019 when compared with 2018.

 The higher growth rates are expected on North-South trades, highlighting South America and imports into Africa as places where volumes – but not so much freight rates – could improve in 2019.

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Keep Me Updated on Future Transportation Bulletins

Upcoming Industry Events

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JBF Consulting specializes in helping large shippers select, implement and manage their Transportation & Fleet Management systems so they can get more out of their investment. To contact JBF Consulting call 203-807-5231 or email: JBFInfo@jbf-consulting.com

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Disclaimer:  This newsletter is being provided to the reader as a general overview of current market conditions and contains information compiled by JBF Consulting from a variety of sources. 

This newsletter is provided solely for general informational purposes and is not intended to be, nor should it be construed by the reader as, specific advice or a solution tailored to a particular company or client. 

Before acting on any information, you should consider the appropriateness of the information provided to your company’s circumstances and it is recommended that you seek independent advice if you have questions specific to your own objectives.

JBF Consulting makes no representation or warranty as to the accuracy or completeness of the information contained herein and shall have no liability for any representations (expressed or implied) regarding information contained in, or omitted from, this newsletter.