June 27, 2018

Truckload contract rates to end first half with pre-July 4th bang

8 to 12 percent year-on-year gains expected, analysts say.

By DC Velocity Staff

Truckload contract rates continue to rip higher, and the only factor that is expected to moderate the increases is the calendar.

Contract rates for dry van services—the most common form of trailer utilization—will end the first half of 2018 up 9 to 12 percent from 2017 levels, according to estimates from Bloomberg Intelligence released today. Estimates published today by investment firm Susquehanna Financial Group today, citing data from billing firm TruckloadRate.com, said van contract rates in May climbed 8.6 percent year-over-year.

Late today, investment firm Baird published a note saying contract rates in June had climbed 10 percent from prior-year levels. Contract rate movements generally are exclusive of diesel fuel costs, which have been steadily climbing for months as well.

Analysts expect contract rate gains to moderate during the second half of the year as they bump up against tougher comparisons from a strong second half in 2017. Other than that, there is little to suggest a dramatic leveling off in the near future. Lee Klaskow, senior analyst, transport and logistics for Bloomberg Intelligence, expects a seller's market for truckload pricing to extend into 2020, albeit not with the same intensity as seen today.

Contract rates appear to be following the age-old maxim of lagging the more volatile spot, or non-contract, market by as long as six months. Spot rates in the second quarter climbed 26.1 percent in the second quarter, below the first quarter's scorching 32.1 percent increase but well above the fourth-quarter's gains of 21 percent, according to Susquehanna estimates.

The gains in truckload pricing spell good news for the intermodal sector, whose line-haul rates are typically pegged to those in truckload. Bascome Majors, transport analyst for Susquehanna, said domestic intermodal providers are bullish on demand and pricing, with their enthusiasm tempered by a shortage of rail capacity and driver costs and availability.

 


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