Hurricanes boost shipping industry pricing, supply chain disruptions remain

Following Hurricanes Harvey and Irma, spot freight activity has been robust “giving the disruptions, which amplifies the cyclical inflection in core contractual truckload pricing growth that occurred during the (first half of 2017),” according to Benjamin Hartford, transportation analyst for Baird.

But carriers might not “fully capture the improvement in fundamentals given incremental cost pressure driven by hurricane-related network disruptions, and may weigh on investor sentiment near term.”

For the week ending Sept. 16, dry-van spot rates were flat at $1.93 per mile, from the week ending Sept. 9, according to DAT Solutions.

“Hurricanes Harvey and Irma have come and gone, but their destructive effects will last for months or even years. Last week, supply chains that were already disrupted by Harvey were hit again by Irma’s landfall. Truckers and freight brokers have been helping with recovery efforts, while tight capacity caused by the disruption, combined with demand from a stronger economy, boosted spot market volume and rates to the highest levels in more than two years for vans, flatbeds and reefers.”

The 2017 pricing forecast for trucking has improved to 1% to 3%, from a negative 1% to up 2%, according to Donald Broughton with Broughton Capital, which provides analysis for the Cass Freight Index.

“The current strength being reported in spot rates is leading him to believe contract pricing rates should keep truckload rates in positive territory through the end of the year.”

In 2018, core truckload pricing is expected to accelerate and will remain the “primary catalyst for cyclical domestic U.S. transports,” Hartford said. Pricing should rise 2.5% to 3% in 2018, from 2017, as capacity declines, spot activity grows in the third quarter of 2017, intermodal rail service deteriorates, a healthy fourth quarter of 2017 peak season, and pressure on capacity related to the ELD mandate.

The Cass Intermodal Price Index rose 1.3% to 127.1 in August, from the same month in 2016. Broughton expects intermodal rates will be stronger through the remainder of 2017 than they were in 2016.

U.S. weekly intermodal volume rose 0.9% to 270,003 containers and trailers for the week ending Sept. 16, compared to the same week in 2016, according to the Association of American Railroads. Through the first 37 weeks of 2017, intermodal volume has risen 3.4% to 9.860 million intermodal units.

EQUIPMENT INDICATORS
U.S. trailer manufacturers built 1,189 trailers per day in August, the third highest of the year, down seven units from July, according to ACT Research. The manufacturers produced 9% more in August, compared to the same month in 2016.

“The longer schedule gave OEMs a bit of operational breathing room,” said Frank Maly, director of commercial vehicle transportation analysis and research at ACT.

August had three more days than July and tied March for the longest trailer manufacturer work schedule of the year.

U.S. trailer backlog fell 11% in August, compared to the same month in 2016.

“Backlog slipped below 100,000 for the first time since last October,” Maly said.

While most vocational/specialty trailers backlogs are up versus last year, both dry van and reefers are in the red, off 11% and 39%, respectively.”