2015 | History Doesn’t Repeat Itself But Freight Trends Do
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2014 was the Year of the Perfect Storm. The weather, improving economy, HOS regulations and the driver shortage, combined to create capacity shortages and record rates. So, now to the big question: what’s the Outlook for 2015? Originally presented by Don Thornton, Vice President, DAT Solutions
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2015 | History Doesn’t Repeat Itself But Freight Trends Do
- 1. 2015 | Future History & Past Trends Don Thornton, Sr. Vice President DAT Solutions February 2015
- 2. 2015: History Doesn’t Repeat Itself But Trends Do Don Thornton, Senior Vice-President DAT Solutions
- 3. Hot Market Maps: Supply and Demand the Past 3 Januarys Load-to-truck ratios January 2015 Looks a Lot More Like 2013 than 2014 January 2013: Demand is slow, capacity is loose = “Typical January” January 2014: Polar Vortex, re-scheduling, supply chains disrupted January 2015: Higher demand than 2013, but capacity is available
- 4. Correlation of Spot and Contract Rates 1 2 3
- 5. Key Market: A Perennial Top 5 -- LA Home to largest port complex on continent: L.A./Long Beach 2014 shows the typical “Spring Freight” season peaking in June 2014 also shows the anomaly: a November peak in both freight and rates AND freight and rates dropping sharply from Nov thru Jan Outbound spot market demand/capacity and rates
- 6. Trending Market: Savannah, GA Cargo diverted from West Coast to East Coast ports January 2015: Load searches double vs. Jan. 2014, by carriers with outbound vans. Loads down 3.2% vs. Jan. ‘14, but up 8.3% vs. Jan. ’13. Again, you see Q2 seasonality and Q4 anomaly, trending down thru Jan 15 Outbound spot market demand/capacity and rates Q4 2014 2nd peak 1 2
- 7. 2015 Outlook Strong Freight, Stronger Capacity Macro: Significant increase in national capacity on spot Jan 2015 vs. January 2013 Macro: National avg rates for equipment rates drop weekly 1/18 to 1/31 Micro: carriers looking for loads &/or loads with better rates lead to higher than national avg capacity
- 8. Data Says Current Capacity May Give Rates a Breather But Seasonal Freight/Rate Pattern Returns in Spring
- 9. Trendlines and RateView Weekly data and trends: www.DAT.com /Trendlines Daily, weekly, monthly capacity and rates: DAT RateView
- 10. RateView and Trendlines DAT Trendlines Executive summary tren d reports free with sign-up DAT RateView Detailed, searchable, capacity and rate data by subscription
- 11. BACKUP MATERIALS
- 12. 2015 Resembles 2014 for Flatbeds Demand is high in 2015, but regional shift is in progress Big changes in sectors that generate flatbed freight Construction, auto, steel, manufacturing all on the rise Oil/gas exploration declining, due to low oil prices January 2013 January 2014 January 2015
- 13. Spot Anticipates Contract Rates: Flats February – November 2014 Spot market rates rise >11% Contract rates rise 7-8% within 30 days, ramp up in Q3-Q4
- 14. Market in Transition: Houston, TX Backhaul market for vans, #1 for outbound flatbed volume Outbound flatbed: Drilling equipment, influenced by oil price Outbound van: Oil byproducts to chemical manufacturing plants Inbound van/reefer flatbed: construction supplies, food, consumer goods Inbound/outbound van: import/export traffic, via Gulf Coast as alternative to Pacific Load-to-truck ratio increases, anticipates rising rates. March – July 2014 Load-to-truck ratio peaked in July Spot market rates peaked in August
- 15. Rising Star: Cleveland, OH Flatbed volume surpassed Houston’s in January Outbound flatbed: steel, auto Outbound van: manufactured goods, including tires, tech, food, furniture 8% growth in manufacturing in Ohio since 2010 Inbound van/reefer/flatbed: metals, chemicals, auto parts, equipment, food, consumer goods Houston rates fall with oil, Cleveland’s up on steel, auto. August - December 2014 Houston flatbed rates drop steadily Cleveland rates rise through year end
- 16. Thank You
- 17. Thank You Daily, weekly, monthly capacity and rates: DAT RateView • Weekly data and trends: www.DAT.com/Trendlines
Hinweis der Redaktion
- I’m Don Thornton, Senior Vice-President at DAT Solutions, which is part of Roper Industries. Before we get into the 2015 Truckload Outlook, here are a few facts about DAT that will give you background for what follows. Many of you may have heard of our load board business, which began in 1978, but what most of you probably don’t know is the big data we deal with as a result of running the largest network of transportation professionals in North America. We serve shippers, 3PLs, and carriers. As you can see from the slide, the 35,000 carriers on our network have roughly 900,000 power units, which works out to an average of 25 trucks per fleet, although we have quite a number of owner operators as well as a few very large carriers. In terms of freight, our customers have helped us estimate that roughly 1/3 of the commercial truck freight in the United States and Canada is moved on the spot market, as the economy has improved and 3PLs have found the capacity they need for their shipper customers. The rate data you’re about to see comes from $36B in spot and contract transactions we monitor across 65,000 lanes in North America. As we know, 2014 was the Year of the Perfect Storm. The weather, improving economy, HOS regulations and the driver shortage, combined to create capacity shortages and record rates. When Tom asked me to speak, he told me he wanted to see information that was new. One element of that is the correlation between spot market supply and demand and its impact on contract freight. So, now to the big question: what’s the Outlook for 2015? When DAT customers ask us similar questions, we start by showing them what we call Hot Market Maps just like the ones on the slide, and then drill down to the key market areas and the lanes where they do business. What you’re seeing is what we might call our “freight weather maps” for the past three Januarys for vans, the largest equipment type. (We have similar information for flats and reefers I can talk to you about offline.). At a glance you can see, January 2015 on the far right looks a lot more like January 2013 on the left than last year (which is in the middle). Obviously, there are some differences. These Hot Market are maps made up of 135 distinct freight markets (basically, major cities and/or areas with cities close by) that are grouped by their transportation activities. The Hot Market Maps are part of our RateView and load board products. If we walk through each of the past three Januarys, Since rates typically reflect supply and demand let’s look at national rates for vans.
- Keep in mind that the spot market rates are necessarily much more dynamic and volatile than contract. The lag time between spot and contract can be anywhere from a month to 6 months, although 2 months is more the norm. What you see on the left hand of the chart is a typical Spring season spot market with the rate peaking in June of 2013, which is not followed by a contract rate increase. But then 2014 starts to get more interesting. 1. The first circle shows that from October of 2013 through December of 2013, spot markets rise and reach an unusual high for the year in December (typically rates peak in June or July) . By comparison, contract rates start rising a month or so later and peak in January of ‘14. 2. The second circle captures the “twin peaks” of 2014 spot market rates – March and June – which prefigure a rise of a nickel per mile increase in the line haul rates on the contract market. 3. Our last circle shows spot rates eclipsing slowly but steadily rising contract rates in December of 2014, but drifting down in January, while contract remains on an elevated trajectory. In the spirit of transparency, what neither the supply and demand maps or these rate charts tell you is that because of the influx of headhaul freight on the spot market, rates rose dramatically in 2014: in fact, last year, on 52% of the 65,000 lanes we cover the spot rate exceeded the contract rate as shippers used 3PLs to find capacity wherever it was available. While the national maps and charts are interesting, probably of greater value to this group would be a quick look at a couple of local markets.
- Our first Key Market Area is Los Angeles, which includes the Long Beach (and San Pedro) ports. LA is typically a Top Five market for outbound and inbound freight, largely due to the import/export freight at its ports, produce and agricultural equipment, as well as construction and consumer items. The LA Market is undergoing significant stress: On Friday, it was announced by the Pacific Maritime Association (PMA) that vessel loading and unloading operations at West Coast ports would be temporarily suspended last weekend. Even before Friday’s announcement, freight was being diverted to other ports, including the East Coast. So, there’s a highly disruptive situation, and the question is where will the freight go if the situation worsens. Stay tuned. When we look at the relationship between supply and demand and rates, we see a very high correlation, with June and November peaks, followed by precipitous declines in the load-to-truck ratio and retreating rates.
- Let’s look at a port on the East Coast that’s benefiting from freight shifting away from the West Coast. Savannah is also getting ready to receive big ships via the improved Panama Canal. In terms of the outbound van supply and demand, again we see a very high correlation between truckload load-to-truck ratios in orange, and the linehaul spot rate, which is the brown line; the first run-up and decline occurs from March to June of 14, and our second peak, although not nearly as steep, occurs in Q4. And, as you may see, the orange line showing load-to-truck ratios drops in January. Significantly, the number of load searches – that is, carriers searching for loads – in January 2015 was double that of 2014. On the freight side, it was up 8.3% from January 2013, so it’s strong, but it’s down 3 % compared to 2014, which isn’t surprising because of the mild weather we’ve been having.
- So that brings us to the freight Outlook for 2015. Based on January data and the emerging trends: capacity is available. Carriers are looking for loads. Specifically: 75% increase in capacity on spot market in January 2015 vs. 2013, which is the more “normal” baseline for January as a national average (dark brown) When we take a look at the two markets we drilled down on, In 2014, searches declined Y-O-Y. In Savannah’s case, the weather was a factor, but not for L.A. More importantly, both LA and Savannah saw significally increased capacity 2015 in L.A., Savannah capacity, compared to national averages
- Rates may not increase Q1 because of falling fuel prices, and the reduced pressure from the spot market (as you can see from the capacity graph here). Basically, Q1 will probably be a 'breather' for rate increases, but there will be renewed rate pressure - and increases - in the 2nd quarter when the Spring Freight Season kicks in. The HOS rollback will also provide modest relief for capacity and rates, although economic growth isn't as robust as some analysts thought a couple of months ago. What about fuel prices? Unfortunately, falling oil prices do not have an immediate impact on other market sectors. And we have already experienced a price jolt upward with the Shell refinery strike. A full-on West Coast refinery strike could further dampen rates, at least on the West Coast and have national impact. To conclude: the spot market is 1) strong and 2) pointing to pressure on contract rates sometime during 2015. I don’t know about crystall balls, but the data suggests 2015 will be more like 2013 nationally, although there will be hot and cold spells in different key market areas – which is a lot like the weather. Thank you.