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Weekly Rate Update: Volumes on fire ahead of Labor Day – 8/23/19

Weekly Rate Update: Volumes on fire ahead of Labor Day – 8/23/19

(upbeat music) – Welcome to the Weekly Rate Update. I’m Craig Fuller here
with John Paul Amstadt, Talking about where the market’s
been and where it’s headed. Again, and I say every single week, it’s been an interesting week. – Yeah. – It always is, I think
when you’re doing it right it’s always interesting. Let’s just put that behind us. – Right. – Volumes are on fire. – Still going up.
– I am so pumped up. – Still going up. Now even with the traditional kind of run up before Labor Day, right? We’re still seven percent
up year over year. – Seven percent volume numbers. But what about rates? – Rates are sideways to up basically. I mean if you look at, there’s some obscure markets like Seattle to LA that are going higher. Philadelphia to Chicago going higher. The main big lands we think about, like LA to Dallas and Chicago to Atlanta are essentially flatter right now. – So they’re flat, they’re not
seeing any downward pressure. – Right, right. – They’re not seeing huge acceleration but I think it’s just a
matter of time, don’t you? – I do too and I talked
to a couple brokers today from Traffics, which is this big, well they started off
as a Canadian brokerage and then have expanded a
lot in the past three years now they’re due about three
hundred millions dollars in gross revenue a year and they were saying that a lot of their shipper customers as well are kind of thinking about
the risk of higher spot rates in peak season.
– Right. Yeah, it’s gonna be, one of the things I’m also hearing is that in the 15/16 cycle when things were soft,
is a lot of the shippers were pulling freight
from the big asset guys and moving it into the spot
market and the brokers. It’s not happening this time
from what I’m understanding. The larger asset-based
guys are actually becoming, having really strong portfolios
that don’t seem to be under a ton of pressure in terms of volume being pulled from them. – Yeah, I think right now shippers to date are either
at budget or below budget on their transport spend. – So they have a little
big of money to play with? – They have a little bit of money to, you know, not be as tight-fisted on the contract side and what
they’re most concerned about is if there is a run up in spot rates they don’t wanna give back all the savings that they’ve recouped.
– Right, yup. So what does that mean? Are they, are you hearing, Your conversation with
Traffics and others, are you hearing that shippers are willing to lock in higher rates
going into the peaks season? – Yeah, if you’re a 3PL or even an asset-based carrier
as well that can make firm capacity commitments, you can, it sounds like shippers
are paying more for that. – Okay. – So, you know, what we’ve been brokers you know, the past month I guess, are you worried about spot rates coming up before shippers realize it and you know, if contract is still sliding, are you worried about margin compression? And what I’ve been hearing most recently is that they’re having a lot of really productive
conversations with the shippers, the shippers know that
what’s really most important and the biggest risk for them is that you know, their brokers
had to give freight back which they can’t cover
in the Fall so that’s, it seems like the rate
discussion is going well and that even the contraction,
the slide in contract may be leveling off. – Yeah. I am hearing much of the same thing, is that there’s no real momentum for increases in contract rates but we’re certainly not seeing significant downward pressure. I think things are probably sitting stable and I think you know, in
the larger public eyes it’s probably a good environment for them because the rates and the spot
market are not strong enough to see a lot of new
entrance into the market so there’s not this view of 18 where there’s a bunch of
new carriers into the market and the comps are gonna get easier moving into the latter part of the year. It’s gonna be easier
to show revenue growth and perhaps some momentum in
their operating performance versus the end of last year because just the comps are
getting fundamentally easier. – Yeah and you know, we’re keeping, especially looking at Q4, we’re in Q3 now, keeping our eye on the
retail story, right? All of the guy, you know,
Walmart had a great beat, Target had a great beat,
Nordstrom really positive guidance going into the rest of this year so I think that still looks pretty good. – Yeah, I think as long as
consumers spending stays strong then that will be really good
for the asset-based carriers moving into the fourth quarter. Typically retail is a game
for the big box retailers and the larger retailers, it’s
a game for the asset guys. They’re the ones that are
the primary beneficiaries of large retail seasons. Particularly those that are in DC to store movements and such and so they’ll do quite well and I think E commerce, man. It is… – [John] Yeah. – That’s a story, probably
an evergreen story that we’ll be talking
about 10 years from now. Just the momentum of E commerce. Certainly it’s an important element. – And you know, we talk about you know, E commerce growth, whether
it’s Amazon’s share of retail or whether it’s you know, the percentage of Walmart’s revenues that come from E commerce. Those always, that growth
rate always accelerates into holiday seasons. – Right. – So that’ll be interesting. One thing that I thought
was a little bit puzzling looking at some of the volume data is that it doesn’t, if you
look at outbound from LAX, outbound from San Francisco,
outbound from Seattle, it doesn’t look like the volumes from the maritime side have
really hit those markets yet. We’re not seeing like, a
spike out of LA for example. The volume growth on a national basis is coming from some other
kind of obscure markets. It’s like Houston and Jacksonville and Evansville.
– But I think it’s, I think it’s, well a couple things. One is I think you saw
shippers think differently about the supply chains, where
the products are coming from potentially are different,
you know Vietnam is– – [John] Right, right. – And so maybe shipping cycles
capacity’s quite different but I also think what happened this year is where retailers and others
were stocking inventory to prepare for tariffs. They just had a lot of inventory
and now we’re seeing that fundamentally shift into the market. To have a surge in mid August is unusual. – Right, right, right. – I mean, you just don’t
typically see that. The surges come after Labor Day and this year has been quite different. It’s an encouraging sign for
moving into the fourth quarter. – Yeah, there’s been a lot
of interesting movement. I think out of the ports,
the major port cities: Houston and Elizabeth, New Jersey, which is the port of New
York, New Jersey market have been strong, like in the past month. – It’s a sign that a lot
of that East Coast volume, consumer spending is strong. What else are you, anything
else that you’re hearing? – I mean, that’s the
main thing for you know, futures is flat to positive really. Same thing with spot. We’re kind of in a little
bit of a lag period where we’re waiting for
spot to react to volume. – [Craig] It’s just a matter of time. – Yeah. – I mean we’re going into, here’s what I think’s gonna
happen, talking about rates. We’ve got Labor Day coming up. Which always a surge in
rates right before Labor Day and I think what will happen is that’s also the start of peak season for the third and fourth,
the retail peak season. I think what will happen is
we’ll see some surge happen right before Labor Day. Those rates, while they
won’t be holiday spikes, they will be pretty strong. I think we’ll come back
into September and October and have really strong rate conditions. Particularly off the West Coast through the rest of the country. We’ll be pretty positive about it. – Yeah, it’ll be interesting to see whether the pre Labor Day rate spike, if we get one, how sticky it is. – I think next week is gonna be really, really good for carriers. I think there’s gonna be a
lot of spot rate activity. A lot of people moving freight
right before Labor Day. I am very, very bullish about
the next couple of weeks and pretty excited about
where things are gonna end up. – Yeah, everything that we’re
seeing is really positive. I don’t see a reason right
now to be pessimistic about the rate situation if
you’re a broker or a carrier. – Now brokers need to be
prepared that they’re gonna, when they start bidding out and thinking about what
they’re buying freight with. Protecting those margins,
this is the name of the game and it might be that
they’re gonna have to pay a little bit more than they
want to to secure trucks and it might be higher
risk of trucks running out. One of the things that I’ve
looked at earlier today is we’re finally seeing
tender rejection data show some level of increase. We’re seeing spikes in
tender rejection data, which is suggesting that
we’ve got enough volume to really impact the market such that it’s taken
up the excess capacity. – Right, and that carriers
now have a choice. – That’s right, they have optionality in their freight selection and I think as long as
they’re able to maintain that we’ll start to see pricing come. Pricing movements, like I said, is probably the story for next week. I think we’ll see some spikes. Unfortunately, it’ll be couple weeks before we really know that data. – [John] Right.
– Where we’re at on price. But looking forward I’m
very bullish, I’m excited. – I’m excited too and
I’m also excited just by the reports that we’re
getting from brokers about having constructive conversations with their customers. I was at another brokerage
in town yesterday, Max Trans Logistics, and
I asked them, I said, “Do you feel like over the past few years” “contract rates have been
sort of marked to market” “like, at an accelerated pace?” Like, adjusted they’re either up or down. You know, to match the
underlying spot market faster. Is that a trend? And they’re like, “Definitely, yes.” Both parties now see that
they have an interest to hold these agreements in place and they’re willing to
move them up or down to adjust and I just think
that it’s an interesting trend about the transparency of the market place and the flow of information and just the sort of collaboration that is becoming more and more valuable. – Yeah, information’s never
been more transparent. I mean, certainly we’re
A, a beneficiary of it and B, a contributor of it and I think it will
continue to be the case and I think that you have to
be agile in a market like this, you have to be protective of your margins. You know, we would argue
that hedging would make sense just to protect yourself
but even if you can’t hedge, just be informed more importantly. – Exactly. – Most important thing
you can do in this market is be informed and we’re
hopefully do our job here each week at the Weekly Rate Update. I’m Craig Fuller signing
off with John Paul. We’ll be back here every Friday to talk about what’s
happening in the market, where the market’s
headed and likely to go. Also don’t forget to sign
up for Freight Waves Live on November 12th and 13th in Chicago. We’ve got tons of activity
with great speakers. A lot of great, wonderful demos, food, party atmosphere, LED’s, it will be electric and
we will see you there. (upbeat music)

Reader Comments

  1. Best channel on Youtube for owner operators for insight into market and trucking industry, even weather! Much love 💪🏼

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