The holiday season was a wild one for the transportation industry, with two mid-week disruptions cutting business days and disrupting the way that freight is tendered and moved. This week, executives at freight brokerages in Freight Alley and Chicago have been cautiously optimistic about how January volumes started, with two important dissenting voices. Most freight brokers have been pleased with volumes after New Year’s Day and into this week, while at the same time enjoying plentiful capacity. In other words, brokers have been covering a large number of loads in a routine way, without much margin pressure. But two young Chicago-based brokerages have a more pessimistic view of the market which needs to be considered.
First, the bull case. Last Friday, we spoke to Jason Roberts, director of business development at Avenger Logistics.
“Yesterday [Thursday Jan. 3] was slow, picked up a lot, today [Jan. 4] is picking up,” Roberts said. “We have not had difficulty with capacity so far—everyone’s gotten out of the house. For us, as we expected, we had a slow first day or two, but looks like things are picking back up.” Roberts went on to say that outbound Midwest and California volume still looked good, and that his team was surprised by unexpectedly high outbound Florida volumes. Roberts said Texas and the Southeast have been performing as expected.
On Monday, we spoke to Keith Gray, VP of operations at LYNC Logistics, Shawn McLeod, branch manager at Axle Logistics, Christopher Thornycroft, SVP operations at Redwood Logistics, and Andrew Silver, CEO at MoLo Solutions.
“I’ve been surprised,” Gray began. “We expected volume to dip especially first part of the year, but I don’t know that we’re seeing it. In certain spots and with certain customers it has dipped, but overall it’s been really good. I was really expecting a large dip, at least in the first part of January. Looking at the board, today’s volume is higher than Friday’s already [at 10 AM ET].”
“Last week’s volumes were hit or miss,” said Shawn McLeod, branch manager at Axle Logistics. “On the second it was dead, but by Friday it was back up to normal. Overall, so far, it’s too early to tell.”
“[Monday’s] volume is stupid, way higher than average daily volume, and it looks like tomorrow is shaping up the same way,” McLeod continued.
The Chicago brokers we talked to acknowledged robust volumes to this point, but were much less optimistic about the rest of the first quarter.
“YOY volume trends have started ahead of last year’s pace, but it’s too early to tell what kind of market we are in, not to mention the uncertainty that is facing the economy as a whole,” wrote Redwood’s Thornycroft. “The biggest focus will be on the East Coast to see how seasonality, capacity, freight volumes, and port activity trends to start off February. For now, the other market trends are playing out as a fairly typical first quarter, although one with a little more capacity than the last 20 or so months.”
On Monday night, Andrew Silver, CEO of MoLo Solutions in Chicago, was even more bearish on January and February freight markets.
“Our volumes are strong now, but 3PLs are in for a rude awakening through the rest of the quarter if they’re unprepared,” Silver said. “Barring a significant weather event, capacity will continue to loosen and rates will drop. Managing your mix of spot and contracted freight will be the key to either growing or disappointing.”
Meanwhile, Patrick Draut, SVP of business intelligence at K & L Freight in Chicago, wrote a Medium post with a thoroughly pessimistic thesis.
“Too many trucks, not enough freight. Saddle up for the race to the bottom” read the headline of Draut’s article.
“At the very minimum, we can reasonably assume truck capacity is at or near its needed level,” Draut wrote. “Coupled with depressed volumes, this will undoubtedly put downward pressure on rates. With the import tariff derby seemingly behind us, any new increase of shipping demand will most likely have to come domestically, and the prospects for that notion are getting less probable.”
