Loaded and Rolling: Truckload carrier executives predict muted peak season

David vs. Goliath: How small fleets can compete against nationwide carriers; spot rate Labor Day peak predicted to plateau

Thomas Wasson

1 year ago

Truckload carrier executives predict muted peak season

At a Morgan Stanley investor conference Tuesday, trucking executives predicted a muted peak season after acknowledging the industry is in the midst bottom of the freight cycle while hoping for some improvement in 2024. Schneider National CFO Steve Bruffett noted that while some seasonality may return in September through November, “I think that sets us up for a more constructive start to 2024. I wouldn’t call it robust but I would call it a more balanced and more in equilibrium type of setup than what’s been in place entering any of the last … four years.”

The management team at Werner Enterprises shared a similar outlook as CEO and chairman Derek Leathers noted, “overcapacity marketplace coupled with overstocked inventories” has passed.” FreightWaves’ Todd Maiden writes: “Werner’s biggest customers, which include discount stores that specialize in household essentials, are in a good position with their stock levels, Leathers noted. He expects restocking to occur during peak season but said customers are likely to be a bit more conservative this year to avoid the demand miscalculations that resulted in stuffed warehouses last year.”

Both Werner and Schneder are tapering expectations for a robust peak season with Schneider lowering its 2023 earnings guidance after its Q2 results in August. But there are some early signs of optimism with Leathers noting, “We’re only now starting to really find some sense of balance in the market.” While truckload capacity has been leaving in dribs and drabs for a year now, the exit rate is increasing. “I think you’re going to start to see that wash increase from here.”

David vs. Goliath: How small fleets can compete against nationwide carriers

On Tuesday, FreightWaves interviewed Guillermo Garcia, co-founder and CEO of Smarthop, about how innovations in tech platforms and TMS systems are helping smaller carriers compete against large nationwide carriers. Large enterprise fleets consisting of thousands of assets frequently leverage extensively integrated tech suites across their organizations, allowing them to manage and solicit hundreds of lanes and thousands of loads. Smaller fleets and owner-operators, lacking access or knowledge of tech-enabled TMS systems, often are heavily exposed to the volatile spot market and heavily impacted by the boom-and-bust trucking business cycle.

Garcia said a big hurdle for small fleets and owner-operators for adopting TMS systems is establishing trust. Frequently these smaller fleets have been on the receiving end of bad interactions from freight brokers, shippers or other TMS providers, which creates skepticism when looking at new platform adoption. Garcia also highlighted his experience starting a trucking company from the ground up in Miami and how that impacted his approach toward helping fleets meet their operational needs.

You can view the full episode here

Market update: Spot rate labor day peak predicted to plateau

Nationwide spot rates have shown some upward movement due to the Labor Day weekend, but expectations for the next 28 days remain muted. Excessive trucking capacity on the spot market continues to exert pressure on rates leading into the traditional peak season for trucking.

One thing to watch will be if conditions continue to tighten for contracted freight. Outbound tender rejection rates have improved 78 basis points in the past 30 days from 3.54% on Aug. 13 to 4.32%. A tentative equilibrium between carrier and shipper pricing power is around 5% to 7% for outbound rejection rates. For many large shippers, their preferred EDI tender compliance levels are often 95% or more for incumbent carriers.

The outlook moving into Q4 remains muddied as potential freight market shocks from hurricanes, a looming UAW strike, and less consumer demand from student loan payments resuming challenge predictions that freight market seasonality has returned.

FreightWaves SONAR spotlight: DOE diesel price continues to rise, with West Coast most impacted

Summary: The nationwide average price paid for a gallon of diesel fuel continues to rise, according to data released Monday from the Department of Energy/Energy Information Administration. Diesel prices rose 4.8 cents a gallon to $4.54, a level not seen since Feb 6. FreightWaves’ John Kingston wrote the nationwide increase in diesel prices is not being felt equally across the country. The winners appear to be states on the East Coast, with Kingston noting the East Coast average rose just 0.5 cents a gallon. There were some declines, with Kingston writing that West Virginia plus all the states on the Eastern Seaboard from Virginia south to Florida fell 0.2 cents.

The biggest gain by region this week is the West Coast, where prices climbed in the double digits per gallon. Kingston wrote the West Coast was up 14.5 cents a gallon to $5.535 a gallon. In just California, diesel rose 16.9 cents a gallon to $5.97; the price in the rest of the West Coast region rose 14.5 cents per gallon to $5.535.

In spite of the continued rise in diesel prices, Kingston said crude prices softened “and traders were quoted as saying that recent gains in the crude market are hitting up against technical resistance points. Global benchmark Brent crude was down 1 cent to $90.64 a barrel, and West Texas Intermediate declined 22 cents to $87.29 a barrel.”