February Truck Tonnage Rises 4.2%

This story appears in the March 28 print edition of Transport Topics.

U.S. truck tonnage improved from a year earlier for the 15th straight month, enough to allow fleet executives to pursue higher freight rates yet leave them with worries about how global events could hurt the domestic economy.

American Trucking Associations said its seasonally adjusted tonnage index rose 4.2% to 113.3 last month from 108.7 in February 2010.

However, the index declined from the January level of 116.6, and the preliminary report attributed the dip to severe winter weather.

The index, reported March 22, compares current activity to a base of 100 in 2000.

“I’m hearing a significant amount of positive news from fleets and that the largest concern continues to be the price of diesel fuel, not freight levels,” said ATA Chief Economist Bob Costello.

The tonnage index is now back at pre-recession levels common in 2007 — it ranged from 110 to 116 that year — but Costello said it is still too early to proclaim the industry completely recovered.

“Based on just tonnage, yes, we’re darn close to it, but if you look at loads hauled, that’s not as robust. Loads have not come back as much,” he said.

Tank truck carriers that supply manufacturing and industry are doing particularly well, Costello said, and those loads are among the heaviest, thereby providing a boost to the tonnage index.

If recovery is not complete, there is at least a better balance of trucking capacity relative to freight, and that allows for rate improvement.

“I’ve heard of carriers turning down freight in significant amounts,” Costello said.

In its most recent quarterly earnings statement, FedEx Corp. said it was involved in a major yield management campaign to boost its profitability. At its FedEx Freight less-than-truckload division, the number of shipments transported declined, but revenue per hundredweight increased.

Flatbed volumes are not especially strong, said David Rusch, CEO of CRST International Inc., but so much capacity has left that segment of the industry that rates are doing well.

“Our revenue per loaded mile is up about 30 cents before fuel surcharges, that’s about 18%, all in the last 90 days,” said Rusch, whose Cedar Rapids, Iowa, corporation has a large flatbed division.

Rusch said housing and commercial construction are still in bad shape, although steel and aluminum producers are “stable but not robust.” What is changing rates, he said, is that many carriers and owner-operators were eliminated by the recession, and surviving fleets, including his Malone division, have trimmed their tractor counts.

“Our fleet count is down 18%, compared with 2006-2007,” Rusch said. He also said his dedicated contract carriage division is im-proving because worried shippers want to lock in capacity.

Diversified carrier Pitt Ohio is also concerned with yield management, said James Fields, its chief operating officer. He said business has been generally better than a year ago.

“Some customers are doing very well, and others are just a bit better than last year. It’s slow, consistent growth,” said Fields, whose company started as an LTL carrier but now also provides truckload, parcel and expedited services.

Truckload appears to be a little stronger than LTL, Fields said, adding that March was fairly typical, with a slow first half followed by a second-half surge as shippers reacted to the approaching end of the first quarter.

Despite improvement in the business climate, Fields said he is not sure about what is coming next.

“I’ve heard all sorts of scenarios about all sorts of impacts,” he said, listing Japan, Libya, the Middle East, oil prices and state and local governments that are going broke, as major issues that could disrupt business. “There’s a lot of instability,” Fields said.

In a presentation this month for investment firm Stifel, Nicolaus & Co., Eaton Corp. economist James Meil said economic “tail winds and head winds are gaining strength” simultaneously. He produced long lists of good and worrisome events.

On the positive side, Meil noted improving U.S. employment, auto sales, the service sector of the economy and retail sales, while inflation is calm, at least for now.

Meil’s troubling developments included Japan’s devastation, Middle East politics, oil prices, the beleaguered housing industry, government debt in Europe and commodity prices.

On oil prices, Costello said they are distressingly high, but he did not see them causing contraction in U.S. gross domestic product at this level.

“We’re nowhere close to that Doomsday scenario happening. I think you’d have to be at $120 to $125 a barrel for a while before that happens,” Costello said.