Few Signs of Peak Season Are Emerging, Officials Say

This story appears in the Sept. 9 print edition of Transport Topics.

Freight volumes have remained steady into early September, but are showing little sign of an emerging peak shipping season because of economic weakness and changing strategies by carriers and shippers, according to industry officials.

“Generally speaking, the whole idea of a peak season is a misnomer,” Jessica Dankert, director of supply chain for the Retail Industry Leaders Association trade group, told Transport Topics on Sept. 4. “There have been three main factors [to flatten peak demand]: a tepid economy, changes in inventory practices and retail demand,” which has been relatively stable.

Dankert estimated that fall shipping volumes won’t be more than three percentage points higher than the rest of the year.

“One of the factors is the change in how [retailers] are managing inventory. They are either spreading [shipments] out or importing earlier,” she said.

Ted Prince, principal consultant at T. Prince and Associates and a former rail and ocean carrier executive, agreed the peak phenomenon is really over.

“Peak volume is more associated with a peak economy,” he said.

“One fact that comes through loud and clear is that seasonability is decreasing,” Prince said after analyzing cargo trends in 2012 Intermodal Association of North America data.

IANA’s lowest quarterly total was 22.2% in the first quarter and the most was 27.6% in the third quarter. That’s a variation of 2.6 percentage points from a 25% average in each quarter. In years past, the intermodal variability was double that pace.

Demand has flattened because ocean carriers have completely switched to so-called “slow steaming” to lower costs, Prince said, slowing shipments and elongating past cargo peaks.

Tractor-trailer load data measured by consulting firm FTR Associates, based in Nashville, Ind., shows a similar trend.

Last year’s quarterly variation was just 3.2 percentage points, with a high of 26.1% of loads in the third quarter and 22.9% in the fourth quarter.

“What we have been seeing over the last several years is that the peak season occurs, but is not breaking any records,” FTR President Eric Starks told TT, citing changing shipper and demand practices. “We are already seeing a similar pattern this year. The weak import numbers highlight this fact.”

The changes by shippers have masked some demand spikes for truckers, said Bob Costello, American Trucking Associations’ chief economist.

Costello told TT that simultaneous, and conflicting, trends are affecting truckers because of changes to long-term retail shipping trends. In the past, orders were made far in advance and inventories were higher.

On one hand, he said, “fall freight season is less volatile because shippers are keeping inventories lean and spreading out the time when they ship goods.”

On the other hand, he said, technological enhancements that have given them instantaneous visibility, have given trucking customers the ability to make more last-minute shipments to fill gaps in inventory. That, in turn, has created short-term volatility as those shipments move.

Jeff Lang, CEO of East Wenatchee, Wash.-based motor carrier Eagle Group, also told TT that freight volumes are steady.

“We haven’t seen a big surge,” Lang said. “Business is fairly strong right now, and it has been strong for a while.”

He said domestic intermodal freight has been stronger than international cargo, particularly at Eagle Group’s operations in East Coast ports.

Cowen Securities analyst Jason Seidl said current freight volumes, which are little changed during the year, are being reflected elsewhere.

“There is no sign that shippers are having trouble finding capacity on the trucking side,” he told TT.

The absence of capacity issues likely was due to the fact that shippers and carriers found ways to collaborate and keep freight moving smoothly, he said.

Seidl also noted that the lack of a capacity squeeze was an indication that the hours-of-service rules change isn’t yet having the anticipated effect of reducing capacity, a widely expressed view before the change took place.

“There is a lot of capacity out there,” said Bruce Carlton, president of the National Industrial Transportation League. 

“We have not heard from any members that their freight is being left on the dock.”

“If there is a tender point out there, it is the fact that a lot of shippers are waiting for the other shoe to drop in truck driver availability issues,”

Carlton said, citing repeated reports that hours-of-service law changes and other factors will trim capacity.

Craig Shearman, vice president at the National Retail Federation trade group, told TT that international shipping volumes have shifted back and forth in recent years with the expectation that this year October volumes will be higher than any month. However, the increase is less than 2% above August.

Still, Shearman explained, the August and October volumes are a sign of modest improvement after declines that were seen on a year-over-year basis during most of 2013.

The trade group’s data is based on a report of cargo volumes at the largest U.S. container ports, Shearman said.