Freight Levels Improve in November Following Lull Caused by Superstorm

This story appears in the Dec. 17 print edition of Transport Topics.

Freight levels appear to have strengthened during November, showing improvement after Superstorm Sandy temporarily depressed shipment volumes, according to recent carrier and analyst reports.

In addition, the Cass Freight Index, composed primarily of truck freight, showed an increase of 3.5% in November from a year earlier.

“Truck volume has been fairly steady, with an uptick at the end of the month,” said Rosalyn Wilson, an economist at Delcan Corp. who wrote the Cass report based on freight bills paid. “November freight trends appear to be improving over the month before, in part because the supply chain is recovering from Superstorm Sandy-related disruptions.”

In October, when Sandy struck the East Coast, truck tonnage recorded the first year-over-year decline in 34 months, falling 2.1%, according to American Trucking Associations. ATA has not yet released its November truck tonnage index.

On the carrier side, Landstar System CEO Henry Gerkens said on a Dec. 6 conference call that November freight levels through Thanksgiving had improved over October.

Gerkens added that October’s freight volume was 2% ahead of the same month in 2011.

Wes Frye, chief financial officer for less-than-truckload fleet Old Dominion Freight Line, said at a Raymond James investor conference on Dec. 4 that November tonnage improved to 5.2% from a year earlier, while Sandy limited tonnage growth to 4% in October.

Old Dominion maintained its estimate that fourth-quarter tonnage will rise between 5% and 5.5% from a year ago. However, Frye cautioned that the increase could be at the lower end of that range.

Also speaking at the conference, Forward Air Corp. CEO Bruce Campbell said “our [freight] trends are decent.”

Reports by analysts reached a similar conclusion.

“October volumes decelerated from the sluggish pace evident in the third quarter of 2012 but picked up in November somewhat due to Hurricane Sandy and somewhat due to the flurry of retail activity which surrounded Thanksgiving weekend,” said a Dec. 3 report from John Larkin, a Stifel, Nicolaus & Co. analyst.

He cited increased spot-market activity during November to back up his assessment. That included the first month-to-month volume growth in November from October, according to the DAT North American Freight Index, which is based on load-board postings.

Peter Nesvold, an analyst for Jefferies & Co., said in a Dec. 10 report that freight levels have improved gradually in the fourth quarter but are still trailing 2011 levels.

He cited an ATA report that included a 2.3% drop in October truckload shipments among fleets with $30 million or more in revenue.

“Contacts noted improving demand trends into November following weaker-than-expected early October trends,” said a report by Robert W. Baird & Co. analyst Benjamin Hartford on Nov. 27. “Numerous contacts described overbooked loads in November, aided by seasonal pickup ahead of late-November retail sales activity and disruptions following Hurricane Sandy.”

“Carriers with a lot of retail freight have done better since early October, but that will soon be in the rearview mirror,” said a Dec. 10 report by BB&T Capital Markets’ Thom Albrecht.

Albrecht also noted that “the broader environment isn’t very good.”

One sign of that weakness was the Dec. 1 release of the Institute of Supply Management’s factory index, which showed a contracting manufacturing sector in November. Overall, that index dropped for the fourth time in six months and hit the lowest level since July 2009.

A more positive economic indicator was a Dec. 3 report from the Associated General Contractors, which noted construction spending in October reached the highest level in more than three years.

Albrecht’s report said that the Cass index was 4% lower in November than October, which was counter to the prior five years, when there was an increase of 0.1%.

Meanwhile, a comment by CSX Chief Financial Officer Fredrik Eliasson at an early December investment conference cited Sandy’s effect on freight railroads.

He said that domestic intermodal business growth has suffered a “significant drop” this quarter, largely because of Sandy.

After three quarters of year-over-year intermodal volume growth around 8%, the railroad has moved just 2% more truck-rail traffic since Oct. 1, despite international business volume that continues to be strong.

“Volumes have rebounded a little, but we clearly see on the intermodal side an impact from that storm,” Eliasson said.