Freight Results Still Mixed, Executive Says
This story appears in the May 23 print edition of Transport Topics.
Although the U.S. economy continues to improve, there remains a spottiness within the freight-hauling sector, a logistics executive said.
“Demand for freight hauling is still a mixed bag. Retail freight is strong. There’s economic growth and manufacturing is doing well, but we’re still not building many houses,” Thomas Sanderson, CEO of Transplace Inc., said. “There’s no uptick whatsoever in building materials, and there’s a lot of spillover into the appliances that go into new houses. They’re not doing well, either.”
“Automotive has generally recovered but not to pre-recession levels,” Sanderson added during a break in his company’s annual shipper symposium. Third-party logistics provider Transplace hosted a conference for its clients earlier this month in Frisco, Texas, its headquarters city.
Transplace ranks No. 7 on the freight brokers’ list of the Transport Topics Top 50 list of the largest logistics companies in the United States, Canada and Mexico. Sanderson said that, while the supply of freight to be moved is growing steadily, the problem with the freight market is to come most likely on the carrier side.
“Demand for trucking is not a problem yet, and I haven’t heard there will be an economic boom in the second half of the year,” Sanderson said. “The issue is capacity. Refrigerated capacity, for instance, is already very tight and getting tighter, and I expect we’ll see truckload tightness escalate.”
During the symposium, Knight Transportation’s Kevin Knight and Virginia lawyer Henry Seaton said two Federal Motor Carrier Safety Administration rules — hours of service and the Compliance, Safety, Accountability program — soon could slice into trucking capacity. At present, though, the rules actually have not yet reduced hauling capacity, Sanderson said — but the policy concerns are real and should be addressed.
He said truck-rail intermodal is an important component of transportation — especially with diesel prices above $4 a gallon, but there still are significant limits as to what it can handle.
“With diesel above $4 a gallon, intermodal is a natural, and certainly people are using it for freight that moves 1,500 miles or more. But the area where it needs to grow is that Chicago-New York-Atlanta-Dallas box that right now is almost all truck. There could be some growth there in the East.”
As for the supply of freight coming from manufacturers and retailers, Sanderson said he worries about $5 a gallon gasoline.
“I was talking to a guy . . . [at the symposium] who told me about seeing $5-a-gallon gasoline. That’s got to affect spending in other areas of the economy. I think $4 a gallon was the threshold in 2008 for hurting the economy, but now it might be $5 a gallon,” he said.
