March Truck Tonnage Rises 7.5%

This story appears in the May 3 print edition of Transport Topics.

U.S. truck tonnage jumped 7.5% in March from year-ago levels, the fastest monthly increase in more than five years, according to American Trucking Associations.

The report, marking the fourth consecutive year-over-year increase, fed a growing sense of industry optimism about freight markets. The seasonally adjusted index hit 109.2 for March, its highest level since November 2008. The last time the index rose faster was in January 2005. 

ATA’s index showed that freight volume also rose 0.4% from February to March.

“We saw a horrendous cycle between 2007 and 2009, and all of the factors seem to be very optimistic right now,” Stephen Russell, chief executive officer of Celadon Group, said during an April 27 conference call to discuss the truckload carrier’s return to profitability in the most recent quarter.

ATA Chief Economist Bob Costello also optimistically described the mood of a trucking industry that has been buoyed by the economic recovery and a modest inventory buildup.

“Freight is moving in the right direction, and I continue to hear from motor carriers that both the demand and supply situations are steadily improving,” Costello said.

Truck dealers meeting late last month in Kissimmee, Fla., also expressed a great deal of optimism about sales in coming months. (Click here for p. 12 story in this issue.)

With the latest monthly increase, seasonally adjusted first-quarter tonnage climbed 4.9% from the comparable 2009 period, a development that fueled other upbeat statements by industry executives last week.

“We are encouraged by our results for the first quarter and our tonnage and revenue trends in April,” Earl Congdon, executive chairman of Old Dominion Freight Line, said April 28. The less-than-truckload carrier nearly doubled earnings and boosted tonnage 5.8%.

“We are clearly at an inflection point,” said David Schrader, senior vice president for TransCore Freight Business Services, whose load-matching service has seen spot market loads triple in March 2010, compared with the prior year.

“What we are seeing now is the start of [a strong trucking market],” Don Thornton, TransCore’s senior vice president of freight services, told Transport Topics. “This is not just a spike. We are in for better times.”

A key reason, Thornton said, is the increase in shipments for the construction and steel industries that have led to a sharp rise in business for flatbed carriers.

Costello said he was excited about recent U.S. economic reports, such as manufacturing growth that is at a five-year high.

“This is definitely a sustainable recovery. The problem is it will take two years of solid growth to make up what was lost in 2009,” Costello said, forecasting that business investment and exports will drive further growth.

Although the industry is recovering, ATA’s index remains 7% behind the peak achieved in June 2008, before the recession began.

Costello said during an April 27 webinar that truck shipments rose 4.6% in February from a year earlier, the most recent month of ATA data on loads and a pace that exceeded the 2.6% year-to-year tonnage growth.

In contrast to the recent growth, shipments fell 15% last year.

“For most fleets, freight volumes feel better than reported tonnage because the supply situation, particularly in the truckload sector, is turning quickly,” Costello said.

Capacity is declining because of forces such as heavy-duty truck sales, which remain below replacement levels; improved equipment utilization; and a 9% year-to-year decline in the truckload fleet size in February, the latest month available, he said.

“It is getting increasingly difficult to find capacity,” Schrader said, particularly in the past 30 days. “When loads become plentiful, carriers want to be very selective. Carriers have gone from taking any load to taking the right load.”

With the pickup in volume, rate increases are expected to follow later by early 2011.

Celadon’s Russell noted that the company boosted its revenue per loaded mile from the prior quarter and agreed with other executives who have said rates could rise 10% or more this year.

Wolfe Trahan analyst Ed Wolfe said in an investor note that Celadon’s 13% improvement in average revenue miles per tractor was impressive. He also noted that “while management is hopeful that rates are heading in the right direction, we believe the pricing recovery will likely take longer to develop.”

TransCore reported a rise of 6 cents a mile in spot rates in the past three weeks for flatbed shipments as demand picks up in that sector.

Costello said that spot rates typically rise before those paid by shippers who have contracts.

“If I was a shipper, I’d be locking in rates right now,” Thornton said.

The “not seasonally adjusted” index, which reflects actual shipments moved, rose 19%. That measurement excludes effects such as differences in the number of workdays and the timing of holidays.