Cass and Broughton Capital report cites ongoing truckload and intermodal pricing strength

Trucking and intermodal pricing for freight movements saw solid gains in April, according to data in the most recent editions of the Truckload Linehaul Index and Intermodal Index from Cass Information Systems and Broughton Capital.  

This pricing data is part of the Cass Truckload Linehaul Index and the Cass Intermodal Linehaul Index, which were both created in late 2011. The indices are based on actual freight invoices paid on behalf of Cass clients, which accounts for more than $23 billion annually and uses 2005 as its base month.

Truckload rates, which measure linehaul rates, headed up 2.7% annually to 138.4 (January 2005=100), extending a stretch of gains going back to November 2017). This reading is in close range of the 144.2 set in December 2018.

Donald Broughton, the report’s author and founder of Broughton Capital, wrote in the report that April’s reading was especially impressive, as it was up against difficult 2018 comparisons, as 2018 was the strongest year of realized truckload pricing since deregulation.

“It also suggests that the weakness in spot pricing is beginning to have a material effect,” wrote Broughton. “We have been predicting continued nominal strength in coming months, with lower percentage increases, as comparisons grow increasingly tough in coming months, but are now lowering our outlook [to -2% to 1% growth].”

Reasons for the drop in its pricing outlook cited in the report included:

• potential disruptions from the December 2019 ELD rule;
• capacity additions coming via lower unseated truck counts and average age of trucks; and better visibility of small fleet equipment via ELDs, among others; and
• a prolonged trade war with China continuing to be a severe exogenous risk to the U.S. economy

On the intermodal side, the report said that on the heels of hitting an all-time high of 151.9 in March, April’s reading dipped 1.4% to 149.8 while still growing 5.6% annually.

This follows annual gains of 6.1% in March, 6.2% in February 6.8% in January, 8.6% in December, 10.6% in November, and 10.1% in October. Intermodal prices have seen gains for the last 31 months, and the February through April three-month moving average is at 5.9%.

The report pointed to tight capacity and higher diesel prices are key roles in ongoing intermodal pricing gains, with diesel driving incremental demand and incremental pricing opportunities for domestic intermodal.

But it cautioned that due to the “severity of weakness in truckload spot pricing, this may be coming to an end.”

“Historically, there has been a high degree of correlation between truckload pricing and intermodal pricing, as intermodal uses the price of the over-the-road competing service as an ‘umbrella’ under which it can raise price and still retain or gain volume,” wrote Broughton. “Truckload rates were only up 2.7% in April, albeit against tough comps; but weakness in spot pricing suggest contract pricing will weaken in coming months.”