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For US surface transport providers, the uphill slog that characterised the past year seems set to continue.
Intermodal and trucking volumes declined last year, keeping prices down, but a contraction of capacity combined with momentum returning to the market may bring some relief in the latter half of this year.
Numbers for 2019 paint a gloomy picture of decline in most sectors. The National Shipment Index, published quarterly by US Bank, shows shipments fell 4% in Q4 over the previous period and 5.4% lower year on year.
The index has now been on a downward trajectory for six consecutive quarters and, for the full year, was down 5.9% – its worst contraction since 2011.
The report, based on actual spend on truckload and less-than-truckload (LTL) shipping, shows it slipped 2.7% from the third quarter to end 2.5% lower than the level recorded in the fourth quarter of 2018.
Intermodal players fared no better. The latest numbers from the Intermodal Association of North America show an 8.2% drop in volumes for December.
Container traffic was down 2.7%, while trailers sank 17.2%. The organisation blamed the impact of international trade policy and downward pressure from more available truck capacity.
And recent results from major operators echo these trends.
Schneider National saw a 13% drop in revenue in the fourth quarter. Its logistics division fared the worst with a 19% contraction in revenue, while truckload revenue fell 15%. At 3%, the decline in its intermodal business was less painful. Management blamed lower prices and muted peak season volumes.
On the rails, Norfolk Southern reported a 7% decline in revenue, on a 9% drop in volumes in the quarter, which pushed profit down 5%. The railroad’s intermodal traffic was down 7%. Management said volumes deteriorated throughout the year, the decline getting steeper in the second half owing to a weak manufacturing environment and low commodity prices.
Tariffs have also taken their toll. The suspension, and subsequent cancellation, of tariffs on imports from China scheduled to come into effect in mid-December alleviated the decline, but many importers had already brought merchandise into the country in Q3 in preparation for the scheduled tariff, US Bank analysts reported.
They pointed to lower contract rates and spot market pricing as major reasons for the decline in freight spending in the quarter.
More granular analysis has been published by Transplace, a provider of transport management services and logistics technology solutions, which manages about $9bn-worth of freight, but its outlook is not much brighter.
Its Q4 19 Market Update & Outlook shows relatively flat full-truckload volumes in the period, whereas the LTL segment recorded declines in tonnage (-4.5%), shipment count (-2.3%) and weight (-1.8%). It was the fourth consecutive quarter of volume shrinkage, Transplace notes, adding that most carriers have excess capacity.
Although most sectors declined, the reefer truck segment bucked the trend and is expected to do the same this year, with loadings projected to increase 2.9%, according to Transplace.
It observed that Class 8 truck orders were down significantly, adding to the pessimistic outlook for the market in the near term, but at least provides a silver lining on the horizon.
According to its analysis, the truck fleet is in the early stages of shrinking. In conjunction with expectations of loadings returning to growth down the road, the expected shrinkage of truck capacity should lead to stabilisation of the supply-demand balance.
Transplace predicts that the truckload sector will fare better in the second half of 2020, with the market headed for moderate 2-3% increases.
The Transplace report also predicts improved conditions for the intermodal sector. Citing possible driver shortages and trucking bankruptcies, its analysts expect intermodal volume to rise again. With plentiful equipment available across the network, considerable rate increases are not very likely, though.
Transplace views the year ahead in defensive terms. Its analysts describe the trucking market of 2019 as a year of retaining current business.
“Expect 2020 behaviour to be similar to 2019 (especially for the first half of the year),” they wrote.