Truckload Linehaul Rates Remain Soft, Intermodal Rates Continue Steep Drop

Truckload linehaul rates in June were nearly the same as the month before, but they are still below levels from a year ago, while there seems to be no end to the recent drop in rates for intermodal shipments.

The Cass Truckload Linehaul Index fell another 1.8% year-over-year, after falling 2.3% and 1.2% in April and May, respectively, representing four consecutive months of year-over-year declines.

The index, which posted a reading of 121.2 in June, its lowest level since August 2014, fell 0.1% from May, the third straight monthly drop.

Analysts at the investment firm Avondale Partners, which provides analysis of the index, have further adjusted their pricing forecast range downward for the remainder of 2016 to a 1% to a 3% decline.

The report says several factors continue to contribute to the excess capacity that has caused rates to drop, including driver pay increases, overall fleet growth, reduction in carrier bankruptcies and an easing of the controversial 34-hour restart rule.

The index is an indicator of market fluctuations in per-mile truckload pricing, isolating the linehaul component of full truckload costs from other components, such as fuel and accessorials, providing a look at trends in baseline truckload prices.

Meantime, Cass Intermodal Index fell another 1.5% year over year in June, representing 18 consecutive months of year-over-year declines. Its reading of 121.1 also represents a 4.3% drop in June from May and is at its lowest level since January 2011.

Historically, there is a "high degree of correlation between truckload and intermodal pricing," said analysts with Avondale Partners. As contract rates for trucking continue to lose strength and move further into negative territory, “[this] would imply even more potential weakness for intermodal pricing."

The Cass Intermodal Price Index is a measure of market fluctuations in per-mile U.S. domestic intermodal costs that includes all costs associated with the move, such as linehaul, fuel and accessorials.

Data within both measures is derived from actual freight invoices paid on behalf of clients of payment processor Cass Information Systems, which totaled $25 billion in 2015.

Surprisingly, the figures follow a report from the day before showing freight shipments and expenditures edged up in June after three months of lackluster performance, hitting their highest levels of the year, according to the Cass Freight Index – but it remains unclear whether this is part of a larger trend.

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Landstar Profit Sinks 20%, Falls Short of Expectations

Asset-light trucking and related services provider Landstar System Inc. (NASDAQ: LSTR) reported a 20% second quarter decline in earnings due to lower revenue and a big insurance claim.

The Florida company reported net income of $32.3 million, or 76 cents per share, down from $40.5 million a year earlier, or 92 cents per share. The earnings per share was less than a consensus estimate of 82 cents from analysts and below updated guidance issued by Landstar in early June. Back in April it was expecting second-quarter earnings of 80 cents to 85 cents per share.

“Net income was negatively impacted by elevated insurance and claims costs, driven mostly by the severity of claims ... the highest quarterly insurance and claims cost over the past six years,” the company said in a statement. It did not elaborate about the claim

Total revenue during the second quarter fell to $775.2 million from $868.4 million, in line with the company's June expectations. Truck transportation revenue hauled by independent contractor drivers and truck brokerage carriers during the quarter was $718.5 million, compared to $809.2 million in the 2015 second quarter.

Landstar's truckload transportation revenue hauled by van was $458 million, down from $496.9 million a year earlier. During the same time, truckload transportation revenue hauled via unsided/platform equipment fell to $242 million from $291 million. Revenue from freight hauled by rail, air and ocean cargo carriers was $45.1 million, compared to $48.1 million, in the 2015 second quarter.

"Overall, from a revenue standpoint, I believe we executed well considering the sluggish freight environment," said Landstar President and CEO Jim Gattoni. He pointed out that comparisons to last year's second quarter are thrown off because of more than 13,000 truckloads on platform trailers hauled for a project for a single automotive customer that was resposible for $27 million in revenue last year. "Excluding the loadings related to that project, we experienced a slight increase in loads hauled via truck over the 2015 second quarter.”

He said Landstar's truckload services continued to experience significant pricing pressure throughout the 2016 second quarter, as industry-wide truck capacity was more readily available as compared to the 2015 second quarter and demand continued to be soft.

“Although we experienced a somewhat normal seasonal uptick in revenue per load from May to June, the pricing pressure continued in the U.S. spot market, in which the company operates much of its business,” Gattoni said. “Additionally, the average cost of a gallon of diesel fuel was approximately 20% lower during the 2016 second quarter compared to the 2015 second quarter, putting additional pressure on pricing, especially as it relates to loads hauled via truck brokerage carriers.”

The result: Revenue per load on freight hauled via truck was 9% lower in the 2016 second quarter compared to the 2015 second quarter.

Looking at the current third quarter of the year, Landstar said it is experiencing the normal seasonal uptick in revenue per load on loads hauled via truck and expects revenue for the period to be similar to second quarter revenue.

Landstar also announced on Wednesday that its board of directors has declared a quarterly dividend of 9 cents per share, 12.5% higher that it was in each of the previous four quarters.

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FMCSA Delays Online DOT Registration System Implementation

The Federal Motor Carrier Safety Administration is delaying the implementation of the final stage of its simplified online registration process, called the Unified Registration System, until Jan. 14, 2017.

The FMCSA has also set the full compliance date for April 14, 2017. The agency is currently updating its information technology systems and moving millions of records to remote storage servers. This work is creating a foundation that will allow the FMCSA and its state partners to successfully launch the final stage of URS, according to the agency.

The Unified Registration System is a process that combines multiple legacy reporting forms into a single, online “smart form” that is designed to streamline the registration and renewal process. The system was created to improve efficiency and reduce errors and was originally supposed to be fully implemented this year.

When fully implemented, the URS will allow FMCSA to identify unfit carriers and detect unsafe truck and bus companies that are trying to evade enforcement actions. Offending companies often attempt to regain U.S. DOT registration by registering as a different or unrelated business entity.

The agency estimates that the initial phase of URS, which was launched in December 2015, has saved the industry around $1.6 million in processing time in its first six months. The FMCSA has issued 62,000 U.S. DOT numbers and removed 340,000 dormant U.S. DOT numbers from its agency databases and screened 100% of operating authority applications for reincarnated carriers.

Related: FMCSA Launches Improved Online DOT Registration

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How exposed is trucking data to theft?

There's this new term being bandied about in corporate circles these days called “knowledge assets,” which means “confidential information” critical to a company's core business operations other than personal information.

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Volvo Trucks names Jeff Lester senior vp of sales

Volvo Trucks North America appointed Jeff Lester senior vice president of sales effective Aug. 1, 2016. Lester will lead the North American regional sales organization, working closely with the regional vice presidents to drive growth, the company said.

“Jeff has successfully served in various management roles at Volvo and has a longstanding career in the trucking industry,” said Gӧran Nyberg, president, Volvo Trucks North America. “I'm pleased to welcome him to this new role.”

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Rodeo du Camion is a Trucking Event Like No Other

Photo: Jim Park

There's a trucking event happening next weekend, July 29-31, that's like no other on the planet. That's a pretty tall description, but it's quite true. Each year at this time a few dozen drivers bring their trucks to northern Quebec, hitch them to 45 tons of lumber, and race them up a steep grade through the center of an otherwise sleepy village called Notre Dame du Nord (Our Lady of the North), Quebec.

The event is called Rodeo du Camion, or Truck Rodeo, in English, but it's really more of a race than a rodeo.

Rodeo du Camion happens about 300 miles north of Toronto, Ontario. Driving time, it's about seven hours from Buffalo, NY, nine hours from Detroit, Mich. and about six and a half hours from Sault Ste. Marie, Mich. The population of the town is about 2,000 people most of the year, but on Rodeo weekend, that number has been known to swell to beyond 20,000. Guests come from as far away as Asia, Europe, Scandinavia, Australia, and of course, the U.S.

The rules of the competition are simple enough: Whoever gets to the top of the hill first wins. There are several trial runs and qualifying heats, and then the competition gets really intense as drivers vie for a position in the semi-final and final events on Sunday afternoon.

They feature bobtail and loaded competitions. Bobtail needs little explanation, but the loaded competition is something else. Competitors pull a 5-axle B-train combination loaded with 45 tons of 2x4 lumber. Gross combination weights are about 138,000 lbs (a legal load in Canada). These races take place on a 700-foot-long hill in the village with a 12% grade lined 10 to 20 deep with spectators.

There's really no way to explain this to someone who doesn't get trucks and engines and raw torque and horsepower. The drivers use these trucks every day to earn their living, and on one weekend during the summer, they place their truck squarely in harm's way by dialing up the fuel pump and making all sorts of little modifications (within the scope of the rules) to ratchet the output up to 800 and 900 horsepower, or whatever they can get out of it.

One can only imagine the strain on the driveline. It's a walking, talking, screaming endorsement of the makers of driveline components, assuming they are off-the-shelf U-joints and clutches and crown gears, etc. Certain safety precautions are required, like caging the driveshaft and protecting the fuel tanks from a potential puncture.

The other aspect to all this is shifting and clutching prowess. You don't have the luxury of starting in 1st gear, and you may only get to 8th or 9th on the way up the hill, but you have to do it fast and do it right. It's pretty embarrassing to miss a shift and have to creep up the hill from a stop. Automatic and automated manual transmissions are not allowed in the competition.

There's a Show 'N Shine event as well, along with an endless lineup of local entertainment, a fireworks display on Saturday night and a parade on Sunday morning.

The fishing in the area is second to none and there are even a couple of decent golf courses nearby for those who prefer a tamer pastime. Accommodations in the immediate area are limited, but camping is available. A night in a motel may be a 40-50 mile drive away.

And finally, a word of caution if you plan to attend: Leave your firearms at home. Canada does not permit unlicensed guns in the country, and Customs officers can be pretty aggressive in their efforts to find hidden weapons. Any undeclared weapons will be confiscated permanently, and their owners can face fines and possibly jail time for trying to smuggle weapons across the border.

We have more images in a photo gallery located here.

There are a lot more information about the event and some very cool video on the Rodeo du Camion website. There's a photo and video gallery there as well

Related - Locking it In Commentary: Bridging the Extremes

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Eaton extends manual transmission, clutch warranties

Power management company Eaton announced it has increased the warranty coverage for two of the company's heavy-duty manual transmissions. New truck customers who specify either an Eaton RTLO 13-speed or 18-speed transmission, a Solo Advantage clutch and Eaton-approved lubrication will now receive a 7-year/750,000-mile warranty on the transmission and 5-year/500,000-mile warranty on the clutch.

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