The cost of fuel is a necessary evil for the trucking industry. Fleet Owner looks at what diesel and other fuels are costing trucking, how much fuel is actually being consumed, and where prices have gone and where they may be going.
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The collapse of oil prices and the resulting pullback from hydraulic fracturing
operations had a major effect on the spot market.
The collapse of oil prices and the resulting pullback from hydraulic fracturing
operations had a major effect on the spot market.
If you've given up on the truckload spot freight market or have been using it less because of the past year's depressed rates, it might be time to give it a second look. External pressures that pushed rates down appear to be easing and rates are finally starting to improve — although they still have a way to go before returning to last year's levels or the record-setting highs of 2014.
That's according to Mark Montague, industry-pricing analyst with the freight matching and load board services provider DAT Services. In an interview, he said the spot market went to pot in March 2015, with things not showing any real improvement until this spring.
The reasons are some of the same that have caused the economy to sputter along, with one of the biggest being lower oil prices. While cheap crude has led to lower fuel prices, those savings have come with consequences.
“The main driving cause was the oil industry collapse with the end of fracking, the end of moving pipe or steel and all other related commodities, which spilled over into the spot market,” he says. “It took a bite out of flatbed freight first of all, then the next bites were in van freight. On top of that, you had the produce market driven by California going to flop because of the drought.”
With the oil industry throttling back, workers in that sector lost jobs and cut their retail spending, which drives so much of the economy. Energy companies also cut their business investment. Even consumers who were saving money on fuel purchases didn't see a big enough dividend to go out and spend wildly.
However, something happened in April. Retail sales increased by their largest amount in just over a year, with another solid increase in May. Also in May and extending into June, oil and fuel prices started heading higher. And in early June parts of California even saw improvements in drought conditions.
Coincidentally or not, the DAT North American Freight Index came back to life in the spring. The May level was still below that of the previous four years, but higher than it was in the latter part of 2015.
Montague says flatbed rates have “really stabilized over the last few months,” and at the beginning of May “we began to see an increase in freight on the spot market for van and reefer freight” which can help bump up rates.
However, there are still factors at work that will keep them from going as high as the industry might like. Linehaul rates, the portion of the spot rate that does not include the fuel surcharge, remains lower than a year earlier for a variety of reasons, including a “race to cut rates in the first half of the year” and truck capacity added by large fleets in 2015. Also manufacturing remains weak, despite some recent improvements in total activity.
Despite these challenges, even one mega-fleet that traditionally relies little on the spot market is turning to it. Swift Transportation announced in June its “spot market participation has increased somewhat” due to the lack of available freight in certain markets.
The benefit, according to Richard Stocking, president and chief operating officer, is it will “keep our trucks moving”.
So while the spot market may not be your favorite place to get freight, it's better than it has been. More importantly, it beats the alternative of having your trucks sit, generating zero revenue.
Related: The Inventory Thorn in Trucking's Side
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The trucking industry has a lot of variables, but none are more important than the financial ones. Here is a look at some key financial numbers every fleet should know.
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Frito-Lay's fleet of compressed natural gas (CNG) trucks and vans have logged more than 100 million miles in the past five years, the PepsiCo division has announced.
The delivery fleet began adding CNG vehicles in 2011 with the addition of 16 Class 8 trucks. The fleet now counts more than 500 CNG vehicles, which now makes up 35% of the company's long-haul fleet. CNG freight trucks emit 23% less greenhouse gas (GHG) tailpipe emissions than the diesel freight trucks they replace.
"Increasing the efficiency of our vehicle fleet is a key component of achieving PepsiCo's overall goal to reduce GHG emissions," said Michael O'Connell, senior director of supply chain. "Alternative fuel solutions like Frito-Lay's use of CNG freight trucks are an important piece of our overall strategy, helping us reduce our environmental footprint, meet changing consumer needs and thrive in today's economy."
Frito-Lay maintains a fleet of more than 22,000 vehicles for sales and delivery. That fleet includes 269 electric delivery trucks, 208 CNG trucks, and Sprinter cargo vans.
"At Frito-Lay, our goal is to be the most fuel-efficient fleet in the country," O'Connell has said. "Our comprehensive fleet sustainability strategy looks at everything from fuel sources to vehicle design."
Frito-Lay has reduced its diesel fuel use by more than 30% from 2008 to 2015, PepsiCo has announced.
Related: Coca-Cola, PepsiCo Expand Fleet Efficiency Efforts
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Graphic: IANA
">Graphic: IANA
">Overall intermodal traffic recorded its first volume decline in the second quarter of the year following 25 consecutive quarters of growth, according to new report from the industry group the Intermodal Association of North America (IANA).
Intermodal trailer volumes dropped 28.6%, continuing a multi-year downward trend, while international shipments fell 9.3%. Domestic container loads gained 3.4%, tempering the overall loss to 6.1%. The total number of intermodal loads fell to 4.28 million from 4.55 million a year earlier.
"The second quarter intermodal volume numbers reflected current market conditions," said Joni Casey, president and CEO of IANA. "Year-end projections are still tracking for growth in both the domestic container and international volumes, however."
The seven highest-density trade corridors, accounting for nearly two-thirds of total intermodal volume, collectively dropped 5.9% year-over-year, with each corridor showing a loss. In the Southeast-Southwest and the Northeast- Midwest lanes, container performance offset the drop in trailer volumes, resulting in the smallest declines of all the corridors. Containers did the opposite in the South Central-Southwest corridor, which finished the quarter in negative territory by 17.6%.
Likewise, every region showed second quarter declines, ranging from 1.6% in Mexico to 14.9% in the South Central. The fall in international shipments between the Southwest and South Central regions was enough to pull down the overall international numbers for the quarter, according to IANA. Regional results also varied by exposure to trailers. Regions that saw the least trailer activity, including Mexico, the Northwest and Western Canada, came the closest to breaking even.
Intermodal service providers again demonstrated clear gains in the highway sector, up 17% from the previous year, thanks to excess trucking capacity. Intermodal loads fell 18.1% The net result was a total volume decrease of 3.2%.
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The DuraClass Yardbird is a dump body designed for contractors and municipalities with a double-wall body side for more durability.
The Yardbird features a continuous formed body sidewall and a fully enclosed top rail for better resistance to moisture and corrosion. The Yardbird, like other DuraClass dump bodies, uses high tensile steel and a fully welded construction for high strength and lighter weight.
Full-depth rear corner posts, enclosed front corner posts and an interlaced understructure give the Yardbird high strength and rigidity. Yardbirds also come standard with quick release upper tailgate pins, a cabshield with window and heavy-duty tailgate hardware.
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So, while leafing through the latest “yearbook of trucking” compiled annually by the American Trucking Associations (ATA), a certain thought occurred to me: what if the industry starts to shrink in size?
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