It has been an incredible buyer’s market for transportation services over the past two years, with even more significant discounts in the market emerging in 2009 after the financial meltdown in Fall 2008. Many carriers have been said to be pricing below variable cost to keep market share amid the double-digit drops in freight volumes.
How have so many carriers managed to stay afloat in this environment? As SCDigest has reported earlier, in an interesting twist, the recession has caused global demand for transportation assets to also crater. That means that banks foreclosing on financially-troubled carriers can extract little value from their trucks and terminals, so the smarter path for now is to let them make interest-only payments or other accommodations and keep the business going.
A new report from the stock market analysts at Robert W. Baird says that there are signs that the worst is at long last behind the carriers, and that this should lead to some modest rebalancing of the demand-supply equation in the carriers’ favor as we head into 2010, something shippers should consider in budgeting and contract negotiations.
The ATA Truck Index continues, in general, to show improvement, with 1.2% increases in July and August, followed by a small decline in September (down .3%, all numbers seasonally adjusted).
The ATA also said tonnage in September fell 7.3 percent, which (while a strong negative) was, at the same time, also the best year-over-year showing since November 2008. In August, the index was down 7.5 percent year-over-year.
Spot market pricing has also stabilized. As shown in the graphic below, Baird sees spot market demand remaining steady or actually increasing a bit right now during a period where such demand usually falls sharply during the latter months of the year.
(Transportation Management Article - Continued Below)