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Category: Transportation and Logistics

Supply Chain News: Freight Volumes and Rates Show Rapidly Improving Environment for Carriers


Data from Cass Report Raises Hope for V-Shaped Recovery

Oct. 20, 2020

Shippers might want to lock in contract rates with carriers soon, as freight volumes and prices are on the rise, according the latest data from Cass Information Systems and partner David Ross of investment firm Stifel.

Supply Chain Digest Says...


Cass expect the rising price environment to continue through year-end and into 2021, as contract pricing in both TL and intermodal are reset higher.

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The new report on September data from Cass, based on the billions of dollars it pays in freight bills across modes for shippers, in fact says the evidence points to the hope for a "V-shaped" economic recovery.

"Earlier in the year, as the economy was starting to reopen, there was a lot of speculation surrounding the "shape" it would take – everything from an "L" to a "V" to a "W" to a Nike swoosh to a square root sign," the Cass report says, adding that "Well, in looking at the Cass freight data it was a "V."" (See chart below, based on the Cass Shipment Index. Freight movements are well known to be highly correlated with the overall economy.)


That Shipment Index, which combines data from a number of modes, was only 1.8% below the September levels of 2019, and puts the index 27.5% higher than the April lows, when it fell almost 25% year-over-year. The index rose 7% in September versus August.

"We see it [the shipment index] staying strong through year-end," the Cass report notes.

And with rising shipment volumes should come higher rates for shippers.

The Cass Linehaul Index measures US per mile truck load contract rates before fuel surcharge and other accessorials. It was down again in September year-over year, falling 3.4%. The most recent month with an increase in rates was in July of 2019.

However, that still put the index at its highest level since December 2019, perhaps indicating a turn in truckload pricing. The combination of rising demand with limited supply is causing shippers to pay more to get their freight moved, as "turn-downs" by carriers are still at very high levels, in part as they move assets to the soaring spot market, Cass says. It adds that "As contract rates are repriced over the coming quarters, it is likely we will again see year-over-year growth in rates very soon."

(See More Below)




Trucking supply is down because a number truckers, especially smaller carriers, are leaving the industry from the impact of the pandemic, as shown in the graphic below from Cass, based on ATA data.


Cass says the air cargo market remains tight, and there will be high rates through year-end due to (1) most commercial belly capacity staying out of the market until probably mid-to-late next year, and (2) an increase in consumer electronics product launches in Q4 2020 (such as the iPhone 12). Freighters have been operating for months near peak levels, so peak season ahead will be tight and yields high.

The report concludes by noting that "the Cass Freight Index showed a big step up in September, in both shipping volumes and overall spending. We expect the rising price environment to continue through year-end and into 2021, as contract pricing in both TL and intermodal are reset higher. Demand should be strong at least into Q1 2021."

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