Surface Transportation

Spot truckload rates are following outbound volumes upward , but the increases have been minimal . Shutterstock . com

US LTL growth , efficiency gains still fueled by loss of Yellow

By William B . Cassidy moved overall , just that it ’ s not moving in the truckload spot market . But the decline does indicate soft general demand , with contract carriers able to handle most of the freight tendered by their customers .

A weak manufacturing sector is perhaps the biggest constraint on truckload demand . The S & P Global US manufacturing Purchasing Managers ’ Index ( PMI ) contracted for the second consecutive month in August , dropping 1.7 points to 47.9 as manufacturers ’ sales slowed .

After a period of inventory reduction , “ slower than expected sales are causing warehouses to fill with unsold stock ,” Chris Williamson , chief business economist at S & P Global Market Intelligence , said Sept . 3 . S & P Global is the parent company of the Journal of Commerce .

As finished goods pile up , manufacturers are reducing orders for parts and components , according to the August PMI report , further reducing demand for trucks .

Slow drain

That drop in manufacturing demand likely contributed to an increase in the number of small trucking firms leaving the market .

“ The number of exits is accelerating again , but there ’ s latent capacity that can jump into the market when it suits them ,” Croke said . “ That ’ s why this market is hard to read .”

By latent capacity , Croke means carriers whose operating costs are low enough they can operate at a lower break-even point . These carriers have paid off tractor and trailer debt , he said . He believes a substantial cohort of small trucking companies and independent drivers were able to pay off that debt during the spot market “ gold rush ” of 2021 and 2022 .

“ They ’ ve cut about 36 cents a mile out of their costs ,” Croke said , and that means they can continue to operate when those making tractor payments of $ 3,000 per month cannot .

Those lower-cost carriers can “ jump in and out ” of the market , he said .

“ As demand moves sideways this year , capacity is going to come and go , and that ’ s what keeps pricing flat year over year for the rest of 2024 ,” Croke said .

email : bill . cassidy @ spglobal . com

www . joc . com

A year after former leading less-than-truckload ( LTL ) provider Yellow declared bankruptcy , the shape of a new US LTL market is becoming clearer . It is a smaller market highly focused on customer service with denser networks , higher costs and higher prices .

The LTL sector , long squeezed between truckload and parcel providers , is more clearly defining its place in domestic and international supply chains .

LTL carriers are still focused on picking up and delivering palletized freight , but they are playing on a bigger field . Their role supporting international supply chains is especially clear , thanks to growing e-commerce middle-mile transportation demand and increased transloading of containerized freight near seaports , as well as smaller and more frequent shipments .

“ There ’ s a lot of optimization being driven by Yellow closing .”

The LTL business is also more profitable in a post-Yellow market , with operating ratios mostly in the 80s . Old Dominion Freight Line , the second-largest LTL provider , has planted its operating ratio ( OR ) in the low 70s , with a 71.9 OR in the second quarter .

LTL pricing began rising as soon as Yellow ’ s gates closed and continues to rise year over year . The US producer price index for long-haul LTL , a measure of final selling prices , was up 7.1 % from a year ago in July .

All that is making LTL more attractive to investors and to those looking to acquire companies . Shippers may feel squeezed by higher LTL prices , but they are enjoying better LTL service .

Public LTL carriers are reporting high on-time delivery performance .

“ There ’ s a lot of optimization being driven by Yellow closing ,” Scooter Sayers , executive strategic account manager at Cubiscan , a firm providing dimensioning technology to LTL carriers , told the Journal of Commerce .

Trends that began before Yellow ’ s collapse have been accelerated by the company ’ s departure .

“ All of this hinged on Yellow going out of business ,” said Webb Estes , president of Estes Express Lines , the

September 23 , 2024 | Journal of Commerce 43