Loaded and Rolling: Inbound container volumes cloud freight rebound, FMCSA task force on truck leasing

May 4, 2023

Inbound container volumes cloud freight rebound

(Source: FreightWaves SONAR)

SONAR ocean container booking data suggests that the predicted freight rebound in the second half of 2023 may be increasingly unlikely. Import and ocean container booking data is typically used as a leading indicator for future truckload volumes, as containers are offloaded in ports and transferred into intermodal or truckload orders. FreightWaves’ Henry Byers, head of ocean intelligence, notes that 2023 container bookings data is trending closer to 2019 levels, suggesting a full-on reversion to pre-pandemic levels.

One concern is a lack of notable rebound in U.S.-bound container volumes leaving China, as U.S. consumers remain saddled with higher debt and are spending less on goods relative to services. Byers notes that recent data from the Purchasing Managers’ Index (PMI) for March showed a decline from 49.2 to 51.9 showing the beginnings of a contraction. At the same time, data from the Logistics Managers’ Index (LMI) shows inventory levels in April remain slightly elevated at 50.9 while the costs associated with that inventory remain higher at 65.1. Just like the PMI, the LMI registers expansion above 50 and contraction below 50.

Additional consumer headwinds are likely on the horizon with student loan repayments resuming by the end of August. The average student loan repayment is an estimated $400 a month and for the past three years these payments have been suspended. That lack of extra income will lead to further consumer demand destruction and by proxy lower freight volumes.

FMCSA task force on truck leasing agreements

(Photo: Jim Allen/FreightWaves)

The Federal Motor Carrier Safety Administration has created the Truck Leasing Task Force, a nine-member panel that will examine the prevalence of predatory leasing agreements and include best practices as drivers weigh the costs and benefits of entering lease agreements. The task force was authorized by the Infrastructure Investment and Jobs Act enacted in 2021.

The agency argues that predatory leasing agreements are a major impediment to owner-operators, noting that the panel will examine “The existence of inequitable leasing agreements and terms in the trucking industry, whether any inequitable terms and agreements affect the frequency of maintenance performed on trucks subject to those agreements, and whether those terms and agreements affect whether a truck is kept in good repair.”

From my experience, large nationwide fleets typically recruit drivers to sign a lease purchase program then partner with a third-party leasing company that manages the terms and conditions. A major challenge I heard from drivers via SiriusXM is that many are unaware what they are signing up for. One driver who was interested in leasing attempted to get a lawyer to review the agreement prior to signing but advised the leasing company wouldn’t provide the documents in advance. This can become an issue, as many leases offer zero money down and no credit checks for interested drivers. While fleets are able to profit off of reselling their used equipment back to drivers at higher costs, transparency remains a sticking point among drivers.

Market update: U.S. Bank Freight Payment Index shows shipments down, spending flattening

(Chart: U.S. Bank)

On Monday, U.S. Bank released its Q1 Freight Payments Index data, painting a mixed picture of the freight environment. The shipments index fell 6.1% year over year compared to Q1 2022 but declined only 0.8% from Q4 2022. During that same period, freight spending remained roughly flat, falling only 0.3% year over year and 0.2% quarter over quarter.

The report attributes part of the declines to a softer home construction market and lagging manufacturing activity. On the inventory front, the report is more upbeat, noting, “general merchandise retailers made progress clearing out excess inventory during the first quarter, according to data from the Census Bureau. Relative to sales, this group pushed inventories down to levels closer to the start of the pandemic.”

Not all areas were impacted by shipping declines equally, with the report noting the Southwest had the best quarter, with shipments rising 5% compared to Q4 2022. Part of this came from gains in truck-related trade with Mexico, especially out of the Laredo, Texas, border crossing. The West Coast saw a quarter-over-quarter decline of 2.8% due to drops in port activity and winter storms. The Southeast saw the largest decline of 10.1% from Q4 22, with lower home construction activity being a major factor.

FreightWaves SONAR spotlight: DOE benchmark nears $4 a gallon

(Chart: FreightWaves SONAR)

Summary: The diesel benchmark price used in many fuel surcharges is approaching $4 per gallon, not seen in the past 15 months. According to the latest Department of Energy/Energy Information Administration update on Monday, the average prices at the pump for diesel fell 5.9 cents, to $4.018 per gallon. Feb. 7, 2022, was the last time prices were lower than $4. That was in the weeks leading up to the Russian invasion of Ukraine, which roiled energy markets.

Reasons for the continued decline appear mixed. FreightWaves’ John Kingston writes, “The weakness in the oil market in general is being attributed to broad macroeconomic factors, such as China’s vaunted reopening not turning out to be quite the demand kick that had been expected, and a supply side that is not seeing much evidence of the cuts in crude supply agreed to by OPEC+ starting this month. But that does not explain the drop in diesel, which from a U.S. perspective has demand and inventories relatively near normal.”

For carriers that lack customers with a fuel surcharge or a dedicated fuel buying program, these lower prices are a welcome sight. A risk remains for carriers and brokers that priced RFPs in recent months and are relying on the fuel surcharge to keep their lanes in the black. If fuel prices fall further, their linehaul rates may not cover the total cost to run the lane once a depleted fuel surcharge is added.