Loaded and Rolling: International Roadcheck is next week; shipping execs weigh in on rates

May 11, 2023

CVSA International Roadcheck is next week

(Photo: Jim Allen/FreightWaves)

The Commercial Vehicle Safety Alliance (CVSA) is holding its annual International Roadcheck next Tuesday through Thursday, with a focus on anti-lock braking systems and cargo securement. This high-volume, 72-hour enforcement blitz will see some potential violators taking a vacation, often causing localized capacity surges in freight markets as fewer drivers are willing to haul freight for fear of landing a violation and possibly being put out of service.

For smaller motor carriers and owner-operators, violation and out-of-service events can have an outsize impact on their overall safety score — a carrier being put in conditional status due to repeated accidents or violations can lose access to freight broker loadboards because of its higher-risk profile. In 2022, CVSA-certified inspectors performed 59,026 inspections, resulting in 12,456 commercial vehicles and 3,714 CDL holders being put out of service.
Braking systems and cargo are not the only items on the inspection list. A North American Standard Level I inspection, the most thorough inspection the U.S. Department of Transportation can conduct, includes additional aspects such as lighting, steering, tires, suspension, frame, fuel and exhaust systems, to name a few. Carriers and owner-operators using older equipment will frequently avoid these inspections if possible, as citations and out-of-service declarations can require expensive repairs before they can resume driving.

Shipping executives weigh in on rates

(Photo: Jim Allen/FreightWaves)

In an article published Thursday, FreightWaves Editorial Director Rachel Premack writes that shippers are focusing more on service levels when determining how far they push down contract rates with carriers. Typically during a down market, shippers aggressively push down contract rates until enough truckload capacity leaves the market and the freight cycle begins a new upswing. Two years of pandemic-related service disruptions have made some shippers more cautious, and many are paying attention to carrier operating costs when negotiating new contract rates.

One executive at a large consumer-packaged-goods firm told FreightWaves, “If you look at the operating costs of a carrier, a lot of rates are eroding margins to the point of forcing some carriers out of the business. We want to avoid that. The minute carriers and drivers start to leave, the supply-and-demand curve starts to flip very dynamically. It’s basic economics. At the end of the day, when you have more demand than supply, you start to get into a price war.”

Not all shippers share the charitable view regarding the plight of their routing guide. One homebuilding shipper vowed a reckoning on carriers that gouged them on transportation costs. The executive noted, “They beat the hell out of us — you saw all the record profits and great money they made. It was all on the shipper’s back.” For many transportation managers, this sentiment is not without merit.

Market update: Class 8 orders fall in April; backlogs and demand remain

(Source: FTR Transportation Intelligence)

Reporting preliminary Class 8 order data for April, FTR Transportation Intelligence noted that while not a major surprise, the numbers are not demand-driven but constrained by available build slots. Preliminary orders for April fell 37% month over month to 12,050 units and were down 20% year over year.

So far, in spite of lower orders, demand remains strong due to backlogs. John O’Leary, CEO of Daimler Truck North America, said, “Right now we’re not seeing any drop in demand whatsoever. Orders are still strong — something like 80% of the big fleets do business with us primarily. And most of them are positioned right now where their average [fleet] age has crept up.” This matches my experiences at an enterprise fleet; Daimler’s FreightLiner Cascadia series was a large portion of fleet capex spending on new Class 8 units.
A better test of future demand will be when new orders open up. Eric Starks, chairman of the board at FTR, noted in the release, “When 2024 order boards open later this year, we anticipate some modest additional strength in order activity. There still are indications that fleets are requesting equipment, and there has been no notable uptick in cancellations.” The report adds reduced order levels are expected to continue through a historically weak summer period.

FreightWaves SONAR spotlight: Spot rates searching for inflection point

(Chart: FreightWaves SONAR)

Summary: Spot rates continue to fall, continuing an ongoing decline that began in January 2022. FreightWaves data from the National Truckload Index (NTI) shows week-over-week declines of 3.15% or 7 cents per mile, from $2.22 on May 3 to $2.15 per mile. Spot rates have remained relatively flat since April 14, with rates ranging from $2.24 to $2.20 per mile, a 4-cent-per-mile range. This decline was interrupted by the first week of May, when spot rates fell to $2.15 per mile.

Data from the National Truckload Index Forecast (NTIF) predicts upward movement in spot market rates for the next three weeks, with rates predicted to plateau at $2.33 per mile on June 8. With all predictive models, a perfect 1:1 fit is difficult to achieve but current correlation for the NTIF28 (28-day forecast) and NTIF (seven-day forecast) are 85 and 99, respectively.

While spot rates are rising, outbound tender rejection levels remain depressed, currently at 2.62%. It appears this rise in spot rates is more based on small fleet and owner-operator market activity, as increases in outbound tender rejection rates would imply larger carriers, mostly hauling contracted freight, are gaining pricing power in the market. The upcoming CVSA International Roadcheck and Memorial Day weekend are events during which spot market truckload capacity typically leaves the market, which may explain the predicted rise in spot market rates.