Old Dominion Freight Line Inc. and Saia Inc. both said this week that tonnage on their trucks was up in the first weeks of the third quarter, while tight capacity and improving demand are driving prices on trucking’s spot markets to their highest levels of the year.
“Between strong consumer demand … and a manufacturing pause, it appears the U.S. is really light on inventory and retailers/manufacturers are rushing to get products on shelves,” Citi analyst Christian Wetherbee wrote in an Aug. 21 research note.
Old Dominion, one of the largest U.S. truckers, said freight volumes and revenue rose in August compared with the previous year. The Thomasville, N.C., less-than-truckload carrier, which combines multiple shipments on the same truck, reported a 2.4% increase in daily tonnage last month. Revenue per hundredweight, a measure of pricing strength, rose 2.3% in August from the previous year, excluding fuel surcharges.
“This positive inflection in our revenue is a result of improving demand trends from our customers in the industrial and retail sectors,” Chief Executive Greg Gantt said in a statement, though he noted “there are continuing risks to the domestic economy.”
Less-than-truckload competitor Saia, based in Johns Creek, Ga., said its daily tonnage rose 0.5% from the previous year.
“With the industrial economy continuing to rebound month over month and robust activity in the TL [truckload] market, our sense was that LTL demand continued to accelerate as the quarter has progressed,” Stephens Inc. analyst Jack Atkins wrote in a Sept. 3 research note. “Looking ahead, we expect the strength in the broader freight market to persist through the end of the year.”
The upswing in demand and spot-market pricing is raising costs for businesses hustling to replenish goods after coronavirus lockdowns, especially for key transport lanes from West Coast seaports.
Demand measured by the ratio of loads to trucks jumped 132.5% year-over-year in August on trucking’s spot market, where shippers book last-minute transportation, according to online freight marketplace DAT Solutions LLC. The average spot market price to hire a big rig last month was $2.22 per mile, up 22.3% from the previous year.
Mac Pinkerton, president of freight broker C.H. Robinson Worldwide Inc.’s North American Surface Transportation division, said in a recent interview that the recent growth in demand wasn’t evenly spread across sectors of the U.S. economy and that overall freight business remains “fairly soft” because some industries are recovering more quickly than others.
“Go into a Target, a Walmart … you’ll still see empty shelves,” Mr. Pinkerton said. “Today they are operating off some extremely low inventory just based off that shift in consumer buying behavior.”