- Shipment volumes for March dropped 9.2% year over year (YoY), according to the Cass Freight Index, but improved for the second straight month, the company said in a report Monday. "April will undoubtedly be worse and likely the worst month in a long time," wrote the report's author, David Ross, managing director of global transportation and logistics at Stifel. He said April volumes should rival those of early 2009.
- Freight expenditures for March fell by 8.2% YoY and by 1% month over month (MoM). The report said Cass expects transport pricing to stay low through May, "but we're watching capacity exits and a potential re-stocking event to drive rates higher again later this year," Ross wrote.
- Cass expects market volatility to continue for weeks to come. There's no chance for YoY growth in domestic shipments and freight costs in the second quarter, showing that the coronavirus pandemic quickly widened from a production concern in China to a global consumer spending problem, Ross wrote.
The gap between the number of trucks and loads is closing, according to DAT, and so is the gap between shipping volume and rates, Cass data shows. Because social distancing has put normal buying habits on hold, neither the shipper nor the carrier is guaranteed an easier time.
"No business, no jobs, and no income for many leads to much less freight moving around," Ross wrote. "There has been a clear divide between winners and losers of these shut-in orders with demand for groceries, home improvement, e-commerce, and consumer staples increasing, while restaurant, auto, and (mall) retail falling to practically zero volume."
Jarring unemployment rates make it difficult to forecast demand, the report noted. Cass typically tracks inventory levels to help with demand forecasting, but the volatility of the market makes the latest data out-of-date.
"Some shippers have inventory filling up warehouses, others have it sitting in ocean containers not even being unloaded, and still others have near empty warehouses, because they can't keep any inventory due to the high demand that causes freight to flow through the system as soon as it's produced. Coming out of the period, some will need to restock, and some will need to destock. Where that balances out is hard to tell," Ross wrote.
When it comes to ocean shipping, the drop in demand shifted from China to Europe late last month. Carriers announced more blank sailings as a result. Imports to U.S. container ports have hit a five-year low and will "remain significantly below normal levels through early summer," according to the National Retail Federation and Hackett Associates.
For trucking, how a carrier is fairing depends on what it hauls. Those transporting essential and high-demand supplies are moving, while others are left to monitor loadboards. Cass showed TL linehaul rates declined 6.6% YoY in March, the lowest rate since June 2009. "This broad pricing pressure should last a little longer, but then when the economy re-opens (and it will), we'll see how many truckers are left and how much freight needs to be moved," Ross wrote.
Cass' linehaul index has a strong tie to the quarterly earnings reports of publicly traded TL carriers. Ross wrote that, because of this, he expects "another tough" first-quarter earnings season for them. J.B. Hunt was one of the first to report earnings. Officials said Tuesday a decline in some of its business can be balanced by a surge in other segments, reflecting the effects of the coronavirus.
"We hope the Cass Indexes bottom in April, and the quicker businesses can reopen, the better readings we should see in May and June," Ross wrote.