Passport Research: Trucking Markets: Cali heat

Volumes across the Southeast and Gulf took a breather this week as demand softened, while California and Florida heated up. Produce season is here, and reefer rates out of southern California repeated last week’s performance, jumping another ~9%. 

It’s vital to remember that going forward, week-over-week and month-over-month comparisons coming against historically low – catastrophically low – comparisons will paint a rosier picture of freight markets than the data justifies. Spot rates are in many cases 25% below year-ago averages, and May 2019 was not great for trucking spot markets.

In our view, industrial volumes have far to run before meaningfully affecting capacity and rates. Detroit volumes have grown 28% since the beginning of the month; Detroit needs to do that again before reaching break-even levels. 
Still, most signs are positive going forward and we have no reason to change our base view that freight – volumes, spot rates and relative capacity – has already bottomed. On a longer-term positive note for trucking markets, Riskpulse released a 2020 Tropical Storm Season Outlook that calls for increased risk in the Atlantic Basin (including the Gulf of Mexico and Caribbean Sea), above 2018 and 2019 levels, based on higher sea surface temperatures and low wind shear. Tropical storm activity typically ramps suddenly in August and peaks in mid-September, but we will keep an eye on meteorological data throughout the summer.

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