Today’s Pickup: New survey highlights optimism among shippers

Morgan Stanley headquarters


Shippers are showing renewed
optimism in the macro environment with rates improving across railroads and
truckload, according to the results of the Freight Pulse 56 Shipper Survey from
Morgan Stanley.

The survey was conducted in the
fourth quarter of 2019. It found that shippers’ economic outlook is up from
mid-cycle levels. Capacity is expected to tighten across all modes as shippers
continue to reduce inventory levels.

Retailers had the most positive
outlook on the economy, sharply increasing their views from the third quarter
of 2019. Just 18% of shippers expect to grow inventory, though, while 48%
expect further shrinking of stock levels.

On the trucking side, volume growth
is expected to slow with intermodal competitiveness improving. Fifty-five
percent of respondents expect truckload growth moving forward, while 13% expect
a decrease. National less-than-truckload (LTL) respondents had the most
optimism about growth, with 60% expecting that segment to expand, likely due to
booming e-commerce sales.

The DHL Supply Chain Pricing Power Index uses the analytics and data contained in FreightWaves SONAR to analyze the market and estimate the negotiating power for rates between shippers and carriers. (SONAR: DHLPPI.USA)

The latest FTR Shippers Conditions
Index (SCI) reflects the optimism seen in the Morgan Stanley survey. FTR’s
index for November stood at 7.0, rising from 6.4 the month before. All index
inputs rose in November over October except freight volume, which was still

“Capacity is forecast to slowly
tighten over the course of 2020, which will lead to slightly worsening
conditions for shippers,” said Todd Tranausky, vice president of rail and
intermodal at FTR. “Truck capacity is expected to slowly increase to its
historical range this year, causing shippers to examine rail and intermodal
alternatives as the increased truck utilization pushes truck rates higher and
makes alternatives more attractive.”

The FreightWaves Intel Group’s DHL Supply Chain Pricing Power Index (SONAR: DHLPPI.USA), which measures the negotiating power between shippers and carriers, is currently at a 40 reading, down from 45 the week before. A 50 reading indicates neither shippers nor carriers have an advantage in negotiations. Readings below 50 suggest the shippers have more power and readings over 50 give an advantage to carriers. 

Did you know?

A study by infrastructure design
firm HNTN Corp. found that Americans pay $274.69 annually in combined federal
and state motor fuel taxes. Conversely, a Class 8 truck with a 150-gallon fuel
tank pays $83.82 in taxes per fill-up, according to data compiled by the Diesel
Technology Forum.


“This will bring important court

— Andrew Hatnay, a Toronto labor lawyer representing the former employees of Celadon-subsidiary Hyndman Transport. An Ontario judge blocked Celadon’s plans to sell the subsidiary before compensating employees following the closure. Instead, Celadon will now file bankruptcy.

In other news:

Chinese New Year leads to inventory buildup

Shippers have built up inventories ahead of the Chinese New Year, which is expected to cause supply chain disruptions. (Supply Chain Quarterly)

Spurned applicant targets Don Hummer Trucking

Police said a job applicant who did not get a job with Don Hummer Trucking in Cedar Rapids, Iowa, sent a letter with a powdery substance in it to the company’s headquarters. The powder was not harmful. (The Gazette)

US mayors conflicted on lowering Americans’ dependence on autos

A new survey by Boston University finds that U.S. mayors would like to reduce the dependence on automobiles and improve roadway safety for pedestrians and bicyclists, but they don’t support programs such as increasing parking prices or reducing speed limits that might advance that goal. (Fast Company)

US manufacturing posts surprising gain

U.S. manufacturing output rose in December as production of durable goods, food and beverages and other products increased.(CNBC)

Sustainability in supply chains takes back seat to sourcing

As the U.S.-China trade war has remade supply chains, companies are sidelining efforts to create sustainable supply chains in favor of avoiding tariffs. (Sourcing Journal)

Final thoughts

How time changes? Shippers are
increasingly gaining the upper hand with carriers and are optimistic that will
continue, according to Morgan Stanley’s latest quarterly shipper survey. While truck
capacity may be tightening, shippers are indicating a further contraction of
inventory levels. In fact, the survey found that shippers expect smaller
year-over-year increases in their volumes across truckload, intermodal, regional
LTL or national LTL. The good news for trucking? Shippers are indicating volume
increases and as capacity tightens, rates could see a bump.

Hammer down, everyone!