Dry van rates are easing but still strong
April 25, 2012
After achieving year-over-year pricing gains that were above the industry average in the middle of 2011, the dry van market has eased at the start of 2012 and is looking to achieve slightly sub-par growth during 2012. Year-over-year gains hit 10% in the second quarter of 2011 and have proceeded to drop since then. Dry Van rates were up 5.4% in January. Note that the rate picture has much less of a U-shape in 2011 than we see in the loadings data. The pricing success is remarkable given the impact of fuel prices. We attribute this to a growing pricing aggressiveness by the fleets, and to their realization that they missed an opportunity for higher pricing in 2010. This atmosphere promises significant increases as the market tightens later in 2012.
Dry van rates fell 12.7% in 2009 but quickly rebounded and rose 5.3% in 2010. Rates rose a further 8.3% in 2011. Growth is expected to slow in 2012 but still remain strong, up 4.9% in 2012. Year-over-year rates should top 6% during the second half of the year. It will then accelerate, starting in 2013, as we approach the introduction of HOS changes into the market. We look for an increase of 6.6% in 2013 and 8.1% in 2014.
As we approach the middle years of this recovery it is wise for carriers to remember the substantial non-fuel cost inflation of the last upturn, when costs rose by 9% and 11% in 2004 and 2005. This clear historical data runs counter to the tendency of management, security analysts and shippers to forecast modest price inflation, below 5%, for the next several years. This practice produces unrealistic expectations in a market that produced nearly 6% price inflation in 2011 – a year of relatively weak freight growth.
Our truckload rates data is based on publically-available data from security analysts and trade organizations. We then forecast the cost and margin elements, factoring in inflation and industry conditions. The figures are for rate-per-loaded-mile (less fuel surcharge), seasonally adjusted and are indexed to 2003Q1.
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