NEW YORK. Truck freight may be showing the first signs of a turnaround after 39 months of depressed freight volumes including sharp declines since last October, according to truckload executives addressing an audience of financial analysts here. Major LTL carriers, however, reported no changes in freight levels, which have been consistently dropping since December.
"The last couple of weeks have been better, not just for us, but for our competitors as well," Steve Russell, CEO of Celadon Group, said during a panel discussion at the Wolfe Research Global Transportation Conference. "Our billed miles have seen a meaningful improvement in the last few weeks."
While "it's too early to call it a turn," Derek Leathers, COO for Werner Enterprises, said he was "less negative" as freight activity "has started to feel slightly better in May." Adding to the consensus, Ginnie Henkels, Swift Transportation CFO, said her fleet has seen similar activity "for the last couple of weeks."
On the less-than-truckload side, "freight has been consistently poor since December and we see no meaningful differences" in May, according to Robert Davidson, president & CEO of Arkansas Best Corp. "The downturn is consistent across the country, with the possible exception of Southern California, which has been even a little weaker" because of lower import traffic at its ports, he told the analysts.
Although he spent most of his time addressing financial restructuring issues at the LTL giant YRC Worldwide, William Zollars, the company's chairman, president & CEO said "we don't see the light at the end of the tunnel, though there are some indications that we may be hitting bottom."
While Steve Duley, vp of purchasing for Schneider National, also believes the truckload sector "may be at or near the bottom," he told the conference, "I'm not sure how long we'll stay there."
Whether freight is at or near the bottom of its decline, when it does come back, truckload carriers' profitability "won't return as fast as it has in the past," according to Max Fuller, chairman & CEO of U.S. Xpress Enterprises. While all of the truckload carriers at the conference reported a significant decrease in fleet size, and bankruptcies have further decreased TL capacity, Fuller said recent bid activity has depressed longer-term rates "so now [increases in] freight volumes will not raise profits immediately." US Xpress has responded to price pressure on bids by limiting contracts with lower rates to six-month commitments, Fuller said.
Shippers looking to capitalize on the weak freight market have driven unusually high bid activity in the first quarter of 2009, according to all of the TL executives speaking at the Wolfe conference. Russell called the level of bid requests in March alone "staggering," and John Smith, CRST International president & CEO reported Q1 bid activity as "unbelievable." With reported rate decreases between 2% and 3% for new bids on longer-term contracts, the fleet executives characterized spot-market rates as "horrendous" and "volatile." In addition to the rate pressures, Smith said shippers are also becoming "more aggressive on detention charges, payment terms and other charges."
The LTL market also "saw a lot of shipper bid activity in the first quarter," according to Davidson, "but not a lot of business moving."