In general, “freight demand remains solid while capacity is tight across transportation modes, something that has enabled some carriers to be somewhat selective on the type of freight they accept,” said Seidl. “It’s all about revenue management. Freight demand is strong across transportation modes, and many carriers are staring down more freight than they have immediate capacity for, a high-class problem that has shifted the balance of powers in favor of transportation services providers. This is not a new dynamic in the truckload market, where capacity has been very tight for several months, but LTL carriers and railroads have now joined the revenue management party. In some cases, smaller carriers, especially in the truckload market, have stopped honoring contractual rates, although that is not the case with the larger carriers, such as the ones in our coverage universe.”
“The rail outlook remains positive,” said Seidl. “The railroads offered upbeat views of freight market fundamentals and the economy as a whole. The traffic strength stems from a broad range of segments, including yet another strong grain harvest; improving demand for building products associated with the housing market; intermodal strength aided by an accelerating shift from a tight truckload industry; strong steel traffic; rising chemical shipments; and strength in energy commodities, including frac sand and crude. The solid demand environment and continued network congestion have resulted in carriers being somewhat selective on the freight they take on.
“Truckload capacity constraints have persisted in the third quarter and shows no sign of easing. The constraints may have even intensified as demand remained strong while driver shortages worsened due to a host of factors, not the least of which is competition for labor from other growing sectors of the economy, namely energy and housing. The strength in these industries is evident in North American Class I rail traffic, which has shown 25.5% and 10.6% year-over-year increases in petroleum products and lumber products, respectively, thus far in third-quarter 2014. LTL (less than truckload) industry fundamentals have remained strong and may have even improved further.”