Heavy Duty Trucking

OCT 2014

The Fleet Business Authority

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20 HDT • OCTOBER 2014 www.truckinginfo.com Quotable "There is no appetite politically for [truck size and weight increases] … The facts don't matter. This is an emotional issue, and that's what plays on the Hill." –Annette Sandberg, former FMCSA administrator, now head of TransSafe Consulting, at FTR Transportation Conference Trucking's Most Respected Business Report hotline Truck of the future? You don't often hear the words "sensual purity" used to describe a heavy- duty truck, but that's how Gorden Wagener, global head of design at Daimler Trucks, described the 2025 Future Truck, unveiled publicly in advance of the 2014 International Com- mercial Vehicle show (IAA) in Hanover, Germany, late last month. Watch for more coverage from IAA in November's Hotline. Understanding the market through pricing 1.45 1.35 1.25 1.15 1.05 0.95 0.85 0.75 Index, 2005 Q1 = 1.0 Until recently, contract rates were surprisingly stable over the last two years. Spot markets, however, moved up strongly over a year ago and have moved up again this year. Contract rates have moved much less, even showing negative months in the ATA's numbers this year. Spot vs. contract: There is a notable pattern where spot rates go up first and are often receding when contract rates make their move. For instance, contract rates kept increasing in 2005 and 2006 well after the demand increases of 2004 stopped. More recently, spot rates fell in July along with the normal summer softening of demand. They will likely stay elevated during the fall surge, in sync with contract rates for a change. PHOTO: DAIMLER TRUCKS 2005.1 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 This chart is a prototype of a new FTR dataset that presents both contract prices and spot prices, using data from a new partner- ship with Internet Truckstop. You can see how much more volatile the spot market is. Spot rates moved up strongly in both capacity crises (2005 and 2014). They collapsed during the Great Recession. They have, until recently, lagged contract rates during this recovery. No wonder they have accelerated this year under capacity pressure. Hard vs. easy: The price differential between hard and easy freight has increased. You can see that in the y/y price differences between contract freight (4-7%) and spot freight (12-16%). "Easy" freight is high-productivity freight that carriers are happy to move – and at a discount. "Hard" freight is the random-route, non-optimized moves that have consistently been transferred to the spot market. Pricing on that freight is moving up. The two-thirds of freight that moves under contract sustained the pressure of a fully utilized marketplace with surprising grace (2-3% rate increases), but it's now beginning to show clear signs of stress, with recent rate increases in the 5-7% range. There's the possibility of 8-10% increases if high-side economic conditions occur. That is what happened in 2004. Price differentials are likely to become more exaggerated, not less, over time as the industry continues to enhance its ability to define the characteristics of hard and easy freight. For more info visit www.ftrintel.com/hdt or contact Eric Starks at (888) 988-1699. Truckload Contract & Spot Pricing Indexes 30% 20% 10% 0% –10% –20% –30% Index, Y/Y% Change 2006.1 2007.1 2008.1 2009.1 2010.1 2011.1 2012.1 2013.1 2014.1 Truckload Pricing Indexes Year Over Year Percentage Change Contract Spot Blended Contract Spot Blended (Truckload, excludes fuel surcharge, seasonally adjusted) Sources: FTR, Internet Truckstop)

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