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Breakbulk July 2018

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8 The Journal of Commerce | July 2018 www.joc.com Cover Story Breakbulk & Project Cargo day period before construction actu- ally starts," said Dan Taylor, senior vice president of sales of Melton Truck Lines. "We see permit activity as fairly strong and consistent, so we believe it's going to be a strong summer. That correlates with what our major shippers of construction products are telling us." IHS Markit data shows auto pro- duction is expected to decline from 17.8 million to 17.3 million vehicles this year, but industry analysts be- lieve the sector remains strong and figures will rebound in 2019. "The third and fourth quarters this year should be very, very strong for the open deck carriers," said Jay Folladori, president of Bennett Mo- tor Express. "There is a heck of a lot more freight available than there are trucks in many, many markets." By the end of June, as construc- tion season hits its peak in many regions of the US, shippers were not- ing how hard it was to find trucks. "Flatbed capacity has and con- tinues to be very tight, expecting to start feeling the crunch on van as third quarter approaches," one shipper told Morgan Stanley. "We are still feeling a tight market in the dry van sector. We are experiencing heavy capacity deficits in the flatbed market," a second shipper said. Exploration in the Permian Basin is siphoning trucks from other indus- tries. With crude oil prices now double the price from two years ago, expect more investments in the future. Trip Rodgers, a financial analyst with energy investment firm BP Capital Fund Advisors, wrote in a recent report that an average well site requires at least 10,000 tons of frac sand, equating to about 400 truckloads. "Assuming 10 to 15 days for the completion stage of an average well, this implies 27 to 40 sand truckloads per day to each individual well," Rodgers wrote. "We estimate this amounts to over 2,000 trucking round trips per day in the region, a figure that is expected to grow sub- stantially in upcoming years." Much of that material is moved on a tank truck, but energy producer Encana has said it's using more sandbox systems to place frac sand onto flatbeds. These well sites also for the balance of the year." Anixter International, a distrib- utor of communication and security products, said rate increases "in the mid-teens" translated into a 20-basis-point increase in operating expenses in the first quarter. Economic data shows the indus- tries shipping freight on flatbed will continue to grow. The Institute for Supply Chain Management's manufacturing index was 60.2 in June and has floated around 60 since December 2017. A number greater than 50 indicates economic expansion, and econo- mists generally agree 60 is a marker of robust conditions. The US Census Bureau reported building permits jumped 8 percent and construction spending rose 4.5 percent year over year in May. "These [data points] give us an early indication of what's to come because once the permits are ap- proved, there is usually a 90- to 180- The Morgan Stanley flatbed index ended June at its highest level ever, outpacing the robust markets in 2011 and 2014. Rates per mile were up 10 per- cent for flatbed carrier Daseke, ac- cording to its first-quarter earnings report. Universal Logistics Holdings reported revenue per mile, exclud- ing fuel surcharges, rose 12.7 percent year over year. "We have not seen a rate envi- ronment like this for a long, long time, if ever," said Robert Ragan, chief financial officer with Melton Truck Lines. "I've never seen anything like this in more than 30 years in busi- ness," added Joyce Brenny, CEO of Brenny Transportation. "Volume was at least manageable a year ago. We were doing well and rates were good. But now it's out of control, and we can't keep up." In May, she said new shippers were waiting 10 to 14 days to get an available truck. As of July 1, the wait time fell to seven to 10 days. Even so, the wait was only three days much of last year, and during leaner times it was as little as 24 hours. Michael McMurray, Owens Corn- ing chief financial officer, speaking on an earnings call, said flatbed ship- ping costs "have driven a 15 percent increase in outbound shipping costs and are expected to persist $1.50 $1.60 $1.70 $1.80 $1.90 $2.00 $2.10 $2.20 $2.30 $2.40 $2.50 Jan- 17 Feb-17 Mar-17 Apr-17 May- 17 Jun- 17 Jul-17 Aug- 17 Sep- 17 Oct-17 Nov- 17 Dec- 17 Jan- 18 Feb-18 Mar-18 Apr-18 May- 18 Jun- 18 Flatbed trucking spot rates climb to new highs Source: DAT Solutions © 2018 IHS Markit National average flatbed rate per mile excluding fuel surcharges "Volume was at least manageable a year ago … But now it's out of control, and we can't keep up." 8% more building permits granted this year, according to the US Census Bureau.

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