Morgan Stanley: Truckload rates on the rise

Morgan Stanley: Truckload rates on the rise    Investment bank Morgan Stanley said last week it expects a strong second half for truckload carriers, with improved demand likely leading to improved rates in the second half of the year, according to the bank's Proprietary Truckload Freight Index.
   'Our proprietary index continues to post readings in line with some of the better years for the truckload industry, but momentum has slowed,' Morgan Stanley said. 'On a seasonally adjusted basis, our index peaked in mid-May primarily due to an early peak in summer demand.'
   The index is showing positive signs for carriers primarily due a rebound in demand.
   'The bull case for truckload has always centered on the potential for constrained capacity, but the sudden rebound in the demand portion of our index has been a key driver of the strong recovery in the truckload market,' Morgan Stanley said. 'The recent moderation in truckload demand suggests second half pricing may not be as robust as bulls expect. In terms of market segments, reefer is the strongest. Dry van has lagged the recovery in flatbed and refrigerated and is showing signs of moderation. Our flatbed index, which led the downturn in 2006, remains quite strong in an absolute sense, but has pulled back significantly from recent highs over the past month.'
   Morgan Stanley is forecasting that second half pricing will improve for truckload carriers.
   'Given that truckload pricing lags a volume recovery, the improved fundamentals this year will likely drive enough momentum to support solid truckload contract rate increases in the second half of 2010,' the update said. 'The bull case for an unprecedented capacity crunch was always a lower probability outcome and may be fading with moderating trends in our index. At this point, our straight-line forecast implies a strong peak season, but nothing near the peaks of 2004 and 2005.”