Good day,
Deutsche Bank analyst Amir Mehrotra and his team took a look at rail statistics, and it appears the trains are getting a benefit from a tight trucking market. “Overall rail volumes were up 6.6% y-o-y last week, marking an acceleration from +3.9% in the previous week at CSX, NSC, UNP, CP and CNI,” Deutsche wrote in its morning note. “Growth accelerated last week in both Intermodal (+7% y-o-y vs. +4.6%) and commodities and merchandise (+6.1% y-o-y vs. +3.2%) reflecting tight truck capacity and a strong industrial backdrop.”
There were several references on earnings calls over the past few weeks on the question of whether rails are picking up freight that can’t find truck capacity. These numbers cited by Deutsche, while more of a snapshot, appear to support the idea that there is that shift.
“All five Class I rails reported carload growth last week, and we note growth returned to Canadian Pacific following two consecutive weeks of decline which were likely related to the potential work-stoppage,” the Deutsche report said. “The volume outlook for the remainder of the year remains solid as we expect tight truckload fundamentals to drive continued intermodal conversions with strong industrial production growth supporting commodities & merch, though comps get tougher throughout the year.”
Did you know?
The national average van rate for April was $2.16 per mile, up 2¢ from March, according to DAT data released today. DAT said it was the second-highest monthly average, beaten only by the $2.24 recorded in January of this year. It’s also up 49 cts from the April 2017 average.
Quotable:
“We think it’s irresponsible to put young kids behind the wheel of a truck in order to avoid addressing the real problems of high turnover. The focus should instead be on fixing the staggering turnover rate with better pay and working conditions.”
-Todd Spencer, acting president of OOIDA, on proposals to lower the allowable age of interstate drivers.
In other news:
Walmart gets ready to make a big splash in Indian e-commerce
Walmart is about to purchase an Indian startup with has burned through a significant amount of cash but could provide a foothold into the Indian e-commerce sector. (Wall Street Journal)
The Sikh presence in U.S. trucking continues to rise
A growing number of drivers behind the wheel in the U.S. are Sikhs. They even have their own political action committee. (The Economist)
Report cites billions of dollars in potential savings by automation in the back end
A report from the Drewry consultancy focused on the back end of the supply chain, and said there are significant savings in automated invoicing and payments. (The Loadstar)
Hoping it will be the sweetest thing, U2 invests in trucking
The band and its members put money into Convoy, a startup, and that fact was just revealed by the company. (CDL Life)
OOOIDA declares: there is no driver shortage
In a press release, the organization of independent owner operators said there is no shortage of drivers and the lower allowable age for truckers should not be reduced. (OOIDA press release).
Final Thoughts:
It seemed inevitable that there would be movement away from tight trucking capacity and on to the rails, and recent data is justifying that conventional wisdom. What’s interesting is that it is occurring as the rail industry is cleaning up its own logistical problems. First-quarter rail data did not show any significant change in speed or dwell times, but executives on earnings calls all reported continuing improvement. They’ll need to keep that improvement moving forward if they want to grab market share spilling over from the roads.
Hammer down everyone!