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Freight volumes ‘capacity-constrained’ in October, rates surge further

Cass’ freight expenditures index sees acceleration in growth rate, up 37% year-over-year

Double-digit increases in freight expenditures through the first half of 2022, Cass says (Photo: Jim Allen/FreightWaves)

A lack of transportation capacity continued to weigh on freight shipments in October. The shortfall in supply to meet demand led to another significant jump in costs during the month, according to a Monday report from Cass Information Systems.

The shipments component of The Cass Freight Index increased 0.8% year-over-year during the month (2.8% higher than September on a seasonally adjusted comparison), with the expenditures dataset up 37.2% year-over-year (+3.9% seasonally adjusted from the prior month).

“Freight volumes remain capacity-constrained, as shown by declining rail volumes and the ongoing backlog of container ships at anchor waiting to unload, but the 2.8% m/m improvement shows a modest rebound as restocking demand remained elevated,” Tim Denoyer, senior analyst at ACT Research, wrote.

October 2021y/y2-year m/mm/m (SA)
TL Linehaul Index12.2%9.1%0.3%N/A
Table: Cass Information Systems. SA (seasonally adjusted)

Stacks of containers awaiting inland transport from the ports, a lack of trucks and drivers to move them and delays unloading equipment at shipper facilities are all contributors to the congestion.

Cass’ (NASDAQ: CASS) expenditures subindex hit an all-time high in October. The year-over-year growth rate accelerated again following three consecutive months of steady decline from July’s high of plus-56.4%. The report noted that the increase was accomplished even as the index faced a “slightly tougher prior-year comparison” in the month.

Compared to two years ago, the expenditures index was 41.4% higher, mostly due to a steady surge in freight rates.

Denoyer said if normal historical patterns hold for the rest of the year, the subindex will be up 34% year-over-year. He sees the increases continuing into next year. “Tougher comparisons in the coming months will naturally slow these y/y increases further, but normal seasonality implies double-digit increases through most of the first half of 2022,” Denoyer stated.

A few transportation and logistics executives shared their outlooks last week. The consensus among the group is dislocation throughout the supply chain, a tight capacity environment and future rate increases will be the likely trademarks of 2022.

Inferred rates, or expenditures divided by shipments, increased 36.2% year-over-year and 1.6% seasonally adjusted from September. October marked the third-straight sequential increase for the calculation.

The report said excess miles due to West Coast imports being moved with truckload capacity amid a chassis shortage, as well as higher fuel costs and a mix shift to premium freight options like air cargo, contributed to the increase.

The TL Linehaul Index, which excludes fuel and accessorials, was up 12.2% year-over-year and 0.3% higher month-over-month. The report said the index would have been seven to eight percentage points higher, placing it closer to third-quarter reports from publicly traded carriers, which showed increases of more than 20%, if adjusted for length of haul.

The public fleets operate at shorter trip distances, typically well below 500 miles. Cass’ linehaul index is seeing “longer-haul mix related to intermodal chassis shortages pushing more freight off the rails and into truckload markets, particularly from the West Coast to Midwest,” which depresses the metric.

“The current supply chain issues are building pent-up demand, and a broad range of freight demand fundamentals remain supportive, suggesting a positive demand environment will continue well into next year,” Denoyer concluded. “Though the near-term direction of freight rates remains higher, cyclical forces like driver hiring and wafer fab construction, which take time, are diligently occurring in the background and will dictate the direction of capacity, volume and rate trends in 2022.”

Data used in the Cass indexes is derived from freight bills paid by Cass, a provider of payment management solutions. Cass processes $26 billion in freight payables on behalf of more than 8,000 subscribers annually.

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Todd Maiden

Based in Richmond, VA, Todd is the finance editor at FreightWaves. Prior to joining FreightWaves, he covered the TLs, LTLs, railroads and brokers for RBC Capital Markets and BB&T Capital Markets. Todd began his career in banking and finance before moving over to transportation equity research where he provided stock recommendations for publicly traded transportation companies.