This Week’s Forecast January 27-31, 2020

Following a muted intermodal peak season last fall, shippers are in the driver’s seat on contract negotiations. For the time being, the truck market is too weak for intermodal rates to rise much, if at all, but that could change later this year if the much-anticipated capacity-driven tightening of the truck market comes to fruition. Although intermodal’s long time status as a growth area has been called into question, railroads have made it clear that they don’t plan on reducing rates to attract incremental volume. Therefore, our outlook for intermodal volume is flattish even with a healthy consumer. 

Truckload capacity

The most notable aspect of trucking markets into 2020 so far is that outbound tender rejections have stabilized around the 7% mark, a level that will eventually be supportive of higher spot rates. Tender lead times are up 7% y/y and have been on the rise. Maybe shippers also are seeing capacity begin to tighten. 

Used truck prices:

Prices for 5-year-old used Class 8 trucks are at their lowest level since mid-2010, when the freight economy was still struggling to regain its footing after the Great Recession. Going forward, already at bargain basement prices, used truck prices may not go much lower, but it may be several months before there is meaningful strengthening since there is considerable oversupply and smaller fleets’ costs are pressured.