Truckload pricing 19.09.2012

A new indicator for truckload pricing, which was recently introduced by Cass Information Systems, the largest payer of freight bills with more than $17 billion in annual freight spend, and investment firm Avondale Partners, disclosed this week that per-mile truckload pricing saw significant gains in October.

Cass and Avondale said that this report is based on actual freight invoices paid on behalf of Cass clients, which accounted for more than $17 billion in 2010, and uses January 2005 as its base month. And they added that this index “isolates” the linehaul component of full truckload costs from other components such as fuel and accessorials, which in turn provides an accurate reflection of trends in baseline truckload prices.

Entitled the Cass Truckload Lineaul Index, the report stated that with the index valued at 108.8 in October—with a base value of 100—truckload pricing was up 9.8 percent in October. While this is an impressive annual increase, it falls short of September’s 111.0 index reading and annual pricing growth of 11.0 percent, which is the highest linehaul pricing increase from carriers since the 2005 baseline period, according to Cass and Avondale.

The report’s authors noted that October’s gains “reaffirms that capacity remains tight and carriers are being more disciplined regarding pricing and capacity additions in this cycle.” This has been the case for several months, given that tight capacity has created an environment in which carriers have regained leverage on the pricing side, following a particularly difficult 2009 and into 2010, which saw carriers take deep discounts at a time when there was more excess capacity.

Donald Broughton, Avondale Partners managing director, wrote in an October research note that the objective of this index was to deliver a more timely barometer of truckload pricing than the one provided by the American Trucking Associations (ATA), which does not fully “remove the effect of diesel in its revenue per mile series,” adding that the ATA’s revenue per mile series—on both a seasonally-adjusted or non-seasonally adjusted basis—tracks more closely with Cass’ Truckload Total Cost (per mile) Index, which is more sensitive to changes in diesel than with Cass’ Truckload Linehaul (per mile) Index. He added that whereas the ATA reports truckload pricing roughly 45 days after the end of the month, Cass data is ready to be analyzed three-to-five days after the end of the month.

“The fact that Cass processes $17 billion in freight bills annually is significant,” Broughton told LM in an interview. “The biggest concern initially when putting this together was protecting confidential information of Cass’ customers, as many of them compete directly with each other and do not want each other to have access to their respective freight spend. Once that was taken care of it is a matter of going through the data and delineating it to strip out accessorial and fuel-related charges.”

Removing fuel from the equation provides a better gauge of actual base prices, too, for both shippers and carriers, in that it provides a better baseline for gauging rates, said Broughton.

While Cass and Avondale are currently focusing on truckload pricing for this index, Broughton said they will also collaborate to put together similar ones for other modes in the future.



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