Dollars & Sense

February numbers on track, Syleconomics show

The trucking industry continued its strong performance with another solid month in February, according to the most recent Syleconomics report issued by Sylectus.

According to the numbers compiled by Sylectus using information from its network members, February 2012 showed increases over February 2011 in virtually every statistic.

Total miles were up 10 percent, with an 18 percent increase in total revenue and a 7 percent rise in total revenue per mile.

The only decrease came in average length of haul, which declined 7 percent.

Sylectus President Stuart Sutton noted that because of Leap Year, February 2012 had one more business day than February 2011. Sutton said because of that, the total revenue increase should be discounted by at least 5 percent.

“Even after allowing for the discount, February 2012 was better for our customers than the same time last year,” Sutton wrote. “Trips, revenues and rates were all better than the same period in 2011.”

In his commentary, Sutton addressed rate per mile and the factors that influence that statistic.

“First, there is seasonality in the trucking industry,” Sutton wrote. “By mid-December, most of the pre-Christmas shipping rush is complete and many people/organizations are gearing down for the holidays.

“The seasonal drop in shipments does not really pick up until around mid-February.  Last year (in 2011) there were several anomalies that affected rates including a few severe snow storms and a major automotive company that produced through the holidays.  Both these tended to keep volumes and rates up.  “By contrast, this year saw very moderate weather patterns that did not disrupt/strain supply chains.  So seasonality, predictability and stability within transportation put downward pressure on rates.”

Supply and demand also contributes to fluctuations in rate per mile, Sutton noted, pointing out that more small carriers and individual drivers are entering the industry. That has resulted in a slow increase in truck and driver availability. With seasonal demand lower remaining relatively low in February, the rate per mile statistic remained relatively flat in February compared with January.

Sutton also noted that often the complaints he hears about rate per mile reductions often come from smaller carriers who don’t have a large customer base, instead relying on load boards for the bulk of their business. Larger companies with more diversified customer bases as well as brokering authorities are able to maintain their rates because of contracts and market strengths.

As a fourth factor, Sutton related a discussion from Sylectus’ annual convention in February, when some trucking executives cautioned smaller carriers against cutting rates in order to grow their business.

“Profitability is necessary to both grow and smooth out the economic downturns,” Sutton wrote.

Sutton pointed out as well, that the rate per mile data published in Syleconomics is a mixture of data from a variety of business segments. It includes different vehicles sizes and type, different geographies and different customer bases.

In all the above analysis, the main rate determinant right now is seasonality,” Sutton wrote. “The good news is that the seasonality can also be beneficial. We are entering the second quarter of the year when manufacturing typically picks up, the Northern hemisphere warms up and people emerge from their winter hibernation and start buying again, and freight volumes tick higher.

“I suspect that when the March Syleconomics is published, rates will have ticked higher as well.”