In The News

Syleconomics - rate erosion and the fiscal cliff

The December 2012 business figures showing some line-haul rate erosion. 

December 2012 vs. December 2011 had one less business day, so the 5% reduction in trip counts is not too serious.  What is very concerning is the rather rapid decline in revenue per mile.  It seems that carriers have dropped rates, even though it seems capacity is still somewhat tight.  In fact, capacity dropped a bit in December.  To see such a sharp decline of 7% in revenue per mile on an annual basis is concerning.  It took so long to get the revenue per mile up to a profitable level for most trucking companies, but it went back down so quickly.
 
The December 2012 vs. November 2012 saw a decrease in loads and business.  December 2012 had about 12% fewer business days plus lots of holiday opportunities, so it would make sense that business would be slower than December.  However, we see a bit more reduction in business even with the fewer business days.  Again, what is more concerning is seeing a 3% drop in revenue per mile in just one month.  December also brought a lot of uncertainty due to the impending “fiscal cliff” concerns.  Those are now behind us.
 
On a year-over-year analysis, the Sylectus pro level customers grew their top line revenue about 8%, although most of this growth was in the first 6 months of the year.

Supply/Demand analysis
 
2011 was the best year ever for many Sylectus customers.  2012 started out ahead of 2011, but the last 6 months of 2011 tracked with 2012.  We see a particularly strong increase in our long-term customer base (customers with us f or at least 5 years).  The long-term customers have such a strong, well-established, trusted network within the Sylectus Alliance, that they have been able to leverage the Alliance capacity into higher business volumes.

What is driving this success of our customers is not a strong, rebounding economy, but rather a continued and prolonged shortage of capacity.   We are beginning to see an equilibrium reached between supply and demand, which is stabilizing rates.
 
So what does this all tell us?

Supply of trucks (capacity) continues to lag below demand and has slowly recovered.  It is now at the pre-recession levels.  This is reflected in a stabilized line-haul rate per mile. The Demand (loads) chart is tracking better than 2007.  2010 and 2011 were great rides and 2012 is ahead of the same period last year. The survivors of the recession are reaping the benefits of the business volume uptick. www.sylectus.com