Q 2/18 I N D U S T R Y U P D A T E JARRETT LOGISTICS SYSTEMS

Transcription

1 I N D U S T R Y Q 2/18 U P D A T E JARRETT LOGISTICS SYSTEMS

2 C O N T E N T O U T L I N E Section One: Fuel Section Two: Less-than-Truckload (LTL) Section Three: Truckload (TL) Section Four: Parcel Section Five: The Amazon Effect Section Six: In Other News 0 2

3 Source: F U E L 0 3

4 F U E L U.S. oil prices have gone up to four-year highs, as the U.S. is taking an effective zero tolerance line on future Iranian oil exports, saying that all countries must cut off oil trade with the country by November 4 or risk sanctions. Diesel Prices as of June 30, 2018: United States- $3.216 East Coast- $3.215 New England- $3.281 Central Atlantic- $3.380 Lower Atlantic- $3.086 Midwest- $3.143 Gulf Coast- $2.978 Rocky Mountain- $3.321 West Coast- $3.735 California- $3.960 Diesel prices were $3.216 at the end of Q2 2018, up $0.751 from the end of Q2 2017, a 30.5% increase Y/Y. 0 4

5 LTL Dayton Freight Lines, an LTL carrier, is introducing a truckload division. Old Dominion Freight line, Inc. (ODFL) is boosting capital spending, as they reported strong firstquarter financial results, with a 22.7% increase in revenue and 66.3% increase in earnings. ODFL expects to substantially gain U.S. LTL market share within the next few years. XPO Logistics Inc. is adding augmented reality technology to its consumer self-service platform, hoping to decrease returns by helping customers decide if heavy goods, such as furniture or appliances, are what they are expecting before it s shipped out. FedEx has named John A. Smith as their new President and CEO of FedEx Freight YRC cut its Q1 loss 44% down to $14.6 million. Based on Roadrunner s first three quarters of 2017 and its operating loss decreasing from $352.5 million to $14.1 million, the company is finally finding its financial footing. Roadrunner s earnings are expected to improve with the strong freight market. LTL carriers and parcel providers are raising fees on large shipments, a move that looks to be aimed at changing shipping decisions rather than increasing revenue. UPS increased fees by 30%, and over maximum limit charges jumped from $500 to $650 on June 4. LTL Less-Than-Truckload 0 5

6 Capacity & Rates Capacity tightness increased 11% in the U.S. truckload spot market since April 1, when greater enforcement of electronic logging devices began, according to DAT Solutions. The Truckstop.com Market Demand Index hit another record high in June, as capacity is at full utilization, the longest period of full utilization ever. The trucking market will probably continue to see full utilization until at least early Because of this, freight rates are expected to continue to grow higher in Drivers According to the American Trucking Associations, the annualized driver turnover rate at large (over $30 million in annual revenue) truckload carriers reached 94% in Q1, which is 20 points higher than Q1 in 2017, and 6 points higher than Q4 in The turnover rate at LTL carriers reached 10%, up from 8% at the end of Trucking companies have increased orders for big rigs but are still having a difficult time getting new workers behind the wheel. On the flip side, companies focused on e-commerce aren t having this issue, as couriers and warehouse operators added a total of 12,300 jobs in March. Smokey Point Distributing will start providing a guaranteed base salary to their flatbed drivers. Acquisitions and Public Stock Offerings U.S. Xpress Enterprises Inc. announced in May that it is planning to go public again. It is expecting to raise more than $300 million from its public stock offering. Epes Transport System Inc. was purchased by Penske Logistics TL Truckload 0 6

7 Pricing and Regulations U.S. spot-market prices for truckload van transport jumped 29% year-over-year in April, according to DAT Solutions LLC. The Cass Freight Index reported a 17.3% year-over-year growth in U.S. trucking and rail freight spending in May along with a 7.2% year-over-year increase in truckload costs. Freight rates were at a record high during the scheduled International Roadcheck three-day inspection blitz in June. Strong shipping demand helped J.B. Hunt Transport Services Inc. to a 15% increase in Q1 net profit and a 20% increase in revenue. J.B. Hunt's freight brokerage profits nearly doubled in revenue. Knight-Swift Transportation Holdings Inc. experienced a boost in earnings due to strong freight demand, but drivers are still hard to find. Freight carriers are benefiting from the surge in demand, while shippers are experiencing an increase in cost. Schneider National Inc. says prices increased by double digits in the first quarter, and freight broker C.H. Robinson reported a jump of 21.5% in truckload transport cost. New freight rail regulations were approved in Canada, allowing shippers more flexibility to switch carriers when facing service delays TL Truckload 0 7

8 Greater freight volumes increased FedEx Corp.'s first quarter revenue up to $17.3 billion, up 10% Y/Y. With a strong quarter behind them, FedEx is planning to invest $6.6 billion in new Boeing Co. 767 and 777 freighters in the next two to three years. FedEx is also looking to invest in block-chain technology in order to monitor shipments that are outside its own tracking systems. The first quarter provided a higher revenue but also a wider loss for the U.S. Postal Service's packaged delivery business. United Parcel Service Inc. is trying to reduce payroll by offering buyouts to some management workers, all while boosting investments to handle the surge in online shopping. More UPS packages are delivered to consumers than to businesses, causing delivery to get more expensive, with weekends costing more, as unionized drivers are able to earn overtime pay. Teamsters unionized employees voted to authorize a strike at UPS, if the two sides cannot come to an agreement by the time their current contract expires on July 31. In an already tight freight market, the possibility of a strike could significantly affect supply chains. UPS has reportedly been communicating with Werner Enterprises Inc. about a possible "final-mile" operation. PARCEL 0 8

9 T H E AMAZON EFFECT Amazon Over 100 million people are now paying for Amazon Prime. Over 1 million small businesses in the U.S. are selling on the Amazon marketplace. Amazon is looking to allow customers to track deliveries on a live map United National Foods Inc., Whole Foods' main distributor, has seen a large increase of business in the past year after Amazon's acquisition of Whole Foods. Amazon is acquiring online pharmacy PillPack Inc. for roughly $1 billion. This acquisition gives Amazon the ability to ship prescriptions to 49 U.S. states. The U.S. Supreme Court ruled that internet merchants must collect state's sales tax payments, even without a physical presence in a state. This ruling gives states the authority to collect those sales taxes from online retailers. The U.S. Postmaster General was encouraged by President Donald Trump to double the rate the Postal Service currently charges Amazon Since accepting returns from Amazon shoppers, Kohl's has seen a large increase in foot traffic at their stores. 0 9

10 T H E AMAZON EFFECT Competition Global online grocery sales are expected to more than double up to $334 billion by 2023, according to Forrester Research. Walmart set tougher delivery standards for its suppliers on April 1, but by April 12 they relaxed some of their deadlines for deliveries based on capacity constraints. According to Armstrong & Associates, U.S. e-commerce logistics costs over the last five years have had an average annual growth of 15%. Walmart acquired a 75% stake in Indian e-commerce startup, Flipkart Group, for $15 billion. Grocery chains such as Kroger Co. and Walmart Inc. have slowed store growth and have been focusing more on online delivery and pickup options. Cigna Corp., health insurer, bought Express Scripts Holding Co. for $54 billion, in a move likely influenced by Amazon's interest in PillPack Inc. Microsoft Corp is working to challenge Amazon's automated convenience stores with a technology that would eliminate shop cashiers and checkout lines. 1 0

11 I N OTHER NEWS Autonomous Vehicles Domino's Pizza Inc. and Yum Brands Inc.'s Pizza Hut are working with automobile makers to study robot cars, with the possibilities of self-driving pizza delivery on the forefront of their minds. Pizza companies are interested because they are always looking for ways to make deliveries cheaper and more efficient. Parcel carriers such as FedEx and UPS, along with Amazon are following the developments of these studies closely. UPS says the company may one day deploy autonomous vehicles, with a person riding along to deliver packages to the door. Kroger Co. and Nuro Inc. are working together to test what would be the world's first driverless grocery delivery vehicle. Two months after a fatal accident in Arizona, Uber Technologies is closing down its self-driving vehicle program in that state. Investigators found that the self-driving vehicle that killed a pedestrian was not set up to brake in an emergency. Volvo Trucks North America and FedEx demonstrated a truck platooning system in North Carolina 1 1

12 I N OTHER NEWS Trucks and Technology Hub Group Inc. is planning to add around 800 trucks and 4,000 shipping containers to their inter-modal freight network. Many carriers are looking into choosing natural-gas powered trucks over diesel in an effort to save on fuel costs. UPS is spending $130 million to purchase 730 compressed natural-gas vehicles. Volvo Trucks added a second all-electric rig to their commercial truck lineup. Daimler Trucks is adding two electric vehicles to their line of Freightliner trucks. Hyundai Motor Co. and Volkswagen AG's Audi will collaborate on hydrogen car technology. Other News Since the ELD mandate, violations of trucking's hours-of-service rules have "dropped significantly" according to U.S. regulators. The timeline for their next acquisition is "between three weeks and nine months," says XPO Logistics. New York City stands to make an additional $17 million in revenue after planning to remove some of the discounts it gives to commercial vehicles for parking tickets. 1 2

13 T H A N K YOU Kevin Green Director of Business Development kgreen@jarrettlogistics.com