Q 3/17 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 3/17 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 What we pay for in a gallon of: Source: F U E L 0 3

4 F U E L U.S. ethanol inventories were close to an all-time high in early August, and world-wide oil inventories were above a five-year average until Hurricane Harvey and Irma hit. After that, inventories were hit hard and oil and gas prices skyrocketed. As of September 30, 2017: United States- $2.788 East Coast- $2.811 New England- $2.762 Central Atlantic- $2.925 Lower Atlantic- $2.740 Midwest- $2.741 Gulf Coast- $2.624 Rocky Mountain- $2.832 West Coast- $3.103 California- $3.180 Diesel prices were $2.788 at the end of Q3 2017, up $0.406 from the end of Q The average price was $2.615 for Q3 2017, up $0.235 from Q

5 Carriers have seen a shift from the beginning of the year where daily bill count was down Y/Y and during Q3 carriers were up 6-8% Y/Y. This has caused carriers to shift their focus into margin protection mode. Old Dominion Freight Line and FedEx announced general rate increases. Old Dominion Freight Line raised their rates on September 1 at an average of 3.5%. FedEx announced an average increase of 4.9% which will go into effect on January 1, ArcBest Corp., parent company to ABF Freight, introduced dimensional pricing; minimum charges will be based on the amount of space a shipment takes up. Second-quarter earnings reports showed revenue and volume growth for most LTL carriers. This includes ArcBest Corp, whose second-quarter profit increased 54% to $15.7 million. Stronger pricing in their ABF Freight trucking unit contributed to the revenue growth. Central Freight Lines created Expedited Elite Fleet, a division for owner-operator teams. Expect LTL rates continue to increase in 2018, as capacity pressures in the truckload sector raise costs, it will begin to overflow into the LTL sector. LTL Less-Than-Truckload 0 5

6 Drivers Driver turnover is rising, which is consistent with tighter capacity. Capacity pressure along with the Electronic Logging Device (ELD) mandate may lead to more driver pay increases. Capacity & Rates Capacity tightness is at almost record levels, as the perfect storm of freight growth, the stress of the ELD mandate, and the recent hurricanes has pushed capacity measures significantly higher. Spot rates have increased significantly this year and have continued climbing upwards. Past data has shown, when capacity has reached levels near this, contract rates increase as well. Miscellaneous Dart Transit Co. and the expedited trucking unit of CRST International Inc. added pay increases for drivers this quarter. All of Schneider National Inc. s intermodal, logistics and truckload sectors had declining profits in Q Paul Svindland was named the replacement for Chief Executive, Paul Will, at trucking company, Celadon Group Inc. Daseke Inc., a flatbed trucking company based in Texas, acquired The Steelman Companies. This is the third purchase in two months for Daseke. Heartland Express Inc. purchased Interstate Distributor Co. for the price of $113 million. TL Truckload 0 6

7 FedEx Corp. had a 16.6% decline in net profit, down to $596 million in the second quarter. One major factor was the global cyberattack that significantly affected FedEx s TNT Express business. FedEx announced an average increase of 4.9% which will go into effect on January 1, The United Parcel Service Inc. (UPS) and FedEx released new surcharges, yet they have taken two vastly different strategies. FedEx is raising charges based on the weight and size of shipments, charging extra for abnormally shaped packages as well as oversized boxes. UPS is adding new surcharges focused on the timing of the shipment. It will cost more to ship to homes during specific time periods during the holiday season. UPS has decided it will start using virtual reality headsets in training new delivery drivers All parcels shipments moving through the FedEx Ground Chattanooga TN sorting center will be photographed from all sides. PARCEL 0 7

8 T H E AMAZON EFFECT Amazon announced plans for a second headquarter location and is looking for a city to house it. Amazon has opened or announced plans for multiple distribution centers including: Miami, FL, Salt Lake City, UT, Salem, OR, and Staten Island, NY. Sales for Amazon.com Inc. s Prime Day promotion were up 60% compared to Multiple companies, including Sears (Kenmore refrigerators) and Eclat Textile (supplier to Under Armour Inc. and Nike Inc.) have plans to sell products through Amazon. Amazon.com Inc. started to hire people for over 50,000 new positions at distribution centers and sorting sites across the U.S. in order to begin preparing for the holiday rush. Amazon is looking into technology that was developed for the U.S. military that would allow them to deliver prepared meals without it needing refrigeration. Amazon closed its acquisition of Whole Foods Market Inc., acquiring it for almost $14 billion. 0 8

9 I N OTHER NEWS Hurricanes Hurricane Harvey pummeled the Texas and Louisiana coasts, shutting down multiple ports, especially the Port of Houston. Historic flooding in Houston and the surrounding area shut down supply chains throughout the entire region. On top of this, over 30% of the U.S. fuel-making capacity was not able to function as many Houston-area refineries had to shut down, with production of well over 2 million barrels a day lost for an extended period of time. The economic toll of this storm was well into the tens of billions of dollars. During this time, The Federal Aviation Administration granted more than 100 authorizations for the use of drones that would be used to assess damage and other purposes for use in and around Houston. This was all followed up by Hurricane Irma, which shut down the Florida coasts, halting supply chains throughout the entire southeast U.S. region. While the damage caused by Hurricane Irma was less than Hurricane Harvey, the economic tool for Hurricane Irma was also in the tens of billions of dollars. 0 9

10 I N OTHER NEWS Autonomous Vehicles Tesla Inc. is looking to get state authorities approval to begin road-testing heavyduty trucks that will use autonomous and platooning technology. A new study says that self-driving cars could transform one in nine U.S. jobs, truck drivers being the ones most likely to be affected. Fiat Chrysler is joining BWM AG and Intel Corp to develop self-driving car technology. Nippon Yusen K.K., a Japanese container line, is planning to test an autonomous ship across the Pacific Ocean sometime in Uber Dara Khosrowshani, former Expedia Inc. Chief Executive was named the new CEO of Uber Technologies Inc. Uber expanded the footprint of its Uber Freight truck load-matching app, expanding from Texas to metro areas in California, Arizona, Georgia, South Carolina, North Carolina and the Chicago region. Uber reported that Q2 revenue from ride bookings doubled from last year. 1 0

11 I N OTHER NEWS Miscellaneous At the beginning of Q3, the Cass Freight Index was at its highest level since August 2014, due to U.S. freight shipments rising 7.1% year-over-year. Fleet owners are increasing their investments in heavy-duty trucks, as Class 8 truck orders increased. The U.S. West Coast Dockworkers Union announced that its members backed a three-year extension of their coast-wide port labor contract, almost two years before the current contract expires. The Suez Canal announced they are reducing transit rates for container ships. These changes will be effective October 1. Newgistics, a parcel-delivery technology firm, was purchased by Pitney Bowes Inc. for $475 million. CSX Corp. has opened a Pittsburgh-area intermodal terminal as part of their plans to create double-stacked connections to and from the East Coast 1 1

12 T H A N K YOU Sales and Marketing marketing@jarrettlogistics.com