This autumn Cowen/AFS Freight Index tasks transportation market in flux
ATLANTA (Oct. 18, 2022) – AFS Logistics (afs.internet), an industry-leading 3PL supplier, and Cowen Analysis right this moment launched the October 2022 Cowen/AFS Freight Index for This autumn, a snapshot with predictive pricing throughout a number of sectors within the freight {industry}. The newest launch of the index tasks quarter-over-quarter (QoQ) declines in transportation prices throughout all reported modes, except for floor parcel.
“Whereas the freight {industry} costs stay elevated on a year-over-year foundation, particular sectors are seeing marked quarter-over-quarter decreases and at the moment are receding from historic highs,” says Tom Nightingale, CEO, AFS Logistics. “However whereas flagging demand and falling quarterly charges point out market energy shifting away from carriers, shippers should stay vigilant as carriers inject unprecedented normal charge will increase.”
The Cowen/AFS Freight Index is exclusive as a consequence of its dataset and forward-looking view. The anticipated charge ranges are derived from the info related to $11 billion of annual transportation spend by AFS clients throughout all modes and consists of precise internet fees that think about accessorials comparable to gas surcharges. Previous efficiency and machine-learning produce predictions for the rest of the quarter, set in opposition to a baseline of 2018 charges for every mode.
Key implications for floor and categorical parcel
Peak season surcharges at the moment are in impact for a far longer time period than up to now and apply to extra shippers. Peak surcharges for extra dealing with and oversize packages have been in place since January for UPS and began on Sept. 5 for FedEx. For comparability’s sake, the 2018 peak season lasted 34 days for UPS and 35 for FedEx. Final 12 months, peak residential supply surcharges from each main carriers utilized to clients who shipped greater than 25,000 residential and floor financial system packages per week. This 12 months, that threshold decreased to twenty,000 packages per week, so extra shippers ought to count on to pay these surcharges. And year-over-year (YoY) charge will increase for varied peak surcharges go as excessive as 60%, appearing as a potent instrument for carriers to keep away from undesirable packages.
In This autumn, the aggressive peak surcharge will increase and extra surcharge prices arising from the seasonal elevated share of residential deliveries will assist push up the typical charge per package deal for floor parcel, taking the index forecast as much as a brand new excessive of 28.5%, as in comparison with the 2018 baseline.
Whereas categorical parcel charges elevated sharply in Q2 of this 12 months, decrease gas surcharges, declining common billed weight and a shift to fewer premium providers resulted in a decline of 5.1% in Q3. For the quarter forward, the categorical parcel index is projected to additional lower to -1.8% in comparison with the 2018 baseline, although that determine nonetheless displays a 4.3% YoY enhance.
“Earlier this 12 months, carriers had a robust hand in relation to pricing as a consequence of capability points in the course of the pandemic, and gas costs working amok,” says Micheal McDonagh, president, parcel, AFS Logistics. “However because the financial system softens and cargo quantity decreases, carriers might want to strategize to achieve quantity.”
GRIs – Worse than they give the impression of being
Citing inflation, FedEx introduced the highest-ever internet listing charge enhance of 6.9%, efficient January 2023 for each categorical and floor parcel. However that printed common enhance could be deceptive. The precise listing charge enhance varies primarily based on package deal traits, as do will increase to particular person surcharges. For instance, the listing charge enhance for a zone 8 package deal with a billed weight of 26 kilos might really be 7.4% for precedence two-day transport, and along with accessorials, calculations present the whole value to ship a package deal as soon as the overall charge enhance (GRI) takes impact might really quantity to a 12.7% enhance – practically twice the introduced GRI.
Annual GRIs even have a compounding impact that drives up prices considerably over time to a far higher extent than regular annual will increase might point out. Based mostly on listing charge and accessorial will increase for the five-year interval from 2017 to 2022, an instance zone 5 package deal with a dimensional weight of 54 kilos has change into 38.2% dearer to ship precedence in a single day.
“Whereas the record-high GRI announcement from FedEx grabbed headlines, shippers should still be stunned by the extra expensive actuality lurking behind the annual will increase they’ve grown accustomed to,” says McDonagh. “The forthcoming UPS GRI will possible be corresponding to FedEx’s, which then leaves shippers with the duty of testing how ‘sticky’ this newest GRI actually can be.”
Key implications for LTL
Weight and gas surcharge per cargo each declined on a quarterly foundation in Q3 2022, which helped drive a decline of two.4% in LTL value per cargo QoQ. Nevertheless, the LTL index nonetheless confirmed a major YoY enhance in Q3 of 20.3%. And whereas the typical gas surcharge decreased by 5.4% QoQ as a consequence of decrease crude oil costs in Q3, common accessorial fees per cargo jumped 8.4% in comparison with the earlier quarter. Looking forward to This autumn 2022, the LTL index is once more anticipated to lower on a quarterly foundation, from 55.3% to 48.6% – nonetheless a ten.1% YoY enhance in comparison with This autumn 2021.
Key implications for truckload
Whereas truckload charges have fallen sequentially, the charges have fallen lower than volumes; indicating shocking resilience available in the market and the lengthy shadow of truckload contract charges. The Cowen/AFS Truckload Freight Index is forecasted to be 17.9% in This autumn as in comparison with 18.3% in Q3.
Not solely is the This autumn truckload index anticipated to buck typical seasonal tendencies and decline on a quarterly foundation, it additionally signifies the primary damaging YoY change since Q3 of 2020. This decline is essentially because of the present macroeconomic setting, pushed by components like inflation remaining above 8% and anticipated charge hikes by the Federal Reserve. Because of this, truckload carriers are more likely to face challenges sustaining income development over the following a number of quarters.
