Capacity crunch continues

If directory sales can provide any indication in where market demand centers, Tom Fugee of Transportation Technical Services has a ringside seat. Demand is high for the company's directories, but what's interesting is where the demand is focused.

Directories of shippers are selling slower in 2004 while demand for carrier directories and the company's directory of owner operators is extremely strong. Carriers aren't looking for shippers, comments Fugee, they're looking for drivers.

Further anecdotal evidence came from this past March's Mid-America Trucking Show, Fugee continues. There were 81 recruiter exhibitors at the show looking for drivers. That should have served as an early warning of the coming driver shortage and capacity crunch.

As TTS starts compiling its next directory of carriers, Fugee notes the large carriers are reporting some growth, but it is the small-to-medium carriers who are indicating strong growth. Medium-tolarge carriers don't appear to be having as much luck. They are caught in the capacity squeeze and may be finding it more difficult to come up with the wages drivers are demanding or to place orders for equipment. Smaller companies, which are often more agile, may be best suited to pick up freight the larger carriers have turned away and still make a profit on it. Earlier industry reports indicated both larger and smaller carriers were seeing yield improvements from the capacity crunch.

Larger carriers have become more selective about the freight they'll handle, which has allowed them to improve network utilization and reduce empty miles while pushing shippers to meet price increases and fund fuel surcharges. The freight those carriers lost on price or other issues has often moved to smaller carriers who, though they have less price leverage, have been able to improve their own density and pricing.

Volumes continued strong after a slight softening in mid-summer and show signs of remaining strong. The market analyst firm Legg Mason indicates retail projections were for only modest growth. Retail giant Wal-Mart Stores Inc., for instance, is predicting only a 2% to 4% rise in samestore sales in the third quarter. That said, retailers have continued to add stores during the year, so overall retail volumes are rising even if same-store sales look modest. On the manufacturing side, domestic manufacturing is showing "solid performance," says Legg Mason.

With very little new capacity entering the market, truckload demand remains strong, says equity research firm Morgan Stanley. Its Truckload Index remains at a seasonal all-time high. In addition, early indications from FedEx Freight's and Yellow Transportation's less-than-truckload businesses (which are not covered in the Truckload Index) show demand in the LTL sector remains strong.

Intermodal growth hit 8.5% in the second quarter and has averaged an 8.1% growth rate for the last three quarters. The Intermodal Association of North America (IANA) says absolute gains reached 130,000 more loadings in the second quarter compared to 2003.

Domestic intermodal volumes posted record gains for the second consecutive quarter and have increased for eight of the last nine quarters. International containers carried 55% of second-quarter loadings, according to IANA.

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