Today’s Pickup: freight markets see strong demand, low volatility

Good day,

For the moment, it appears that freight markets in the United States are at a point of relative equilibrium. FreightWaves’ TRI (tender rejection index) metrics have stabilized at fairly low levels, and spot rates have pulled back from their January spike to return to their December levels (we think the December 2017 levels represent a ‘new normal’ that has priced in the loss of productivity from the ELD mandate). Zach Strickland wrote about this strong, but steady freight environment on Friday afternoon.

Still, trucking prices remain quite high. FreightWaves believes that the lack of turndown and spot rate volatility indicates that carriers were largely successful in gaining double-digit contract rate increases and still perceive those contracts to be fairly priced. Donald Broughton wrote this morning that consistently high demand across dry van, reefer, and flatbed will eventually bring a return to volatility and higher contract prices. 

Did you know?

The Cass Freight Index measuring U.S. domestic road and rail shipping jumped 11.4% in February and the index for freight spending grew at an even faster rate, signaling that companies are paying more to rush goods to markets. 

Quotable:

“At least for now, economic fundamentals – a weak dollar and robust overseas demand for a wide range of California products – continue to drive our exports higher.” 

-Jock O’Connell, international trade advisor for Beacon Economics, on growth in Californian exports

In other news:

Nikola Motor to refund prepayments for reserved trucks

US startup Nikola Motor has announced they will refund all deposits for the pre-orders of their electrified trucks within the next 60 days, without the pre-order applicants losing their place in the production line. It is a show of strength. (Electrive)

Late CSX chief Hunter Harrison among the highest paid CEOs in 2017

CSX Corp. disclosed compensation totaling $151 million for deceased railroad executive Hunter Harrison, the biggest CEO pay package for 2017 reported so far by a large U.S. company. (Wall Street Journal)

Xi takes center stage to defend China’s trade from Trump barrage

The Chinese president’s first chance to hit back in person comes in a speech Tuesday at the Boao Forum for Asia — China’s answer to Davos — on the tropical island of Hainan. (Bloomberg)

Container lines forced to play weak hand in transpacific contract talks

The timing for ocean carriers to negotiate annual transpacific contracts is “the worst possible”, according to the latest assessment by Drewry. The consultant blames weak demand after Chinese new year and an increase in capacity. (The LoadStar)

IATA releases air cargo strategy for 2018

IATA forecasts a rise in cargo carried to 62.5M metric tons in 2018 (+4.5% on the 59.9M metric tons in 2017) representing less than 1% of world trade by volume, but over 35% by value. (IATA)

Final Thoughts:

We reported yesterday that Nikola Motor Company announced that it will return all deposits paid to reserve its Nikola One hydrogen-electric trucks. The announcement has been interpreted as a shot across Tesla’s bow, which is notorious for using deposits on car orders as no-interest loans to float the company. Nikola tweeted, “We don’t use your money to operate our business. We want everyone to know we have never used a dollar of deposit money in the history of our company.” It is unclear how many customers placed deposits for a vehicle, but Nikola is touting a large number in reservations.

Hammer down everyone!

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