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Rates may have not yet bottomed??

Article link here

I'll post the article below:

Quote:

Truckload Rates Not Yet Bottoming
John D. Boyd | Sep 4, 2009 5:32PM GMT
The Journal of Commerce Online - News Story

* Truckload
* | Intermodal Shipping
* | Trucking
* | United States

Spot pricing at times below intermodal, analyst says, from “desperate” rate policies

Freight rates in the truckload market, competing in many cases with rail-truck intermodal traffic, are steadily declining “without solid evidence of bottoming,” said transport stocks analyst John Larkin of Stifel Nicolaus.

Larkin said his group had held meetings in the past week with executives of “various publicly traded and privately held truckload and intermodal providers,” and spot pricing for truckload freight “remains under pressure.”

Some truckload rates have “come in below intermodal rates and below what many carriers believe to be truckload variable costs,” he told clients. “We believe this level of spot pricing is unsustainable for the smaller, less-capitalized carriers that seem to have adopted what we consider desperate pricing policies.”

Larkin said some “non-sustainable trucking operations” that offer the low pricing are staying in business because they are getting help from creditors and equipment lessors, who hope those carriers can stay afloat until their equipment returns to book value.

“Many industry players believe that this stance taken by many financiers only delays inevitable truck company failures, and won't reduce (and might increase) the size of losses ultimately realized by the lenders, lessors and finance arms of major truck manufacturers,” he said. “In the meantime, the lenient policies preserve too much capacity in the trucking marketplace.”

Wow, just wow.

Looks like we have a lot of failures to come yet. There are companies hauling for below their variable costs??? That's not counting there fixed costs. Jeezuz.

It looks like the banks at this point would rather stick there neck out for these companies because they don't want the trucks, trailers, or perhaps any real estate should the company collapse. That really gives a clue how bad it is.

I know things will eventually get better but it makes you wonder how far off it really is. I also wonder what the real unemployment number is, also people that lost their jobs but have taken something cheaper and don't have any "extra" spending money. Things just aren't moving.

Quote:

Originally Posted by RostyC (Post 461588)

Article link here

Wow, just wow.

Is that comes as surprise to you?

I wouldn't say a surprise, but with some of these guys saying the recession is over and the fact that trucking generally recovers two to three months ahead of other industries I think it's concerning news.

Just where is this recovery? I don't even smell a whiff of one.

Quote:

Originally Posted by RostyC (Post 461597)

Freight volumes actually usually lead the general economy by 6-9 months. Considering we are still seeing declining volumes in both trucking, intermodal, and rail, I would be dubious of any recovery claims.

We'll see a slight uptick in volumes this Fall due to inventory replenishment, but it will barely register as a blip due to continued oversupply. Until consumer demand actually picks up sometime next year, rates will continue to be ugly.

If it weren't so serious I would have laughed when I heard that the recession was over. I don't think we have seen the bottom for rates. I still see too much capacity and not enough freight. At least we do have freight, just not enough of it. You can stay busy if you want to run for $1/mile. You just won't make any money. We still need to hunker down, keep costs low and negotiate for the best rates we can get. If you think that you will be able to survive on $1/mile freight you will have a rude awakening. The politicians want to put a positive spin and make the citizens think that their stimulus tax has done it's work. They hope to quash any opposition by convincing the citizenry that the recession is over and things are getting back to normal. I don't see things getting much better until at least some time next year. Until we lose more capacity we are not likely to see rates turn around. As we head into our slow season you can expect downward pressure on already low rates.

It's not the politicians claiming the recession is over...at least not the ones that matter. Wall Street analysts are the ones making the noise and some European politicians, who may actually be right as far as they're concerned. If anything, administration officials have been more conservative than many in their assessments. The fact is, we are in better shape than we were six months ago, or even a year ago. Much of the unknown has been taken out. The stimulus debate is relatively pointless; it's difficult to prove or disprove either side of the argument. The worst of the fall is over, but we're in for a slow slog back up the hill.

Quote:

Originally Posted by no_worries (Post 461620)

Nothing is over, party just started....

There's still inflation to come and where is government debt.....

wait and see...

Things are better than 6 months or a year ago? The unknown has been taken out? That is a total load of BS right there. Unemployment might be going down but it's because Americans are taking jobs that were previously held by immigrants who have gone back home due to the economy. As Rosty said, those jobs pay much less so people simply don't have the money to spend, only enough to pay the bills.

My company is in construction and we are hoping to make it to Xmas right now. After we get our normal week off for Xmas, we may not have a company to come back to. I've talked with our majority owner face to face. He says he will do everything in his power to not let the company go under or close the doors to save his money. In his words, it would be too difficult to re-open if we did that. The unknown is still there..........as long as my job is still insecure I am not going to run out and spend money like crazy. I'm packing it away as best I can just in case the owner runs out of money before everything picks back up again. What I have heard, late 2010-2011 is when things will begin to take off with the economy. Commercial and industrial growth will stay stagnate until 2012-2013.

Quote:

Originally Posted by Dejanh (Post 461621)

Nothing is over, party just started....

There's still inflation to come and where is government debt.....

wait and see...

And the impact will be...?

Quote:

Originally Posted by Mr. Ford95 (Post 461625)

We're talking the general economy, not individual circumstances. Do you remember what the economic outlook was 6 and 11 months ago? Nobody had an inkling of what was going on or what was to come. We know where we stand now. That alone is drastic improvement, it allows companies to plan. Things may look bleak regarding your own situation...that's not what I was referring to. As for your growth projections...sounds like a long slow slog to recovery to me.