Major carriers are still seeing high demand in the middle of the II quarter

Speaking at Bank of America’s annual transportation conference, management of some of the country’s largest fleets said it had seen no change in customer demand since the first-quarter results were announced a few weeks ago. Management teams acknowledged the sharp decline in spot market fundamentals at the event, but said some of them were related to the relative strength of contract rates, which contributes to better compliance with routing instructions.

Major carriers mostly carry contract goods, and while the spot market is looking for the bottom, management teams have said they are not yet seeing a reduction in contract volumes. J.B. Hunt (NASDAQ: JBHT) actually experienced an increase in published or contract volumes as these rates increased.

“We have succeeded in really increasing the volume of our published volumes during the competition season,” said Brad Hicks, president of JB Hunt Highways. “The spot market, of course, has rolled back to some extent, but part of that is due to the fact that the published volumes have grown. Once rates have become high enough through the bidding season, carriers are now holding on to published freight, while a year and two years ago a huge number of these carriers fell, chasing this volume. ”

JB Hunt completed two-thirds of its contract negotiations in 2022.

Hicks also noted some stabilization in the market over the past 10-12 days, noting that rejections of tenders received at SONAR have leveled off somewhat.

Schneider (NYSE: SNDR) CFO Steve Bruffett reiterated these sentiments, noting that the volume of tenders has not changed since the results report three weeks ago. He also said that demand from customers has not changed, but it is unlikely the path will be so simple in 2022.

“As we move forward in time, there are likely to be some inequalities in both economic and freight structures,” Bruffett said. “It doesn’t necessarily mean everything will just stop. We are still constructive about how this year will go. “

Schneider has gone halfway through a season of truck congestion and intermodal betting, and the bid negotiations have “gone well”. Bruffett noted that with annual calculations it is increasingly difficult to move forward and that this year’s increase in interest rates may not be so strong. However, he said the rate hike addresses higher costs on different fronts and builds on the higher rate base set last year.

He believes that cost inflation, restrictions on the production of original equipment manufacturers and drivers working under their own authority, with a much higher cost profile, will create a new minimum level for spot rates.

Conference participants also noted that the demand for long-term contracts and capacious potential remains high.

According to Nick Hobbes, chief operating officer and president of contract services, JB Hunt’s loyal customers are “quite optimistic” about future prospects. “Does that mean he is strong and reliable? No. They have problems with a certain product that they can’t get, but they feel pretty good from what they see in their stores ”.

He noted that failures in the production of components and semiconductors still do not allow some customers to have in stock in demand. But the immediate expectations are healthy.

“It’s uneven, but they’re feeling good for the next few months,” Hobbes added.

Hicks said that if China returns to service after the COVID blockade, “there is a certain degree of expectation that if these goods start to arrive, things may get better in June. We expect that we are likely to see stronger demand for delivery as the summer deepens ”.

Unfortunately, no change in the intermodal

Both companies have not seen a significant improvement in service in their intermodal franchises. J. B. Hunt noted that in the second quarter, rail service actually deteriorated even more.

However, customer service has improved as many places have been able to add docks needed for faster unloading of trailers and containers. Although J. B. Hunt said any increase in use at customer facilities was lost by the deterioration of rail service.

Bruffett hopes for some relief in ports, rail ramps and places for customers over the summer.

JB Hunt and Schneider are in the process of adding a significant amount of intermodal capacity. JB Hunt will be looking increase your fleet by 40% over the next three to five years, and Schneider plans to add several thousand units in 2022, a growth rate of 25%.

According to the Association of American Railways, intermodal traffic on Class I railways decreased by 7% compared to the same period last year. However, growth initiatives in both companies yielded volumes that outpaced broader intermodal trends in the first quarter.

“It may not be a smooth road, maybe some bumps on this road, but I think that in general the situation of freight traffic will remain constructive,” said Bruffet.

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The FREIGHTWAVES TOP 500 In the list of carriers for hire J.B. Hunt (No. 4) and Schneider (No. 7).