Loaded and Rolling: Morgan Stanley report says carriers, brokers ‘hungry for freight’

Morgan Stanley report says carriers, brokers ‘hungry for freight’

A report published Wednesday by Morgan Stanley Research highlights demand expectations and how carriers and brokers are hungry for freight. The 37-page report is a combination of survey data and pricing models, with expectations and sentiment for the next three months indicating a negative outlook.

According to the survey, the demand for freight remains strong, with one shipper saying, “Solicitations don’t stop coming. I used to consider all asset carriers who would reach out; I’m even beginning to be more selective about which asset carriers I’ll entertain at this point. Brokers, I’m flat-out letting them know we won’t be adding any new brokerage partners in 2023. Everyone seems hungry for freight.”

Concerns about pricing capacity out of the market remain at the forefront. One broker said, “I have spent a lot of time speaking with carriers, shippers, customers, and other brokers. What I am seeing and experiencing is a period where the market is trying to correct itself or normalize. However, costs are still higher or increasing YoY. Additionally, when you compare the customers driving down rate pressures on both contract and spot rates, I am seeing lots of capacity leave or exit the business. My concerns are that as customers drive down rates and trim down their carrier partners, that this will create a gross over reaction to the market and ultimately create a situation for the customers where rates will increase in Q2 for the remainder of the year.”

Sentiment remains bearish with shippers, but brokers and carriers remain neutral. The report said compared to the last check, brokers continue to push rates lower but mode matters. LTL pricing remains disciplined, but a large topic to watch will be how carriers balance lower rates coupled with higher costs on labor and equipment.

Trucker Path survey on home time preferences

Trucker Path, a popular mapping and navigation tool for drivers, on Wednesday released data from a survey related to drivers’ preferences for going home.

The good news from the results is that carriers for the most part appear to do a good job at getting drivers home. Regarding the data, FreightWaves’ Mark Solomon wrote: “The survey … gave drivers four options to choose from: Whether they wanted to return home every night, several times a week, several times a month or never. According to the results, 63% of the drivers who preferred to return home every night were allowed to do so. About 89% of drivers who wanted to return home several times a month had their request granted.”

Often in trucking, the most important load is the one that gets the driver home, and survey data is a great tool to gauge the state of home time requests. For large truckload carriers, failure to adequately accommodate for driver time off requests can prove costly; often it can take between $4,000 and $5,000 to seat a new driver from start to finish.

Market update: FreightWaves’ Q1 Freight Sentiment Index results

FreightWaves on Monday released its Q1 Freight Sentiment Index results, obtained from surveys given to brokers, carriers and shippers the first two weeks of each quarter.

In the results, while profit expectations for the first quarter appeared bleak, there was data suggesting that long-term expectations for profitability for the year had improved.

FreightWaves’ Joe Antoshak wrote: “Top-line broker sentiment declined to 6.97 from 9.8, which was the most drastic change of the three groups. The same metric for shippers fell to 10.64 from 12.68. Carriers, meanwhile, creeped up to 5.97 from 4.87. That’s a modest gain (and still the lowest of the bunch), but it suggests more market parity.”

Most equity research and anecdotal evidence from executives continues to suggest that conditions will deteriorate through the first half of 2023. Expectations for long-term profitability from our survey data appear to match consensus for an improvement in freight market conditions in the latter half of the year, as inventory ratios rightsize due to changes in consumer demand.

FreightWaves SONAR spotlight: Diesel markets poised for stormy February

Commentary courtesy of the Daily Watch, a newsletter for SONAR subscribers.

Summary: On Feb. 5, the European Union will start enforcing a ban on Russian fuel imports, after which diesel markets should get uncomfortably interesting. For one, French refinery workers have begun to strike in protest of their government’s pension reforms, limiting national supply. Unfortunately, the U.S. is far from primed to alleviate the supply crisis in Europe, given the current domestic shortages of distillate fuels. Last week, nearly 3 million barrels of diesel were diverted from Europe to New York, suggesting that diesel shortages in the Northeast are more dire than those across the pond.

How does this news bear on short-term diesel prices? Not much, at least for the time being. On Monday, the national average of truckstop diesel prices reached its lowest point since early March 2022, when Russia began its full-scale invasion of Ukraine that sent energy markets haywire. Since then, prices have only risen by 1% to an average of $4.70 per gallon, though costs vary by region: California still pays an additional premium of $1 per gallon, whereas Texan markets score discounts from their proximity to refineries and oil fields.