January’s bump in the air cargo market came simply because of the ramp up to the Chinese New Year, and those in the air cargo industry should expect a much more muted 2013, participants learned during the 28th annual BB&T transportation services conference in Coral Gables, Fla.
The conference, held from February 12-14, covered the air freight and surface prospects and challenges for 2013.
Shippers, carriers and other transportation specialists in attendance anticipate a down market once February’s numbers are in, and so will look to March for gains.
“We found most of the participants to be cautiously optimistic regarding 2013 and their outlook for freight,” according to a BB&T summary of the event.
Same-day service came up repeatedly throughout the conference, but attendees are still unsure of how to make money on the super-fast delivery. Representatives from FedEx, UPS and the U.S. Postal Service are much more bullish on next-day delivery, a segment that is being propelled by e-commerce sales.
During an intermodal panel, one shipper said anything longer than 500 miles should be on intermodal, and in general, attendees see the growth of intermodal in the coming year. More cargo will be moved, for at least part of its journey, to the railroads in 2013. The railroads are in good shape, and the only hurdle they still have to face is perishable transportation, which has been less than desirable in the past.
Shippers attending the conference view trucking capacity as loose, with first load tender acceptance levels above 95 percent. But capacity will get harder to come by as the second quarter of the year approaches. This could lead them to move spring freight earlier than usual to get ahead of the capacity crunch.
“We believe that shipping spring and summer products early is a viable way to manage capacity risk,” BB&T’s Thomas Albrecht wrote in a separate summary. “While shippers on panels were hesitant to offer rate projections, in private conversations, most were confident of holding rate increases to levels below last year.”
This capacity crunch will be met with flat to slightly declining rates for small to midsized carriers, some shippers said during the conference. Large carriers will see a modest increase in pricing.
January turned out to be a good month for truck carriers with strong retail and consumer businesses, but those transporting industrial equipment saw a bit of a light month. So far, February is lagging behind last month’s activity. Tank carriers have been more active than flatbed carriers; in the coming months, flatbed activity is expected to increase. While truckload carriers experienced a bigger January than less-than-truckload carriers, the situation has now reversed, Albrecht noted.
Carriers were also concerned about the impending hours of service regulation, but Albrecht wrote there is a decent chance it won’t be enacted by the July 1 deadline. Officials are less worried about the hour hit to a driver’s shift, but are instead focusing on the 34-hour restart period and the mandatory 30 minute break after 8 hours.
“Carriers are modeling different scenarios, while shippers are seeking to understand the productivity hit and what they can do to offset that,” Albrecht said.
As always, a perennial concern is the cost of diesel. Gas has risen by $.20 a gallon in the past two weeks and is expected to climb higher. - Jon Ross