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Market Effect

Shaky start to 2016, but ELD mandate could improve pricing

[LTLS] OPERATE AS MORE OF AN OLIGOPOLY,
IF YOU WILL, WITH YOUR TOP 10 CARRIERS
By Steve Brawner CONTROLLING ALMOST 80 PERCENT OF THE

Contributing Writer
BUSINESS THAT’S OUT THERE.
Motor carriers did not have a great
first part of the year, the spot market —JASON SEIDL, COWEN GROUP
has been challenging lately, and ton-
nage in the less-than-truckload sector in
particular has been weak. But the federal quarter) just finished — and that’s the ing companies using paper logs must
government’s electronic logging device reporting season for what I cover in install electronic logging devices by
mandate could reduce capacity, and when freight transportation — the general feel Dec. 18, 2017. They think the require-
that happens, pricing could improve. was January started off OK,” he said. ment will reduce capacity and therefore
Those were some of the observa- “February was great for everyone. Mind increase pricing, and while the deadline
tions of Jason Seidl, managing director you, it added one extra day because of is not until the end of 2017, fleets will
of the investment banking firm Cowen leap year. But about mid-March was face pressure to do it earlier from ship-
Group. Seidl, who has been a trans- when we started seeing things slide off pers such as Walmart and from third-
portation analyst on Wall Street for a little bit. That sluggishness continued party logistics companies such as C.H.
18 years, made at the 2016 Arkansas through April. I think seasonally, things Robinson. Many carriers he follows have
Trucking Association Annual Business feel a little bit better here in May, but reduced capital expenditures, so fleets
Conference & Vendor Showcase in Little it’s still not great.” will be smaller at the end of the year, he
Rock in May. Seidl said less-than-truckload ton- said. As trucking capacity lessens and as
Seidl said the first part of the year nage in particular has faced challenges. long as the economy continues to grow,
was disappointing for trucking com- The LTL model is highly leveraged, spot pricing should improve.
panies. During the months of January and fixed costs don’t go away when Seidl said government regulations
through May when so many contracts the freight is reduced. That sector has including the ELD mandate, new engine
are signed, most companies were hop- more exposure to industrial products emissions standards and hair follicle
ing for 2-3 percent rate increases and impacted by the strong dollar, which testing usually reduce capacity. But
instead saw increases of 0-2 percent — a makes American exports more expen- regardless of the effect on motor car-
number that probably will be closer to sive. Pricing has remained stronger than riers, the regulations tend to make life
zero by the time the season completely expected, but some carriers have faced more difficult for one group — drivers.
ended. Moreover, the spot market has price competition. “Over the years that I’ve been
been weak for dry van and refriger- “They operate as more of an oligop- involved in transportation, it’s never
ated companies. Seidl displayed a graph oly, if you will, with your top 10 carriers been a good year to be a truck driver.
to conference attendees showing the controlling almost 80 percent of the Right? It’s always going to be a tough
nation’s gross domestic product has business that’s out there,” he said. job, and I think the government’s just
been bouncing between 1 and 3 percent making it that much tougher as the day
growth since around the beginning of THE REGULATION EFFECT goes by,” he said.
2011 — a rate that “probably feels worse Seidl said many motor carriers Seidl said his firm is “a little bit
than that for most people.” and investors are hopeful about the more favorable longer term, little bit
“When talking to a lot of the recent Federal Motor Carrier Safety more cautious near-term” when it
trucking companies out there, (the first Administration mandate that all truck- comes to transportation stocks. That

38 Issue 3 2016 | ARKANSAS TRUCKING REPORT