Dive Brief:
- Excess capacity in the trucking market dragging down spot market and contract pricing by double digits put pressure on C.H. Robinson's revenue in the third quarter, executives said on an earnings call Tuesday. Price per mile billed was down 12.5% year-over-year for the firm in Q3.
- Net revenue declined 8.7% for the quarter year-over-year with truckload volumes down 4%, intermodal volumes were down 24% as low trucking rates brought shippers back to truckload from intermodal.
- "While industry data suggests truckload capacity continues to exit the market, we believe capacity will exceed available shipments for the next few quarters," said CEO Robert Biesterfeld. In July, the CEO said some shippers asked for rate concessions outside of the normal contract bidding cycle as rates dropped. This week, he confirmed his previous assessment that shippers can expect low rates through the first half of 2020.
Dive Insight:
The uptick in carrier bankruptcies and closures in the last two quarters along with frenzied buildup of capacity amid the boom in 2018 is taking its toll on the trucking market. Though the consumer economy is still cooking, suggesting a somewhat normal peak season, Biesterfeld spoke about the prospect with caution.
The CEO said though C.H. Robinson's aggregate freight demand is looking slightly up, this could be a product of a more condensed peak season (due to a later Thanksgiving) than an actual change in the market.
"I describe the view of our customers that they’re sharing with us around peak is mixed. In general, uncertainty still seems to kind of reign. We are seeing some customers put in place supply chain continuity programs in order to ensure capacity for the peak season. And others are just playing it out somewhat a status quo," said Biesterfeld. With spot rates low, there is not much incentive to book freight early.
And these trends will likely continue for at least few quarters, the CEO predicted.
"While capacity is showing some very early signs of tightening, we don’t see anything on the horizon that would lead us to believe that the freight environment will be significantly different through the first half of 2020," said Biesterfeld.
However, a slower market with lower rates will not deter C.H. Robinson from its tech initiatives, even though the investment may stress the bottom line. Tools like instant quotes are designed to help C.H. Robinson quash the threat of new tech-focused players like Convoy and Uber Freight. And though its instant quote application hasn't yet materially contributed to volume, the CEO said Freightquote by C.H. Robinson has 200,000 unique users.
