https://talkbusiness.net/2021/07/j-b-hunt-profit-rose-41-revenue-up-35-in-second-quarter/
J.B. Hunt profit rose 41%, revenue up 35% in second quarter
Arkansas Transportation Report
by
Jeff Della Rosa
Lowell-based carrier
J.B. Hunt Transport Services Inc. exceeded analysts’ expectations in profit and revenue as freight demand surged in the second quarter.
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BROADER MARKET TRENDS
In a recent webinar, Zach Strickland, director of freight market intelligence at FreightWaves, said freight volumes started to rise in mid-June and continued to do so throughout the remainder of the month. The rise in demand was similar to the one at the end of March before Easter. The most recent increase led up to Independence Day before people went on vacation, he said.
“It actually has been a very extreme vacation year thus far this summer,” Strickland said. “A lot of people getting out of the office and trying to make sure they get everything done before they leave.”
Freight volumes moderated after Independence Day, but he expects demand to continue to remain strong. He also said outbound tender rejection rates, which reflect market capacity, have started to fall and were less than 22%. Higher rates reflect tighter capacity. However, he said the recent rate decline is more likely a result of carriers better adhering to contracts as contract rates increase as opposed to new capacity being added to the market.
“We’re still several months away from seeing what we would consider a market that is somewhat stable,” Strickland said. “Anything over a 20% tender rejection rate we consider chaos; 15% is considered extremely tight; 10%, marginal tightness; and that 5-10% starts to be in that manageable area of capacity.”
He noted fuel prices have risen about 30% since January, and this has contributed to a rise in spot rates. Fuel prices are not expected to fall anytime soon, he added. Meanwhile, contract rates are up about 15% since the start of the year.
Another metric he discussed was maritime rates, and the average spot rate to transport a 40-foot-long container from China to the United States has risen. Before Independence Day, the rate exceeded $10,000 to deliver a container from China to the East Coast. The rate was about $3,800 less to deliver a container to the West Coast. Before the pandemic, the rate to deliver a container from China to the West Coast was between $1,300 and $1,400, he said. Now, the cost spread between delivering a container from China to the East Coast or West Coast is three times that amount.
“That is insane,” he said. “It’s unfathomable how … extensively these rates have grown over the last year or so. We are starting to see a little bit of a sign of these coming back down, but considering we’re not into their traditional peak season…
it’s certainly not time to start to relax just yet, especially since some of that freight demand fell off thanks to some of the disruptions across the ocean in China.”
