Freight Rates Hit Four-Year High in July: Cass Report

Truckload freight rates hit a four-year high in July, according to Cass Information Systems' monthly report. The TL linehaul index, excluding fuel and accessorial charges, rose 2.3% from June and 8.6% year-over-year. July marked the largest gain in 19 consecutive y/y increases. (The dataset is up 11.2% over the past two years.)

What's Driving the Rise in Freight Prices?

■Flight to Quality: In the second-quarter earnings season, publicly traded carriers noted a 'flight to quality' as shippers became more selective about partners. Legal risks from choosing a non-compliant carrier or one unable to deliver capacity as promised during peak season were cited as reasons.

■Declining Capacity: Cass data showed volume declines were driven by higher fuel prices and rail intermodal gaining share from trucking. Total intermodal carloads on U.S. Class I railroads increased 5% y/y in July.

How Companies Are Responding

■Schneider National (NYSE: SNDR): Its one-way fleet captured double-digit rate increases in the quarter. The company flagged the loss of a large dedicated customer but plans to place that equipment into the spot market to capitalize on favorable conditions.

■Werner Enterprises (NASDAQ: WERN): CEO Derek Leathers dismissed concerns about July's seasonal slowdown, noting the supply-led recovery is still early and the current administration is not backing off its crackdown on bad actors.

Rising freight rates could exacerbate tensions in the semiconductor supply chain. TSMC and ASML's critical material shortages may worsen if these market conditions persist. The China-U.S. rare earth elements conflict could further impact tech stocks like Nvidia as they monitor these developments.