Cowen, Chainalytics partner on truckload data

Wall Street analyst Cowen and Company has partnered with Chainalytics, a leading firm that collects tens of billions of annualized freight spend dollars covering well over 230 direct subscriptions with key shippers and third-party logistics providers globally, to offer the “Chainalytics-Cowen Index” monthly report.

“The purpose of this monthly report, which provides truckload freight demand indices, is to quantify and regularly monitor the difference between contract and spot market truckload pricing for both dry-vans and reefers,” explains Cowen and Company Managing Director and Railway Age Wall Street Contributing Editor Jason Seidl. “We’ve transformed vast amounts of raw, primary data into easily digestible indices. Together, we’ll show just how much power buyers and sellers of capacity have at the negotiating table.”

“While it’s very well known that spot market pricing currently remains subdued given both sluggish demand and very difficult 2014 comparisons, we find it constructive to put some context around the marketplace as the 2016 truckload bid season is under way,” says Seidl. “Our new indices suggest that the gap between lower spot rates and higher contract rates, which in many cases date back to negotiations that took place 12 months ago, continues to widen. The implications are significant as discussions between brokers, truckers and shippers heat up.”

Of what value is the Chainalytics-Cowen Index to railroads? Plenty, explains Seidl: “All the big railroads track trucking pricing. There continues to be an imbalance between available trucks and freight. Ample truck capacity, combined with low diesel fuel prices and a sluggish industrial economy, could challenge intermodal.”

“The simple equation is: Spot Pricing Growth minus Contract Pricing Growth = Index Level,” Seidl explains. “As spot market pricing falls and contract pricing remains steady, the index level experiences declines. In that case, we believe shippers (‘buy-side’) acquire leverage in pricing negotiations. If the spot market, which makes up about 15-20% of the overall truckload market strengthens, then we would expect to see an increase in our index levels. We can see that with the 2014 data. In that case, sellers of capacity or asset-based truckers benefit at the expense of shippers. Brokers, or companies that match the buyers and sellers of capacity, typically benefit when markets are out of balance. When markets experience significant tightness or looseness as we saw in 4Q14 (tough for shippers to find capacity) or today (easy for shippers to find capacity), brokers are more likely to expand their net margins.”