070122_TT_AllPages

THETRUCKER.COM
BUSINESS
JULY 2022 • 13
Survival games
DRIVERS SCRAMBLE FOR LOADS AS TRUCKING
PENDULUM SWINGS TO DOWNCYCLE
CLIFF ABBOTT | SPECIAL CORRESPONDENT
Things are tough all over. There is still
freight to haul, but there’s more competition
for it. In the meantime, expenses are up and
rates are down — and it’s likely to get worse
before it gets better.
The American Trucking Associations
(ATA) reported a decline of 2% in freight
hauled by member carriers in May. The ATA
release said freight levels had climbed for
eight consecutive months prior to the April
decline.
“It is important to note that ATA’s forhire
tonnage data is dominated by contract
freight with minimal amounts of spot market
loads,” said Bob Costello, chief economist
for ATA. “The spot market has softened
more than for-hire contract freight, as the
market transitions back to pre-pandemic
shares of contract versus spot market.”
Costello is referring to economic conditions
that saw a surge in retail products during
the COVID-19 pandemic, many of which
are shipped on the spot market. Much contract
freight hauled goes to the manufacturing
industry, which suffered shutdowns and
slowdowns during the pandemic.
Today, consumer spending on retail
items is slowing, with higher gasoline prices
and inflation taking up more of the family
dollars.
The Cass Freight Indexes, published by
Cass Information Systems, showed an April
decline in shipments of 2.6% over March
and 3.5% compared to April 2021. The Cass
Index measures multiple modes of transportation
including rail, air, ship and pipeline,
in addition to trucking.
The Cass Index for May reversed the
trend, showing a 5.4% increase in total shipments.
The expenditures index, however,
went in the other direction: Total shipping
expenditures fell by 4.9% from April. The
Cass release stated, “After a nearly two-year
cycle of surging freight volumes, two key
drivers of growth for the freight cycle —
goods consumption and inventory restocking
— are faltering.”
Another factor reported in the Cass report
is the ACT For-Hire Trucking Survey:
Supply-Demand Balance. For this metric,
available freight represents demand and capacity,
and the number of available trucks
represents supply. The ACT index has been
showing more demand than the trucking
industry could provide trucks to haul for
21 consecutive months. That changed in
March, with a change to the supply side.
There is less freight and more trucks to
haul it.
One reason there are more trucks is that
there are more drivers; the driver shortage
many large carriers have complained about
is seeing some relief. Avery Vise, vice president
of trucking for FTR, explained one of
the reasons.
“Net revocations of for-hire authority approached
9,300 (in May) and were more than
double the number recorded in April, and
were a record,” he said in a June 6 podcast.
Vise explained that it takes time to revoke
authority, which often occurs when the
owner’s insurance lapses. Because there’s a
30-day grace period for premium payment,
revocations that occurred in May were carrier
businesses that failed in March or April.
As spot rates rose over the past two
years, record numbers of drivers bought
trucks and sought their own authority to
take advantage of the high rates. Now it
seems the opposite is beginning to happen:
Lower rates and high expenses are causing
some to sell (or surrender) their trucks and
take jobs as company drivers.
According to the Bureau of Labor Statistics,
trucking added more than 27,000 jobs
in April and May. Not all of them were driving
jobs, of course, but a large percentage of
them were, allowing carriers to put trucks
that were previously parked back on the
road.
When the number of trucks increases
and the amount of freight decreases, spot
rates suffer first.
Where spot rates are generally posted for
loads that are currently available, contract
rates can be negotiated months in advance
and may not always represent current market
conditions. Contract rates usually follow
spot rates, but the results take longer
to show up because carriers must negotiate
new rates with their customers before
changing them.
“While I expect contract freight to outperform
spot market freight, the rate of
growth will be slower than in 2021,” added
ATA’s Costello. “Most contract carriers are
still struggling with maintaining enough capacity,
both equipment and drivers.”
As spot rates continue to decline, as they
have for the past four months, carriers that
depend on the spot market will continue
to struggle with higher fuel prices and increased
inflation.
According to the latest DAT Trendlines,
spot rates for van loads have fallen
more than 10% since March, when the average
rate per mile was $3.02. That rate
fell to $2.79 in April and then to $2.71
in May. The report notes that van rates
typically rise by eight cents per mile in
iStock Photo
The national average price for a gallon of diesel fuel reached $5.72 in mid-June, 47 cents higher that it was at the
end of March, according to the U.S. Energy Information Administration. Prices easily topped $6 per gallon on the
West Coast, reaching an average of $6.89 in California.
June, but it hasn’t happened this year.
Refrigerated freight followed a similar
trajectory, dropping from $3.41 in March to
$3.15 in April and then to $3.07 in May for a
total decline of just under 10%.
The bright spot in the trend goes to the
flatbed sector, which may be benefiting
from seasonal changes as construction activity
picks up. Flatbed rates have climbed
from $3.40 in March and were up two cents
per mile in April; rates reached $3.45 in May
and had climbed to $3.48 by mid-June.
The bad news, however, is the cost of
fuel. The national average price for a gallon
of diesel fuel reached $5.72 in mid-June, 47
cents higher that it was at the end of March,
according to the U.S. Energy Information
Administration. Prices easily topped $6 per
gallon on the West Coast, reaching an average
of $6.89 in California.
When a fuel surcharge (or equivalent
amount) is subtracted from spot rates, it is
evident that rates have fallen much farther.
Truckstop.com, in conjunction with FTR,
reported that dry van rates from its load
board, posted in the second week of June,
were 10% lower than June 2021, but about
29% lower is an “imputed” fuel surcharge
is factored in. Refrigerated loads were
28% lower. Even flatbed rates, which have
risen, are 4% lower when fuel surcharge is
factored.
It was only a matter of time until the
trucking upcycle ended. Belt-tightening and
judicious management will be needed for
the downcycle to come. 8