Tucker Blog

Friday, July 30, 2010

Freight Markets on Fire – Relationships Never More Important

Everywhere you look in the freight world, freight activity has been exceptionally strong through June, with ships, trucks and planes scarce and in high demand. Our team, like everyone arranging freight today, is working harder than ever in this challenging environment, to keep customers’ supply chains running smoothly. There is far more freight that needs to be moved in the U.S. than there are trucks available to move it. For all of 2010, the industry saw gains, but things have supercharged in June. If you were managing freight transportation in 2003 and 2004, you’ll know exactly what is going on. If you were not, here’s the situation.

The economy is strong, but it met a much smaller trucking industry. Trucking’s recession began in 2007—before the U.S. economy slid. Since then, an estimated 13% of the trucking fleet of equipment and drivers have exited the industry. Truckers are still leaving the industry. Some are retiring, selling or declaring bankruptcy, and according to FTR Associate’s economist, Nöel Perry, who told the National Industrial Transportation League on June 10 in Washington, DC, some truckers are being foreclosed upon. Perry stated that banks are foreclosing on carriers now that their cash flows have improved and their assets have more value. During the depths of the recession, there was no market for used trucks and trailers, so it was more sensible for banks to keep the carrier afloat. The market for selling a troubled carrier’s equipment is better now—now that carriers are seeing light ahead.

As motor carriers prepare for DOT’s new carrier safety scoring program, CSA 2010, poorly performing drivers are being fired by fleets. Under CSA 2010, drivers with poor safety ratings are unattractive to carriers, because the driver’s safety data sticks with a carrier for two (2) years. With great uncertainty over how shippers and brokers will use CSA 2010 safety data, some carriers are terminating their worst drivers now.

The numbers support the wild imbalance in freight to equipment. According to the Journal of Commerce, June 24, 2010, intermodal traffic through May 29 was “up 35.5% from 2009 and up 10.3% from 2008.” This represented the highest intermodal week since November 2008. They also reported that container cargo for that same week surged 37.5% year over year and carloads increased 21.9% from 2009. According to a front page Transport Topics (TT), June 21, 2010 article, class 8 truck sales were up 13.5%, representing the fifth straight monthly increase.

Another TT article reported that a large national truckload fleet is seeking 2,000 new drivers, which would return the fleet to its historically largest size. ATA has stated that bulk and tank shipments rose faster than all other truck segments, at 9.5% and stated that truckload shipments over 1,000 miles were 25% higher year over year. Finally, TransCore’s North American Freight Index showed a 291% increase in spot market freight availability, year over year in April, the most recent month available.