Over the past year there has been a significant increase in the number of drayage companies, with a rapid increase of drivers leaving larger carriers and forming smaller, independent operations to chase high spot market drayage rates.
Since January 2021, approximately 11,000 drivers have been added to the Intermodal Driver Database (IDD) operated by the Intermodal Association of North America (IANA), with about 1,630 additional drayage companies, mostly one-truck operators, receiving Standard Carrier Alpha Codes, or SCAC, by November 2021, according to Jason Hilsenbeck, president of Drayage.com and LoadMatch.
Drayage.com, a carrier directory, added 1,228 new dray carrier listings in 2021, Hilsenbeck told JOC.com. “It’s been overwhelming, in the past seven to eight months we’ve been adding small companies to the directory eight to 15 times a day.” These mainly are drayage drivers who used to be employed by or leased to larger drayage providers, Hilsenbeck said.
According to Hilsenbeck’s data, 516 of those new listings were one-driver companies, with 488 representing firms with two to five drivers. The largest concentration of new companies is in the US Southeast, with 305 new carriers with five or fewer drivers added to the Drayage.com directory in Savannah from July through December and 148 new carriers in Charleston, South Carolina, in the same period.
The increase in carrier numbers at Savannah and Charleston is a result of the massive buildup of freight at those ports. Spot drayage rates in Savannah reached unprecedented levels during the height of the port congestion last fall. A spot dray from Savannah to Atlanta, for example, cost a shipper $2,000 to $3,000 in late 2021, more than twice what many truckers were paid on the contract market.
Although the spot market has cooled in Savannah in recent weeks, rates are still more than 50 percent above what used to be considered normal, according to Hilsenbeck.
The shift of drivers between large and small carriers is a common occurrence in the truckload market. When rates climb, drivers will leave large companies, get their own operating authority, then make money hauling lucrative freight on DAT Freight & Analytics and Truckstop.com load boards. When rates fall, drivers will flee back to the safety of the large trucking companies with a steady book of freight.
In 2021, approximately 110,000 companies applied for US motor carrier operating authority, nearly double the number that applied in 2020, according to data from the Federal Motor Carrier Safety Administration analyzed by FTR Transportation Intelligence. Most of those trucking registrants were small firms with a handful of drivers, and many were one-truck operators, according to FTR.
Ben Banks, vice president of drayage company TCW Inc., said this has never happened before in drayage because the margins are not high enough to survive with one or two trucks. Small drayage firms usually sell their invoices to third parties called freight factors, which provides immediate cash to the driver for a fee. “Margins have been so razor-thin in the past that it never made sense,” said Banks.
That calculus has changed. “With some of these drivers getting $2,000 to run from Savannah to Atlanta, they can now afford to pay a percentage of those invoices [a fee] to the factor and still turn a profit,” he said. But there are differences between the container drayage and over-the-road markets that make it harder for port container haulers to go independent than their truckload counterparts.
“It looks like a phenomenal opportunity, but there are a lot of things they underestimate,” said Ken Kellaway, CEO of national drayage provider RoadOne IntermodaLogistics. “For one, the insurance requirements are fairly significant, and they have to get the right authority, the right licenses, to go in and out of the ports. And then they have to figure out how to manage the cash flow.”
These drivers are dependent on the spot market, Kellaway said. “What happens when those high premium prices start to go away and normalize again?” he asked. The result typically is a flow of truck drivers back to larger carriers that cover insurance and other costs and provide regular work. “This trend is only as good as the spot market, and we think a lot of customers are being overcharged,” said Kellaway.
The shift in drayage capacity complicates efforts to get those high volumes out of ports, especially those ports where there are no appointment systems for drayage drivers, said Hilsenbeck. “For those ports without appointment systems, or dual transactions [revenue moves in both directions], this has definitely added to the bunching of truck driver arrivals at the terminals,” he said.
Capacity is a major concern in Charleston and Savannah where the chassis supply is so tight that drivers who bobtail into the port — meaning without a chassis — wait several hours to get the necessary equipment to haul a container. One driver in the Facebook group “Savannah Port Truckers” posted Jan. 15 about a seven-hour trip in the Garden City Terminal, the result of more than five hours waiting for a chassis.
Drivers haul fewer loads per day when this happens, further restricting capacity for high-volume shippers. “There are lines of trucks that are waiting, and it’s unfortunate,” Griff Lynch, CEO of the Georgia Ports Authority told JOC.com. “I think it’s going to get a lot better in the coming months. But it's not there yet, so I'm not going to sit here and tell you it’s better than a few months ago.”
How shippers purchase drayage capacity is changing, said Hilsenbeck, as more importers are driven to brokers and the spot market. But the next few months could bring significant changes.
“February is traditionally the lowest part of the year” for drayage and trucking demand, he said. “With the early Chinese New Year and renewed COVID-19 lockdowns in China, there’s going to be a drop off in import volume, and I don’t expect volume to increase again until later in March. Things are still chaotic, but there will be a reevaluation of these supply chains in the next few months.”