US Truckload Capacity Remains Tight As Volumes Continue Recovery

Trucking’s recovery from the 2020 recession is far from over, with peak trucking volumes still months away, speakers at an FTR Transportation Intelligence webinar said last week.

“We’ve recovered most of the volume we’ve lost, but we’re not back to February levels,” FTR vice president for trucking Avery Vise said during the webinar. Despite the retail resurgence following the worst of the recession in 2020, total truckload shipments for the year were down 4 percent from 2019, he said, adding truckload volumes should match 2019 levels by some point in mid-2021.

The industrial recovery, while under way, lags the resurgence in US retail demand by several months, Vise said. And while large truckload carriers haul large volumes of retail freight, tens of thousands of smaller truckload companies focus more on industrial and specialized freight for US manufacturers and smaller local companies.

“Manufacturing [output] is still down close to 4 percent from February, and we’re working our way through manufacturing inventories that were in place before the pandemic,” said Vise.

If industrial freight keeps building, and consumer freight does not slow, shippers could see capacity tighten even more in 2021 than it did in the third and fourth quarters of 2020.

Although spot truckload volumes have been climbing by double-digit percentages, that is not the case for contract freight. The spot market, Vise pointed out, represents about 30 percent of overall truckload volume. “We have to be careful not to rely too heavily on spot metrics,” he said. “To some degree they fail to take into account some measure of disruption.”

That disruption has led to lower levels of truck utilization, which means tighter capacity and higher rates. Truck utilization rates were higher when capacity was tight in 2017 and early 2018 — hitting 100 percent at times. Although FTR’s utilization rate is between that high and 95, disruption caused by the COVID-19 pandemic means capacity is tighter than the rate implies.

Contract truckload rates rose about 3 percent on average in 2020, “which if you look at what was happening is amazing,” said Vise. FTR projects an 11 percent average increase this year for truckload contract rates. “Even if there’s some weakness in freight, we’re not looking at a year when rate increases are in low single-digit [percentages]. That’s not going to happen,” he said.

Vise expects difficulty finding truck drivers, and replacing those that have left the business, to keep capacity tight in 2021. “We are going to be challenged for months to come due to the [US truck driver drug and alcohol testing results] clearinghouse and pandemic restraints, so we don’t expect much change in capacity utilization,” he said.

That will drive more freight to an already full intermodal network, said Eric Starks, chairman and CEO of FTR. He said the research firm’s intermodal recovery index shows freight levels are about 20 percent above February 2020 levels. “We are at record levels of import activity,” which is fueling intermodal demand, he said.

More and more imports are being transloaded, however, which means shipments are being taken from international containers and reloaded into 53-foot domestic containers. “We’re seeing additional opportunities for rail to move more of this freight, but it will be a domestic container move, not international,” said Starks. “We’re also seeing tight capacity, and part of that deals with not being able to find the drivers [for drayage].”

Source: Journal of Commerce