A number of recent signs in the trucking industry indicate that conditions may slowly begin to normalize in the coming weeks after the coronavirus pandemic, but 2020 is shaping up to be much tougher than experts had expected.
FreightWaves’ Outbound Tender Rejection Index, which measures the rate that trucking companies are rejecting loads offered by shippers, reached 5.29 percent in June after bottoming out at the lowest point in the index’s history in recent weeks.
At the same time, FreightWaves’ Outbound Tender Volume Index hit its highest June 5 reading in three years, a 7 percent year-over-year increase, marking a steady build in volumes since Memorial Day.
These readings suggest that capacity is starting to tighten as demand keeps more trucks on the road.
Demand should be increasing after U.S. economy unexpectedly added a shocking 2.5 million jobs back in May. The trucking industry lost about 1,200 positions, which is far fewer than the 83,000 lost in April.
Having that capacity taken offline, however, may not be such a bad thing. It may even help truckers recuperate rather quickly even if the overall U.S. economic recovery isn’t particularly strong.
“We don’t need the economy to do a full-180 and just boom for trucking to do very, very well,” Brian Fielkow, president of multimillion-dollar trucking and logistics company Jetco Delivery, told FOX Business. “Trucking’s positioned to do well in a more tepid [environment].”
The trucking industry is coming off of two tough years in 2018 and 2019, and many predicted 2020 would be a “recovery year,” Fielkow said. But everything changed along with the onset of the global pandemic.
A near-term recovery is not likely to affect all players equally, either.
“This business is so segmented and so regional … every niche has got its own challenges,” Fielkow said. “You can make some generalizations, but it’s still such a niche-type business.”
While demand surged for some companies, like those delivering to grocery stores or hospitals, during the pandemic, it plummeted for others. Additionally, state economies are reopening at different rates throughout the United States.
The pandemic and the economic standstill it caused have dominated headlines, but the industry is still dealing with some underlying challenges that have not gone away. For example, trucking companies are still struggling with rising insurance rates, a weak spot market, difficulty finding qualified drivers, trade uncertainty and increased costs related to new regulations.
Shipping rates have also been so low that it has been more profitable for some companies to keep their trucks parked rather than to accept a job.