Before last year, shippers and truckers settled into a sort of “equilibrium” of truck capacity and freight demand – a balance in the market that kept rate increases largely in check. However, all that was “shattered” in 2014 – first by the cruel winter to begin the year and stronger than expected U.S. economic growth that kept trucks and trailers filled and pushed higher truckload and LTL rates, explains the Journal of Commerce in its annual review.
“As we head into 2015 and beyond, be prepared for significant rate increases across all modes,” Justin Long, a transportation analyst at Little Rock, Ark.-based investment bank Stephens, warned shippers. The good news for them, though, is trucking execs appear more bullish about 2015 than any year since the end of the recession, ordering a big wave of new model trucks. Much of it is replacement demand, but there should be some expanded capacity as well.
In fact, carriers are placing orders for trucks that won’t be delivered until mid-2015, a “striking show of confidence in the recovery’s durability,” points out JOC. ACT Research expects a slight uptick in active truck capacity this year, based on Class 8 truck sales and replacement rates.
“Since the end of the recession, we haven’t really needed to add trucks,” said VP Steve Tam. “I think we’re there now.”
However, the long game may be a blessing for many carriers. Dan Clark, president and general manager of GE Capital Transportation Finance, says that despite the surge in truck orders, “we’re not seeing a lot of additional equipment being put into action at the fleets we’re talking to. Nobody has the confidence they can get enough drivers to seat them. That might be good because it will keep carriers from over-expanding.”
The struggle to find, hire, pay and keep truck drivers will continue in 2015, even in sectors traditionally more insulated from capacity volatility.
“The driver shortage has reared its ugly head, and even LTL carriers have trouble finding drivers,” says Robey W. (Rob) Estes Jr., president and CEO of Estes Express, the largest privately owned U.S. LTL carrier. The higher rates will pressure shippers to find new sources of capacity and innovative ways to move freight, says Estes.