2020 Freight Shipping Outlook: More Capacity Could Heat Competition

2020 Freight Shipping Outlook: More Capacity Could Heat Competition

2020 Freight Shipping Outlook

Freight Shipping Factors Changing

 

We’ve been pointing to a number of issues that have elevated freight shipping rates over the last few years. Number one among them has been a lack of freight shipping capacity caused by a lack of vehicles, a shortage of drivers and the use of Electronic Logging Devices that restrict how many hours and miles a driver can work each week.

Looking forward to 2020, some experts are looking at the first two issues — a lack of vehicles and shortage of drivers — from a different perspective. If they are correct, shippers could see increased competition for their business among carriers reflected in the form of lower rates. Here’s why.

More Trucks on the Road

 

In the past few months there has been an increase in the volume of freight shipped. Last year the additional freight would have squeezed already-tight capacity and made freight shipping a seller’s market, as it was in 2018. That hasn’t happened in 2019, largely because carriers reinvested a lot of the income they made in 2017 and 2018 into buying new trucks.

New orders for heavy trucks hit a record high of 53,100 in August 2018, 150% higher than they were in August 2017. In fact, 2018 set a new record for heavy truck orders, with the total of 490,000 orders placed crushing the previous record set in 2004 by more than 100,000 vehicles. Spending on new trucks was incentivized by the 2018 federal tax cut. Carriers saw the opportunity to upgrade their fleets with money they otherwise would have paid in taxes.

The new trucks are far more technologically advanced than older fleet vehicles and come with sophisticated safety enhancements and fuel savings of as much as 50%.

The frenzy of new truck orders has put a lot more trucks on the road, and there are still orders to be filled. But given the current shortage, there’s no one to drive them, right? Hmmmm …

Bureau of Labor Statistics Pushes Back on Driver Shortage Claim

 

For the third year in a row, the driver shortage tops the American Transportation Research Institute’s most recent annual survey of issues facing the trucking industry. The driver shortage has been one of the primary reasons blamed for the lack of freight shipping capacity.

But in its March 2019 Monthly Labor Review, the Bureau of Labor Statistics (BLS) cast serious doubt on the idea that there is a shortage of truck drivers at all.

While the BLS does agree with the American Trucking Association that the long-distance truckload motor freight labor market “has experienced high and persistent turnover rates for decades,” they go on to say that high turnover does not necessarily mean that there is a shortage. Rather, they continue, “the overall picture is consistent with a market in which labor supply responds to increasing labor demand over time, and a deeper look does not find evidence of a secular shortage.”

The BLS concludes that the market for truck drivers “works about as well as the labor markets for other blue-collar occupations.”

In other words, there is a lot of turnover among truck drivers. But any shortages that result from that turnover are resolved when carriers raise pay and improve conditions.

Will Higher Capacity Lead to Lower Rates?

 

Theoretically, as capacity increases there should be more competition among carriers, and more competition should lead to lower rates. Why just theoretically? Because there are a lot of factors that go into motor freight shipping rates. For 2020, new tolls being deployed by states could become a factor. Fuel prices and weather will be wildcards, as usual.

But generally speaking, unless unknown factors take hold of the market, the outlook for shipping rates looks good for 2020.

As Always

 

FreightCenter continues to deliver the lowest prices from our fleet of vetted carriers for our Truckload and LTL shippers. In 2020, you will want to be diligent in checking online for the lowest rates as carriers compete for your business. And if you are considering selecting a carrier you’re not familiar with, call your National Account Manager at 800-716-7608 to make sure that carrier provides service that meets your standards.

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