This year has proven to be somewhat of a crazy ride for the logistics and brokerage companies out there! It started when we were all warned by “experts” about the negative effects of what CSA 2010 was supposedly going to do to the trucking industry. They said 8-10% of all class 8 trucks were going to be sidelined and deemed unsuitable for the road. They told us that drivers with good clean driving records were going to be demanding a premium, jumping from company to company based on who would pay them the best. The scare with that thought was wondering what effect the increasing driver pay was going to have on the small to medium sized trucking companies, who were already struggling to stay afloat with escalating costs for diesel, insurance, plate fees and equipment maintenance. The “experts” also said that CSA 2010 was going to be responsible for freight rate increases of 10-15% across the board due to the decreased capacity of available trucks on the road, while freight tonnage was expected to increase this year. These concerns along with our country’s economic stability being unknown were supposed to set us up for a so called “perfect storm” in our industry in which only the strongest would survive.
It turns out that our so called experts were right about rate increases to an extent, but so far to this point wrong about the others. Yes, we did see drastic freight rate increases at the beginning of the year that shook our world up a little bit until the market stabilized, but it wasn’t caused by CSA 2010. Instead, the most accepted reason that we saw the escalating rates was due to many medium to large sized carriers running leaner with some of their equipment parked on the sidelines. This combined with a rise in freight tonnage during the first quarter of this year most likely caused the increases that we all felt. It wasn’t until about half way through quarter two when truck capacity seemed to loosen up, prices started to go down and we could all catch our breath a little to get ready for the summer shipping rush of food and beverage products. The only problem was that the normally predictable rush never seemed to come this year. Instead, it feels as if most customers and shippers have run unusually lean and slow this year compared to years past. The most obvious reason for this would simply be that the consumer sector is spending less than normal on their consumables due to factors such as fewer vacations taken, road trips and just having less consumer confidence given our current economic state.
What the rest of 2011 yields for the trucking industry is anyone’s guess. If past trends repeat themselves this year, what we can all expect is that truck capacity should remain relatively loose and carrier rates low through mid to late September. That is typically the point in the year where customers ramp up production and shipping for the winter rush. When this load volume increases is also the time when we should start to see capacity tightening and rates increasing a little. There are questions that still remain before anyone will know what to fully expect though. Will the economy pick up anytime soon and gain some positive momentum, thus increasing consumer confidence and spending? Or will we see the predicted negative effects of CSA 2010 kick in at all?
Nobody knows the answers for certain, apparently not even the “experts”, so for now we just need to keep on trucking and be strategically prepared for whatever the transportation market bears.
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About Mike Rotman