Trucking recession: Fall 2022 crashed to pandemic lows

Troy Hawkins, a longtime trucking owner-operator, loved a take-home pay of round $70,000 in 2021. However, this 12 months, he estimates his earnings has sunk to about $45,000 or $50,000.

It’s not as a result of the Baltimore-based truck driver labored much less. The price of diesel has soared and his per-mile price simply hasn’t stored up. 

Hawkins’ scenario isn’t distinctive. Two experiences launched Tuesday convey simply how dangerous issues obtained within the trucking business this fall.

FTR Transportation Intelligence stated trucking situations hit an 18-month low in October 2022. Excessive diesel prices and sinking charges pushed the agency’s Trucking Situations Index to its lowest level since April 2020, when it hit a file backside. 

FTR Transportation Intelligence recorded for October 2022 its most damaging trucking atmosphere since April 2020. (Supply: FTR Transportation Intelligence)

In the meantime, the American Trucking Associations stated its for-hire tonnage index in November skilled its largest month-to-month lower for the reason that COVID-19 pandemic. It dropped month over month in October, too. The ATA’s index largely captures contract freight, relatively than the extra risky spot market. 

Nevertheless, the tonnage index nonetheless reported an uptick of 0.8% in comparison with the earlier November.

The American Trucking Associations’ Truck Tonnage Index reported a month-over-month decline in November freight volumes. October was additionally a month-over-month droop. (Supply: American Trucking Associations)

One other carefully adopted index mirrored a decline for this fall — however not a crash to pre-pandemic ranges. The Cass Transportation Index Report indicated November logged a month-to-month and annual decline in freight shipments. Nevertheless, shipments remained elevated from 2018, 2019 and 2020 ranges.

Some fleets have been struggling effectively earlier than this fall. The downturn in spot charges and uptick in diesel costs led some insiders to say trucking was getting into a “massacre” or a “Nice Purge” as early as spring 2022, notably for small operators

Giant public truckers like Knight-Swift and J.B. Hunt started warning of a droop in October. KeyBanc’s logistics analyst crew sounded alarms in September of a “trucking winter” the place the months main as much as Christmas, which tends to be the most well liked time of the 12 months for trucking, could be muted.

Some consultants predict that trucking business situations will stay difficult by 2023.

“We don’t see a month on the horizon as troublesome as October was for trucking corporations however nor can we count on a lot for carriers to get enthusiastic about,” Avery Vise, vice chairman of trucking at FTR, stated in a Tuesday information launch. “The speed atmosphere appears to be like to maintain market situations no less than mildly damaging into 2024.”

A shaky scenario for sturdy items, housing

In a information launch, ATA chief economist Bob Costello attributed the decline in freight volumes to a slowdown in sturdy items and housing. As trucking carries 72% of freight tonnage within the U.S., monitoring the transportation mode represents a key method to perceive modifications within the total economic system.

The Division of Commerce reported Tuesday that single-family homebuilding within the U.S. fell to a 2.5-year low in November, because of hovering mortgage charges that some keep have plunged the housing market right into a recession

Total, building has declined month over month, based on the Census Bureau however stays elevated from 2022. Public building, representing authorities infrastructure investments, noticed an uptick month over month.

Inflation-adjusted shopper spending on sturdy items declined within the second and third quarters of 2022, based on the Bureau of Financial Evaluation. A class breakdown of lowering items expenditure underscores a slowdown within the housing economic system. Inflation-adjusted spending on main home equipment, laundry tools, window coverings and family merchandise restore all dropped from the 12 months prior. 

A downturn in homebuilding — and purchases for these properties — means much less freight for truckers to maneuver, because the decline within the ATA quantity index exhibits. Flatbed truckers, who haul building supplies like lumber, are particularly uncovered to this. Nevertheless, the surge in multifamily homebuilding helps offset a few of these declines

The FreightWaves Outbound Tender Reject Index measures what number of trucking corporations are rejecting their contract freight for the spot market, indicating a sizzling marketplace for trucking. Within the flatbed area, this index stays elevated from pre-pandemic situations. 

Nevertheless, it has largely declined since March 2022, when the Federal Reserve started rising its funds price. This resulted in larger mortgage charges and a slowdown within the housing market. 

The FreightWaves Flatbed Outbound Tender Reject Index has declined sharply from its highs in early 2022 however stays elevated from pre-pandemic norms. (Supply: FreightWaves SONAR) 

The decline in U.S. imports additionally explains why trucking volumes have sunk. The amount of container imports at American ports in November plummeted by 19.4% from the earlier 12 months, based on knowledge from Descartes Datamyne.

That is notably chilling for the trucking business’s dry van sector, which strikes sturdy items that don’t require temperature management. In response to the FreightWaves Nationwide Truckload Index, contract charges for dry van truck actions are down 4% in comparison with the earlier 12 months, whereas the smaller and extra risky spot market has sunk 23% over the identical interval. 

Spot charges (inexperienced) have sunk 23% in comparison with the identical interval final 12 months, whereas contract charges (blue) have declined 4%. (Supply: FreightWaves SONAR) 

Proprietor-operators and small trucking fleets particularly challenged amid 2022 trucking recession 

On the identical time that trucking charges have sunk, the price of diesel has significantly elevated. 

The retail value of diesel (blue) has elevated greater than the rack value of diesel (orange). Small trucking corporations usually tend to pay the retail value of diesel. (Supply: FreightWaves SONAR) 

Nevertheless, this uptick hasn’t been equally shouldered by giant and small trucking fleets. That’s as a result of trucking corporations with extra staff can safe gas reductions as a result of they’re shopping for in bulk. 

As longtime gas professional Scott Berhang defined to FreightWaves, giant trucking corporations pay a small premium on the “rack value” of diesel, which is at all times a lot decrease than the retail value marketed exterior of a gasoline station. The trucking fleets and truck stops negotiate no matter premium is paid on the rack value. 

Proprietor-operators like Hawkins of Maryland usually tend to pay the retail value. 

“These prices have disproportionately damage smaller carriers not too long ago, and enhancements in these conditions likewise won’t assist bigger carriers as a lot as smaller ones,” Vise stated. 

The unfold between rack and retail costs has elevated this 12 months, placing extra stress on small truckers. As of Dec. 20, nationwide truck cease gas costs had been 61% larger than nationwide rack costs — an expansion of $1.83. Presently final 12 months, truck cease gas was 46% dearer than rack — an expansion of $1.13. 

“Rack costs transfer in a short time, whereas retail costs are inclined to lag far behind,” Berhang stated. 

Retail costs are sometimes individually set by the gasoline station proprietor, so they’re extra more likely to publish the very best doable value that may nonetheless maintain clients coming in. In the meantime, rack costs are a way more risky reflection of the worth that refineries promote to wholesalers. Fuel stations will usually wait to slash costs if rack costs dip, however they are going to reply shortly to a rise in rack costs.

That’s relieving information for the massive trucking fleets which might be extra more likely to take pleasure in gas prices near the rack value, however that places stress on owner-operators. 

Following this 12 months’s downturn, Hawkins stated he’s going to give up the trucking world and return to a job in human assets — although he prefers the liberty of the open street. 

“I don’t assume the charges have ever stored up with our gas price,” Hawkins stated of 2022’s trucking situations. “You’re nonetheless behind with the gas price being so exorbitant.” 

Do you’re employed within the trucking business? E-mail the writer [email protected] along with your expertise. And don’t neglect to subscribe to MODES to your weekly dose of logistics insights. 

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