by Seth | Feb 21, 2020
The trucking industry plays a very important role in economic stability and growth in the United States and around the world. In 2019, many carriers experienced reduced revenue streams due to falling demand and reduced freight rates precipitated by lessened shipping volume. The trade kerfuffle between China and the United States and the resultant threats of increased tariffs on billions of dollars worth of imported goods was partly to blame. However, industry experts see promising signs of improved trucking income in the second half of 2020.
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China and the U.S. trade billions of dollars in goods each year and rely on the trucking industry to transport them to their destinations. In 2019, there was a disruption in trade between the U.S. and China and it had a negative impact on the income for trucking companies. However, progress is being made in trade talks between China and the United States that has trucking industry experts optimistic the volume of trade between these economic behemoths in 2020 will eclipse the numbers for 2019. That bodes well for truckers even though some economists expect GDP growth to slow by 1.8% in 2020.
There are several factors that contributed to the trucking industry having a down year in 2019 and that affects the freight outlook for 2020. While tariffs and the trade kerfuffle between China and the U.S. are major factors, there are other important factors that could play a role in the fortunes of and outlook for the trucking industry in 2020. Some factors that may have a large impact include:
1. Increased Regulations And Guidelines
2. Rising Truck Insurance Costs
3. Diesel Price Instability
4. Driver Shortages
5. Changes In Driver Training Standards
6. Freight Transparency
7. Artificial Intelligence
8. The Electronic Logging Device Mandate And Other New Technologies
9. Restart And Break Rules
All these factors as well as tariffs and trade negotiations between China and the United States influence the transportation industry outlook for 2020.
There is increasing outbound tender rejections. For almost a month and a half, outbound tender rejections have been rising. Currently, there is a 14.25% OTRI. This is the highest level reached in 2019. It’s a national tender rejection rate increase of 170% since November 1, 2019. Vans and reefers national average rates are at their highest since January 2019 and they are continuing to rise. In the Pacific Northwest, transit delays and road closures along I-80 and other places caused by winter storms have forced carriers attempting to avoid bad weather on the way to the West Coast to have drivers take the Southern route. The added miles increases shippers’ rates on long hauls.
The seasonal rush has shippers with a backlog of freight and reduced capacity which has driven up rates. This problem is expected to be resolved soon, but moving freight out of Florida, Georgia and Texas will cost shippers more for the time being. Reefer capacity in the Southeast continues to be strained. As a result of more shippers having to protect their cargo from freezing during winter, refrigeration rates have increased. Due to inclement weather, the Upper Midwest, Minnesota and Wisconsin have seen diminished capacity and increased rates as carriers are hesitant to send their drivers into those areas.
Trucking is a cyclical market and conditions can potentially swing in favor of the carriers in 2020. Vendors who are focused on establishing the right partnerships stand the best chance of doing well in the upcoming year. In the current market conditions, it’s important not to chase rates. Many carriers are price sensitive now and could leave deliveries midstream should more favorable opportunities arise. This type of behavior is prevalent in the current business climate. The only way to circumvent it is to do business with good logistics partners that have an established working relationship with ethical carrier partners that are service-oriented.
For truck shippers in the United States the feast-and-famine business cycle is currently in the feast stage. Last year was one of the tightest trucking markets ever recorded. However, it’s poised to give way to a capacity glut that is an all-time high this year. Dry van truckload spot rates are down this year by double-digit percentages compared to a year ago. As the 2019 autumn shipping season approached, spot rate collapses pulled down contract rates until they were almost flat year over year. But industry analysts anticipate that by late 2020 truckers will be feasting on lucrative job opportunities.
The less-than-truckload market is a sector where carriers can still find rates that are still rising. Those rates are continuing to climb, but much more slowly than in years past. Some shippers say the LTL carriers initially seeking percentage rate hikes in the high single-digits in their annual contracts, often have to settle for rate increases that are much lower. A high percentage of trucking and logistics executives anticipate that the freight market in 2020 will either have a lucrative bounce back year to some degree or the trajectory of the freight market will stay flat.
In 2019, private fleets were able to grab about 5% of the market share away from for-hire carriers. This helped pull down the per-mile rates. In 2020, the gap between contract rates and spot rates could be reduced by another 5 to 10 percent at the beginning of the year, but begin to rise again as autumn approaches. Some of the other trends trucking industry experts expect to see in 2020 include:
1. Increased Carrier Bankruptcies
2. A Higher Number Of Mergers
3. Changes In Pricing
4. Rising Fuel Costs
5. Improvement Of Technology
6. More Incorporation Of Data Analytics
7. An Increased E-Commerce Influence
8. Shift In Production Locations
9. Increased Market Urbanization
10. A Market Flip
The trucking industry in the United States has the biggest impact on the country’s gross domestic product than anywhere else in the world. In the more than 150 other nations where there is a sizeable trucking industry, none of them has as significant an impact on their country’s GDP as the trucking industry in the U.S.
In the United States, the trucking industry plays a very important role when it comes to having an impact on employees nationwide. Research has shown that the trucking industry impacts more than one in every twenty American workers. An analysis of all workers revealed the jobs of more than 5.8% of American workers is related to or impacted by the trucking industry.
When it comes to hiring truckers, no business in the country can top Walmart. Currently, there are more than 8,600 hired truckers that work for Walmart.
Commercial trucks in the United States involved in carrying goods from one place to another haul an estimated 10.8 billion tons of products across the country each year.
When it comes to moving goods all across the country, no method of transportation handles more of the goods that are transported from state to state than trucks. In fact, almost 70% of goods carried from one location to another in the United States is transported by trucks.
When it comes to hiring a diverse workforce, few fields can match the incredible diversity of the people who are employed in the trucking industry. In the United States, more than 40% of all trucking jobs are held by people who belong to an ethnic, racial or social minority group.
One of the industries that is most dependent on truck drivers for their continued existence is grocery stores. Research has shown that without regular visits from truck drivers carrying the goods that they need to serve their customers, the average grocery store would be almost completely empty and unable to provide the products people want within three days after truck drivers stopped making deliveries.
Without truck drivers, many parts of the U.S. economy would come to a screeching halt. The United States could be possibly facing just such a nightmare scenario within the next few years if the ever-growing demand for properly trained, licensed, truck drivers is not addressed. Industry experts say the trucking industry desperately needs to hire about 900,000 truck drivers immediately to meet the transportation industry’s growing demand.
The trucking industry is filled with opportunities for people who love to drive trucks. There is a large and growing demand for skilled, professional, truck drivers. Many segments of the American economy are in dire need of truck drivers to make sure they get the goods they need in a timely manner to meet the demands of their customers. They cannot do it without truckers. Whether they are owner-operators or they work for a large or small trucking company, there are a growing number of employment opportunities available and a great outlook for truck drivers in 2020 and beyond.
There is good money to be made in the trucking industry. However, to be successful trucking companies must be able to overcome several challenges to become and remain profitable. Some of the most pressing challenges are figuring out ways to recruit, train, hire and retain truck drivers to prevent a dire driver shortage. Trucking companies must integrate ELD and other new technologies to make trucking safer and more time and cost efficient. Managing the cost of fuel, insurance, equipment, regulatory requirements and crash litigation are some of the other challenges trucking companies must overcome to be successful.
Embracing technological solutions is key to the future success of the trucking industry. Technology that improves risk management, driver hiring, safety, support, in-truck amenities and compensation. They need improved safety and performance and utilizing telematics, computerized systems for better dispatching, accounting, flow and harvesting of information on vehicle location, speed and mechanical condition and business operations. That’s the trucking industry’s outlook for 2020.
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