Trade deals should strengthen trucking industry

by Jeff Della Rosa ([email protected]) 455 views 

The trucking industry is expected to have a good year in 2020, compared to 2019, as the U.S. economy grew about 2.2%, and that level of growth should be sustainable in 2020, said Shannon Newton, president of the Arkansas Trucking Association.

“In an election year, the economy historically has some pent up anticipation of whatever comes of that election, so you usually don’t see any major changes, rise or fall, during an election year,” Newton said.

Doug Voss, professor of logistics and supply chain management at the University of Central Arkansas, expects 2020 to be better than 2019, and the strength of 2020 might hinge on the trade deal with Canada and Mexico and the de-escalation of the trade war with China. Voss said 2019 wasn’t as strong as 2018 for the industry, with spot rates falling and carrier bankruptcies and operating expenses rising. But if the economy improves in 2020, he expects fuel prices to rise along with fuel consumption. And with 2020 being an election year, it might temper the market somewhat as companies might not invest as much as they would in other years.

John Kent, clinical associate professor of supply chain management and director of Supply Chain China Initiatives at the University of Arkansas, said heavy-duty truck purchases is one of the metrics he follows to gauge the health of the trucking industry and noted the numbers have been mixed over the past several months, indicating uncertainty in the market. Freight rates might rise in 2020 because of lower capacity as carriers go out of business and shippers have the same amount of freight that needs to be hauled, he said.

A trade agreement with China would be a positive for the economies of China and the United States and the trucking industry, Kent said, noting that reaching an agreement has been a rollercoaster ride. A deal would mean more soybeans and agricultural products should be exported to China in 2020, he said. Air and ocean freight have been soft and have fallen along with trade but should improve if a deal is reached.

“To me, a lot of it triggers on the two big economies, the U.S. and China,” Kent said. “And if we can get along a little better, I think that will benefit. It will be a win for both. And if we don’t, I think we’ll continue to have some tenuous times.”

Between January and November 2019, shipment volumes declined, from the same period in 2018, according to the Cass Freight Index. The volumes in 2020 are expected to flatten and might turn positive as early as January 2020, the index shows. Freight expenditures are expected to moderate in 2020 and should exceed the flat freight volume.

The top priority for the Arkansas Trucking Association in 2020 will be the campaign to support the extension of the half-cent sales tax for highway projects, Newton said. While 2019 was somewhat of a struggle for the trucking industry compared to 2018, it included some legislative highlights, such as tax reform and placing Issue 1 on the ballot in the November general election, she said. Issue 1 regards the proposal to permanently extend the half-cent sales tax that’s set to end in January 2023.

Some of the regulations that will go into effect in 2020, such as the Drug & Alcohol Clearinghouse, are expected to have a minimal impact on the industry in Arkansas. The state has already had a similar system in place since 2008, and Newton said she doesn’t anticipate the federal system to be a burden on carriers. Nationwide, however, Voss cited a study showing the Drug & Alcohol Clearinghouse could impact as many as 300,000 drivers who should not be driving because of drug and alcohol abuse issues. This and the full implementation of the electronic logging device mandate in December 2019 should remove some capacity from the market, he said, and that would be good for rates.

Along with the new trade deal with Canada and Mexico, another federal regulatory change that could impact the industry in 2020 is the proposed revision to the hours-of-service rule. Newton also noted the impact of rising insurance premiums on the industry and that the issue of insurance cost and availability is tied for third on the top 10 list of critical issues in the trucking industry in Arkansas. No. 1 is driver shortage.

“Even in a soft economy we still have challenges in attracting people to fill the jobs that we need, both truck driving [and] diesel technician, and as a whole, the country is essentially at full employment,” Newton said. “So our industry is competing with others for talent.”

The driver shortage in 2020 is expected to be similar to 2019, with about 1,500 openings in Arkansas, she said, adding that need has been greatest for over-the-road and irregular route driving positions.

Editor’s note: This article first appeared in Talk Business & Politics annual State of the State magazine.

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