Truck capacity tightens, rates increase; tonnage dips 12%

Spot rates have started to rise and capacity has tightened amid produce season while truck tonnage fell by the highest rate in 26 years in April.

American Trucking Associations’ advanced seasonally adjusted for-hire truck tonnage index fell 12.2% in April, from March. The index declined 11.3% in April, from the same month in 2019.

“April’s monthly decline was the largest in 26 years when there was a labor strike in April 1994,” said ATA Chief Economist Bob Costello. “Considering that April factory output and retail sales plummeted, the large drop in truck freight is not surprising. However, not all fleets saw large declines in April. Those hauling food for grocery stores and those involved in the online retail supply chain outperformed most other fleets. Some fleets witnessed very large declines in freight last month.

“These historic declines show just how much trucking was impacted by our national response to the COVID-19 pandemic,” Costello added. “As the nation starts taking small steps toward reopening, we should see some modest improvements in the freight market, but the size of April’s decline gives us an idea of how long the road back may be.”

The tonnage index compares to the Cass Freight Index that fell 22.7% for shipments and 18.2% for expenditures in April. The declines for the month were expected after the panic buying came to an end, stay-at-home orders remained in place and unemployment levels rose.

The decrease in the shipments and expenditures indexes would have been more concerning “if it weren’t a self-inflicted wound. Businesses and mobility were severely limited by unprecedented governmental restrictions in April, and those are loosening here in May and should further loosen on their way back to ‘normal’ in June,” according to the Cass Freight Index report.

May is expected to be better as the U.S. economy slowly reopens and some manufacturing plants restart, and this includes some automotive plants. For carriers that delivered e-commerce, groceries, home improvement and consumer packaged goods, April was similar to March, the report shows. But restaurant, automotive and mall retail shippers were moving very little.

April volumes declined between 10% and 25% for most carriers across several transportation modes, including truckload, less-than-truckload, intermodal and rail. Excluding dedicated freight, a bright spot was in small package delivery as UPS reported volumes rose in April, from the same month in 2019. The freight mix has changed, however, from about half business-to-business freight to 30% business-to-business freight. Consumer freight went from about half to 70% of the volume as a result of a surge in e-commerce volumes with businesses closed and people heeding stay-at-home orders.

Consumer confidence remained poor leading into May because of uncertainty over what’s next.

“We’ve never seen anything like this, so it is impossible to predict exactly what it will mean for freight as we move through the year,” the report shows. “There are many paths and shapes we could take as an economy in the next few quarters.”

Spot rates have continued to rise through mid-May as a result of seasonal demand, according to DAT Solutions. Between the week ending May 10 and the week ending May 17, dry-van spot rates rose 3.3%.

“As some states attempt to return to normal life and produce enters supply chains, the increased demand brings some relief for carriers that have struggled with low rates during the COVID-19 crisis,” according to DAT.

Pricing on the top 100 dry-van spot market lanes rose in the week ending May 10 for the first time since mid-March, according to the Journal of Commerce. Produce season has contributed to tighter capacity in southern California, Texas and central Florida.

The COVID-19 Truck Freight Recovery Index, produced by FTR and Truckstop.com, shows trucking activity has risen from a bottom but has yet to accelerate. The index fell to 28.9 on April 17 but has since risen to 47.3. An index reading of 100 indicates a full recovery to a seasonally-adjusted level of activity before the pandemic.

The reopening of the U.S. economy is happening “in fits and starts,” said Avery Vise, vice president of trucking for FTR. A return to recovery is expected to be inconsistent and uncertain, and when the trucking industry will see normal freight levels might take a year.

“If by normal you mean getting back to where we were in February, which was not a great market but not a bad market, we’re probably going to be well into 2021 before we get to that level,” Vise said. “There’s been real financial damage to consumers, and there’s no way around that.”