Analyst: Trucking industry faces ‘stronger, longer’ peak season

by Jeff Della Rosa ([email protected]) 482 views 

The trucking industry looks to be headed toward a “stronger and longer” peak season as containership backlog worsens at ports and capacity is unlikely to loosen soon, according to an industry analyst. Meanwhile, an economist said industry employment likely has reached pre-pandemic levels.

The shipments component of the Cass Freight Index rose by 12.3% in August, from the same month in 2020, but the growth is expected to moderate to the mid-single-digits through the remainder of the year. The moderation can be attributed to more difficult comparisons in the latter half of 2020. Tim Denoyer, analyst for ACT Research, is the author of the Cass Freight Index report.

“The recovery after a skid in June and July amid further slowdowns in rail volumes suggest trucking is picking up slack from the railroads, currently snarled by the chassis shortage,” Denoyer wrote. “But shipment volumes remain limited by the capacity of the freight network, as shown by the backlog of 125 or so containerships at anchor off North American ports.”

Southern California ports recently hit a new record of 49 containerships at anchor, and the backlog “clearly represents a stronger and longer than average peak season demand outlook.”

Denoyer expects more pressure will be put on the trucking industry to handle freight as intermodal volumes decline. He noted a shortage of intermodal chassis following tariffs of more than 200% on imported steel in May “is a key reason chassis production has been dismal this year, and the intermodal network has run short.” Class 8 trucks, the largest truck class, also face supply chain issues, contributing to limited capacity.

According to WardsAuto.com, U.S. Class 8 retail sales rose by 2.8% to 18,176 in August, from the same month in 2020.

In an ACT Research report, Denoyer reemphasized the intermodal chassis issues and the freight market tightness leading up to a “clearly historic peak season… Amid perhaps the strongest freight demand of all time, the U.S. chassis fleet is shrinking because of these tariffs, which make the situation tough to remedy quickly. We expect intermodal volumes to be impacted through this peak season and beyond.”

He also said the chip shortage “may have some light at the end of the tunnel, but it continues to slow equipment capacity growth. And the Delta variant, which worsened the chip shortage, could also impact the nascent and gradual recovery in driver supply.”

In a recent webinar, Aaron Terrazas, director of economic research for Convoy, said to expect a strong holiday shopping season, especially online shopping. But unlike last year, he expects more final mile capacity to be available this year. He added that grocery spending has flattened as restaurant and bar spending is up above pre-pandemic levels.

Meanwhile, Terrazas expects that trucking industry employment has likely returned to pre-pandemic levels. This was based on an analysis of Bureau of Labor Statistics (BLS) data that showed carriers added 5,400 workers to their payrolls in August.

While trucking industry employment has improved over the past three months, driver capacity remains tight, Denoyer said.

“The ACT Driver Availability Index continued to improve this month, and BLS trucking employment trends continued to improve despite slowing of national job growth,” he added. “The effects from the pandemic, driver demographics, e-commerce driving jobs and the Drug & Alcohol Clearinghouse are lengthening the rate cycle, but we expect economic incentives to eventually outweigh the secular driver supply constraints.”

According to the expenditures component of the Cass Freight Index, the total amount spent on freight rose by 42.2% in August, from the same month in 2020.

Terrazas noted the increased rates that shippers have faced can be attributed to higher driver wages. He said he doesn’t expect rates to fall in the next six months, but they could start to fall next year if capacity loosens. But capacity isn’t likely to ease going into early 2022, he added.

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