Trucking industry capacity tighter than average during annual International Roadcheck

More shippers were looking for trucks to haul their freight during the annual International Roadcheck this year than compared to the five-year average. It’s a good sign for publicly held transportation and logistics operators.

Trucking/transportation analyst Brad Delco with Little Rock-based Stephens Inc. expected and saw capacity tighten during the annual event, which took place June 6-8. During the 72-hour event, inspectors completed the North American Standard Level 1 Inspection, which is the most thorough roadside inspection.

“The Market Demand Index, which measures spot market pressure in regard to freight versus capacity, accelerated 29.4% sequentially from the week prior,” Delco noted. “This acceleration outpaced the five-year historical average of 24% increase during Roadcheck week.”

Also, the number of shippers who were seeking out trucks to haul their freight rose by 62% during the Roadcheck week, compared to the five-year historical average of 45%.

“Importantly, we note that truck searches for the week immediately following Roadcheck were up 13% this year, when historically we have seen searching down 15% the week following, continuing to suggest supply/demand dynamics remain more favorable than seasonal trends,” according to Delco.

This suggests “shippers felt a notable capacity squeeze during this week as they searched for available trucks as we believe non-compliant carriers who do not have ELDs and are not complying with (hours of service) regulation simply park their truck over this period as to not risk possibility of inspection.”

In a previous note, Delco said the Roadcheck event sheds light on how the ELD mandate, which is set to go into effect Dec. 18, will impact the industry.

Recently, the U.S. Supreme Court declined to hear a challenge to the ELD mandate. In April, the Owner-Operator Independent Drivers Association (OOIDA) filed an appeal to the Supreme Court after a lower court challenge failed. Transportation/logistics analyst Benjamin Hartford of Baird said the decision by the Supreme Court to not hear OOIDA’s case reduces the “lingering uncertainty surrounding the mandate ahead of its scheduled December 2017 implementation.”

Hartford expects a 2% to 4% reduction in net capacity as a result of the mandate, and this supports the likelihood of contract price increases in 2018.

According to DAT Trendlines, spot rates remain at a two-year high. Dry-van rates rose 9.7% in May, from the same month last year. Refrigerated rates increased 6.9% in May.

“Over the past several weeks, we have seen continued improvement in truckload spot rates,” Delco said. “While we typically see spot rates accelerate from May to June during the spring peak season and during the week of annual Roadcheck, we have seen better than seasonal acceleration in rates and notably a higher Market Demand Index level.”

Dry-van spot rates rose 2.1% sequentially during the Roadcheck week this year, according to Delco. Historically, the rate increase is about 1.4%, as far back as 2013. In the week following the Roadcheck, spot rates rose 0.7% this year compared to the historical average of a 1.4% decline, going back to 2013.

“We believe the encouraging spot rate trends solidify our view that truckload supply/demand dynamics are improving even ahead of normal seasonal trends,” Delco noted.