Truck capacity remains tight; freight demand still rolling

As industries ramp output from increased demand in the second half of 2021, truck freight demand also is expected to rise, according to a trucking industry report. Meanwhile, freight spending has increased and shipping capacity stretched as carriers struggle to find qualified drivers to fill truck seats.

Recently, U.S. Bank released its second-quarter Freight Payment Index report, authored by Bob Costello, chief economist of trade group American Trucking Associations (ATA).

“The national truck freight market improved during the second quarter, as the economy gained momentum emerging from the effects of the pandemic,” the report showed. “The U.S. Bank National Shipments and Spend Indexes grew both sequentially and year-over-year, which is reflective of solid economic activity, including retail sales, imports, construction and manufacturing output. While still below peak levels prior to the pandemic, the shipments index has increased significantly.”

The rise in the shipment and spend indexes can be attributed to tight truck capacity amid a driver shortage. Carriers have been unable to increase supply to meet the rising demand. As a result, prices have increased while shippers work to get their loads moved in the time frames needed, according to the report. Also, the spend index increased because of rising fuel prices, which are reflected in higher fuel surcharges.

Through the second half of 2021, carriers will be challenged to meet freight demand amid “one of the largest supply crunches in history,” according to the report. “Increased new driver training and rapidly rising pay will help, but it will take time to get additional drivers into the market.”

In the second quarter, the U.S. Bank National Shipments Index rose by 4.4% after falling 8.3% in the first quarter. The index rose 6.8% in the second quarter, compared to the same period in 2020. Shipments in the second quarter were helped by some industries that are recovering from the impacts of the pandemic, including travel and restaurants.

The U.S. Bank National Spend Index increased by 10.1% in the second quarter to its highest level. Compared to the same period in 2020, the index increased 44% and is the result of higher volumes and pricing, including higher fuel surcharges.

According to DAT Freight & Analytics, its Truckload Volume Index rose 11% to an all-time high in June. Spot and contract rates remained in “record territory as surging retail imports and peak produce shipments fueled demand for transportation services.”

Shippers faced tight capacity in June, said Ken Adamo, chief of analytics at DAT.

“While the number of trucks posted to the DAT load board network increased significantly in June, overall demand accelerated at a faster pace. The typical seasonal decline in contract and spot rates from now to Thanksgiving looks less likely in 2021.”

Spot truckload rates usually fall after Independence Day with back-to-school and back-to-office retail goods already in place and produce season past its peak, according to DAT. Some carriers will shift to transporting other freight types and could provide relief to retailers seeking transportation services for end-of-year holiday goods.

Usually, 12% to 15% of truckload freight is shipped via the spot market. As of early July, the figure is closer to 25% but is expected to tighten as more shippers adopt a shipping strategy that includes a mix of dedicated, contract and spot, and asset and non-asset providers.

Between July 4 and Thanksgiving, weekly truckload volumes of produce typically fall an average of about 21% or about 7,300 fewer truckloads per week by the end of November.

As of early July, contract rates were rising. New routing guide contract rates increased by 7% in the two weeks ending July 1, compared to the previous two weeks. Contract rates are expected to be high through at least this fall, according to DAT.

In June, the ATA’s advanced seasonally adjusted For-Hire Truck Tonnage Index declined by 1.5%, from May. Compared to June 2020, the index rose by 0.5%. Through the first six months of the year, the index increased by 0.3%, compared to the same period in 2020.

“Tonnage has definitely flattened out, on average, over the last six to nine months,” Costello said. “The good news is that it remains slightly above 2020 levels.

“Supply chain issues are likely putting some downward pressure on tonnage,” he added. “But it is also likely that tonnage isn’t growing as much as it could because of industry-specific supply constraints. This index is dominated by contract freight, and the for-hire truckload carriers have seen their tractor counts fall because they are having difficulty finding qualified drivers. It is difficult to move more tonnage with less equipment, which is why we are seeing strong volumes in the spot market as shippers scramble to get loads moved.”

According to Van Buren-based carrier USA Truck, the average number of seated trucks in the second quarter declined by 8% to 1,787, from 1,943 in the same period in 2020. Meanwhile, its second-quarter load count increased by 11.2% to 3,738 loads. USA Truck’s second-quarter net income rose by 123.7% to $4.19 million, and revenue for the period increased by 37.4% to $123.73 million.