ATLANTA – Although the June State of Freight webinar occurred just just a few weeks after May’s edition, there have been two key differences.
One was that FreightWaves CEO Craig Fuller was back in his familiar position with FreightWaves Director of Market Intelligence Zach Strickland. Second, it took place in front of a live audience on the Way forward for Supply Chain conference on the Georgia International Convention Center here.
But even given the short interim between sessions, the live June edition found just a few recent things to speak about, including the likelihood that the nation’s housing crisis was contributing to an overhang in trucking capability. Listed below are five takeaways from the Tuesday session.
Listed below are five takeaways from the Tuesday session.
Links between homelessness and trucking
FreightWaves CEO Craig Fuller said he recently participated in a roundtable discussion with representatives from the Federal Reserve in FreightWaves’ home city of Chattanooga, Tennessee, and the topic of the national housing crisis got here up. “Considered one of the things we talked about was that there’s a portion of the driving force population that not has a everlasting home,” Fuller said. “They’re actually living day-to-day of their cab.”
The financial advantage of such a living arrangement isn’t having a housing payment, though the accommodations should not quite on the extent of people that dodge paying rent or a mortgage by cruising full time.
The shortage of reasonably priced housing “might be keeping a few of these carriers on the road who otherwise would have left the industry,” said Fuller.
At the identical time, a slowdown in housing starts implies that construction jobs are less more likely to lure some drivers out of the cab, helping to keep up capability.
The role of brokers and volatility
Fuller cited statistics that showed how the most important carriers through the years have lost market share to brokers. “Market share is fragmenting, not consolidating,” which can increase volatility, he said.
Even when a shipper desires to cut down the variety of corporations in a routing guide to a smaller variety of core carriers, Fuller said, brokers can step in and widen the circle of potential carriers. “After which the shipper needs incremental capability, they will call up the broker and that’s who’s supplying the small carrier. That’s the reason they’re surviving.”
The top result, Fuller said, is that the expansion in brokers’ market share is slowing what a conventional model might need projected can be a lack of capability because the weak market drags on. “The downside of the market may go on longer than these up cycles, and that is likely to be a everlasting feature,” the FreightWaves CEO said.
Big bust is likely to be coming
Fuller said he expects a major bankruptcy in trucking. He didn’t name any potential candidates, but he said “someone I trust” told him about an organization with somewhat lower than 1,000 trucks being in “significant financial trouble.” Even when that company survives, Fuller said, “there’ll likely be an enormous bankruptcy by the top of the 12 months because what’s happening is that these balance sheets have just been so destroyed.” Add to that higher rates of interest and it’s possible lenders aren’t going to rescue an organization that’s in trouble.
OTRI still pointing higher
FreightWaves Director of Market Intelligence Zach Strickland reiterated that the Outbound Tender Rejection Index in SONAR stays the perfect indicator of the balance between trucking supply and demand. With the index’s recent gains, Strickland said the OTRI is about where it was in early June 2019, which marked a turning point for the market. “I feel that is demonstrating that the market is responding to more seasonal norms,” he added, noting that the second half of May and the primary a part of June “is actually a reasonably good time for the freight market.”
Fuller said a transient upturn within the OTRI during Roadcheck Week marked the primary time in a protracted time that the freight market reacted along historic norms. Many drivers stay off the road during Roadcheck Week. “Before, we might have these market events, and so they just didn’t move the market,” Fuller said. “This time, a market event actually did see some response and I feel that means that the market is moving.”
Higher rates just is likely to be an inflation response
Yes, rates are rising, based on the National Truckload Index in SONAR. The national average rate was $1.58 per mile on May 8 and was $1.71/mile on Monday.
But costs are higher too. “With the price structure, the carriers have a better floor, arguably a 30% increase,” Fuller said. Driver wages are a key a part of that, because the strong market of 2020 and into 2021 led to a slew of major carriers announcing increases in driver wages which can be still in place.
Equipment costs are way up too,” he said. (Fuel costs should not within the NTI, but is likely to be higher depending on the time point comparison). For corporations that lease their equipment, “they’re in a situation where they’re paying much higher capital expenditures just to remain in business,” Fuller said.
State of Freight: How long will trucking market trough linger?
State of Freight takeaways: Impacts of the deep freeze; data looking up
State of Freight: Reasons to be bullish on second half of 2024
The post State of Freight: Fuller highlights connections between housing market and trucking appeared first on FreightWaves.