Chart of the Week: Carrier Details Total Trucking Authorities, Outbound Tender Volume Index – USA SONAR: CDTTA.USA, OTVI.USA
Operating authorities for motor carriers of property issued by the Federal Motor Carrier Safety Administration have grown 45% since July 2019, based on FreightWaves’ latest data released in partnership with Carrier Details. Truckload demand as measured by the Outbound Tender Volume Index is just up about 11% — supporting the view that there continues to be a big buffer within the domestic truckload market.
Operating authorities are usually not a pure measure of capability since one authority will be the equivalent of multiple trucks. Nonetheless, capability growth is centered across the increase in smaller operators who leave larger corporations.
Larger fleets, like several of the publicly traded corporations, have generally not added capability over the past few years. Quite, they purchased existing capability in the shape of smaller trucking corporations or leased on recent operators. Most of J.B. Hunt’s tractor growth earlier this yr was in the shape of leased-on operators, who could keep their existing authorities.
Earlier this week, FreightWaves CEO Craig Fuller wrote that the small carriers are still driving industry growth, which is contrary to standard thought.
The info supports this idea. From August 2019 to now, tractor counts as reported by the FMCSA have grown by roughly 425,000 units. Roughly 42% of that growth got here from carriers with one to 6 tractors. Carriers with 20-100 units got here in second with 16%.
The purpose being, the expansion and decline in aggregate capability has been largely a small operator’s game, with the larger fleets focused on acquiring existing capability for growth. Knowing this, we will reasonably assume that authority contraction is an honest, albeit imperfect, proxy for capability leaving the market.
Operating authorities have been contracting since last fall but haven’t come near countering the pace of growth that occurred from July 2020 to July 2022. The speed of contraction tends to speed up through the winter months and slow during spring and summer.
The truckload market has grow to be more responsive, with tender rejection rates climbing back above 4% for the primary time since last winter, topping the Fourth of July. While the present value continues to be historically low, suggesting abundant capability, the trend is an indication of future disruption.
If capability exits quickly, with the info suggesting it will most probably occur right around Christmas, the market will probably be caught off guard if demand continues to climb or spikes. The bare minimum expectation is for a much tighter holiday season and greater than likely 2024.
Perhaps the largest takeaway from the info is the increasing volatility of capability changes. Normally, this has been a much smoother and slower process. However the spiking growth through the pandemic has created a capability bubble that is constant to burst at an erratic and rapid pace.
This will probably be the largest risk to transportation sourcing over the following 12 months. As carriers proceed to bid contracts lower, the sustainability is becoming increasingly questionable.
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