Shifting Trends in the Trucking Industry
We’re already rolling into fall of 2019 and the trucking industry is experiencing shifting trends compared to where it was in 2018. As of July 2018, ACT Research classified the industry as in a recession due to decreasing orders for new trucks, swelling inventories on dealer lots and declining spot rates.
Last year, tariff concerns were the main area of focus driving the spot market to unprecedented highs, resulting in driver shortages and a 12-month lead time for new trucks due to manufacturers being at full capacity. This created an opportunity for new operators to enter the marketplace, resulting in a strong used truck market for those updating fleets.
Things have now shifted as shippers are looking at the bottom line and are using improved logistics and contracted lanes to move shipments more cost effectively. The increase in capacity from expanded fleets, as well as new owner operators, has taken much of the steam out of the spot market. Previously, operators were leaving carriers to be owner operators but now owner operators are joining carriers to keep their trucks moving. Additionally, carriers that rely on the spot market are feeling the recent rate compression.
Due to these shifts in the industry, many new truck orders placed in the second half of 2018 are now under scrutiny as manufacturers announced cancellations in the order board. Order cancellations are likely a result of rate decreases, which makes it harder to cover the payment as well as driver shortages, which brings asset utilization back into focus.
So is there reason to panic in the trucking and freight market? Signs would say no, as volumes overall are still very high. The decrease in the spot market has been compounded by weather issues in the agricultural markets, which tempered the typical seasonal increase for agriculture. However, most carriers were able to renegotiate rates in 2017 and 2018 and even with the decrease in spot rates will likely remain profitable. It’s important to also note that not all operators have been affected the same. For example, reefer rates have been an insulated segment due to demand.
Given these trends, it’s important for trucking companies to evaluate how they are positioned in 2019. Now is an ideal time to focus on asset utilization and to be strategic about asset acquisition, weighing decreasing interest rates with the potential for further rate deterioration in the spot market. FNBO can help you with this evaluation to best position your organization for the rest of the year.
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About the Author
Aaron Martens is a Vice President in the Commercial Banking Group for FNBO. In this role, Aaron supports closely-held and family-owned businesses with comprehensive banking services. Aaron has been with the bank for over 15 years, with the majority of his experience in commercial banking. Aaron received a BSBA from the University of Nebraska Lincoln and an MBA from the University of Nebraska Omaha.
The articles in this blog are for informational purposes only and not intended to provide specific advice or recommendations. When making decisions about your financial situation, consult a financial professional for advice. Articles are not regularly updated, and information may become outdated.