William B. Cassidy, Senior Editor | Nov 03, 2020 5:06PM EST
Truck capacity, which not long ago was so abundant shippers could pick and choose among carriers and rates, is now at its tightest since 2018, if not tighter, truckload carrier executives say. They’re warning shippers to expect “low-level double-digit” rate increases in 2021, arguing rate hikes are needed to support additional wage increases for drivers.
The lack of sufficient truck drivers to seat tractors is the key factor driving up truckload rates, David Jackson, president and CEO of Knight-Swift Transportation Holdings, told JOC.com. Jackson and other truckload carrier executives say higher rates are needed to increase driver pay, to attract more drivers and, in turn, create the additional capacity shippers want.
The average number of tractors fielded by Knight Transportation and Swift Transportation, the company’s primary subsidiaries, dropped 2.3 percent year over year in the quarter to 18,464 units, according to Knight-Swift’s third-quarter earnings report. “You just have a tough time finding a truck that wants to move,” Jackson said in an Oct. 27 interview.
He expects truckload contract rates to rise by “low double-digits” in 2021. That’s a consensus of sorts among truckload carriers, many of which forecast 10 to 15 percent increases. Others say those increases may be more aspirational than realistic, but shippers can still expect price hikes. The market has swung so quickly that rate expectations may lag the new reality.
And although complaints about poorer service and higher rates have surfaced among shippers, Jackson said his customers are focused primarily on securing the trucks they need. “I wouldn’t say that service rates at the top of the list for customers right now. It’s about access to capacity,” he said. “Customers are pretty grateful just to get capacity right now.”
Drivers numbers are down
Shippers have been skeptical of renewed claims of a driver shortage, with some suggesting carriers are “managing” capacity by not taking on more drivers, much as container shipping lines have managed capacity this year through blank sailings. Even if that is true or partly true, motor carrier executives insist the lack of truck drivers is real and a growing problem.
Labor Department data shows the number of for-hire trucking employees in September was down 73,200 year over year. In August, the number of long-distance truckload production employees — mostly drivers — fell to 443,500, down 26,500 year over year and 23,800 from this year’s high point in February, according to US Bureau of Labor Statistics data.
Those are significant shortfalls at a time when freight demand is high. Although much of the shortage is attributable to the coronavirus disease 2019 (COVID-19), trucking executives also point to the impact of the US commercial drivers license (CDL) drug and alcohol testing clearinghouse, which allows potential employers to check whether driver applicants have failed tests.
More than 30,000 truck drivers have tested positive since January and are prohibited from driving, Bob Costello, chief economist for the American Trucking Associations, said at the 2020 Transplace Shipper Symposium last month. “Nearly 24,000 of them have not even attempted to take the steps they need to return to duty,” Costello said. “They’ve thrown in the white flag.”
“Driver availability is [as] difficult in the present environment as I’ve seen in my 30-plus years in this industry,” Mark Rourke, president and CEO of Schneider National, said in an Oct. 29 earnings call. “I think it’s well documented that the new driver funnel to the industry is significantly constrained,” with fewer new CDL graduates from truck driving schools.
Schneider also has seen attrition among its team drivers, “an increasingly important component to deliver transit-sensitive cargo” to customers strained by low inventories, Rourke said. “COVID has reduced our non-family team configurations due to the discomfort of operating in tight quarters with one another,” Rourke said. “It’s been a challenge here in the short-term.”
Rourke said some Schneider owner-operators also had left the company to pursue high-priced freight on the spot market, which means the number of smaller trucking companies likely is increasing. Those smaller trucking companies typically aren’t available to the type of high-volume shippers scrambling to rebuild inventories, especially in the retail sector.
Owner-operators shifting gears
Some independent owner-operators are signing on with Landstar System, said Jim Gattoni, president and CEO. Landstar ended the third quarter with 10,571 trucks, 272 more than at the end of the second quarter, Gattoni said in an Oct. 22 earnings call. That’s a record number of “business capacity owners,” both individual truckers and small fleets, contracted with Landstar, he said.
“I think there has been supply that’s been sitting on the sidelines, especially when you think about owner-operators and small carriers, which are the bulk of our capacity,” Joe Beacom, Landstar’s vice president and chief safety and operations officer, said during the earnings call.
“I think they’ve been waiting for things to change, whether that’s their ability to feel comfortable about operating in a COVID environment or whether it’s the feeling that the markets and the pricing have bounced back to the point that it’s worth their while,” he said. “I think you’ve seen a lot of carriers or owner-operators that were sidelined come back into the market.”
Contact William B. Cassidy at bill.cassidy@ihsmarkit.com and follow him on Twitter: @willbcassidy.
William B. Cassidy, Senior Editor | Nov 03, 2020 5:06PM EST
Credit: JOC.COM
Truck capacity, which not long ago was so abundant shippers could pick and choose among carriers and rates, is now at its tightest since 2018, if not tighter, truckload carrier executives say. They’re warning shippers to expect “low-level double-digit” rate increases in 2021, arguing rate hikes are needed to support additional wage increases for drivers.
The lack of sufficient truck drivers to seat tractors is the key factor driving up truckload rates, David Jackson, president and CEO of Knight-Swift Transportation Holdings, told JOC.com. Jackson and other truckload carrier executives say higher rates are needed to increase driver pay, to attract more drivers and, in turn, create the additional capacity shippers want.
The average number of tractors fielded by Knight Transportation and Swift Transportation, the company’s primary subsidiaries, dropped 2.3 percent year over year in the quarter to 18,464 units, according to Knight-Swift’s third-quarter earnings report. “You just have a tough time finding a truck that wants to move,” Jackson said in an Oct. 27 interview.
He expects truckload contract rates to rise by “low double-digits” in 2021. That’s a consensus of sorts among truckload carriers, many of which forecast 10 to 15 percent increases. Others say those increases may be more aspirational than realistic, but shippers can still expect price hikes. The market has swung so quickly that rate expectations may lag the new reality.
And although complaints about poorer service and higher rates have surfaced among shippers, Jackson said his customers are focused primarily on securing the trucks they need. “I wouldn’t say that service rates at the top of the list for customers right now. It’s about access to capacity,” he said. “Customers are pretty grateful just to get capacity right now.”
Drivers numbers are down
Shippers have been skeptical of renewed claims of a driver shortage, with some suggesting carriers are “managing” capacity by not taking on more drivers, much as container shipping lines have managed capacity this year through blank sailings. Even if that is true or partly true, motor carrier executives insist the lack of truck drivers is real and a growing problem.
Labor Department data shows the number of for-hire trucking employees in September was down 73,200 year over year. In August, the number of long-distance truckload production employees — mostly drivers — fell to 443,500, down 26,500 year over year and 23,800 from this year’s high point in February, according to US Bureau of Labor Statistics data.
Those are significant shortfalls at a time when freight demand is high. Although much of the shortage is attributable to the coronavirus disease 2019 (COVID-19), trucking executives also point to the impact of the US commercial drivers license (CDL) drug and alcohol testing clearinghouse, which allows potential employers to check whether driver applicants have failed tests.
More than 30,000 truck drivers have tested positive since January and are prohibited from driving, Bob Costello, chief economist for the American Trucking Associations, said at the 2020 Transplace Shipper Symposium last month. “Nearly 24,000 of them have not even attempted to take the steps they need to return to duty,” Costello said. “They’ve thrown in the white flag.”
“Driver availability is [as] difficult in the present environment as I’ve seen in my 30-plus years in this industry,” Mark Rourke, president and CEO of Schneider National, said in an Oct. 29 earnings call. “I think it’s well documented that the new driver funnel to the industry is significantly constrained,” with fewer new CDL graduates from truck driving schools.
Schneider also has seen attrition among its team drivers, “an increasingly important component to deliver transit-sensitive cargo” to customers strained by low inventories, Rourke said. “COVID has reduced our non-family team configurations due to the discomfort of operating in tight quarters with one another,” Rourke said. “It’s been a challenge here in the short-term.”
Rourke said some Schneider owner-operators also had left the company to pursue high-priced freight on the spot market, which means the number of smaller trucking companies likely is increasing. Those smaller trucking companies typically aren’t available to the type of high-volume shippers scrambling to rebuild inventories, especially in the retail sector.
Owner-operators shifting gears
Some independent owner-operators are signing on with Landstar System, said Jim Gattoni, president and CEO. Landstar ended the third quarter with 10,571 trucks, 272 more than at the end of the second quarter, Gattoni said in an Oct. 22 earnings call. That’s a record number of “business capacity owners,” both individual truckers and small fleets, contracted with Landstar, he said.
“I think there has been supply that’s been sitting on the sidelines, especially when you think about owner-operators and small carriers, which are the bulk of our capacity,” Joe Beacom, Landstar’s vice president and chief safety and operations officer, said during the earnings call.
“I think they’ve been waiting for things to change, whether that’s their ability to feel comfortable about operating in a COVID environment or whether it’s the feeling that the markets and the pricing have bounced back to the point that it’s worth their while,” he said. “I think you’ve seen a lot of carriers or owner-operators that were sidelined come back into the market.”
Contact William B. Cassidy at bill.cassidy@ihsmarkit.com and follow him on Twitter: @willbcassidy.