Topics: Carrier Solutions, Transportation Industry, Newsletters
“An Analysis of the Operational Costs of Trucking: 2024 Update,” released in June by the American Transportation Research Institute (ATRI), did not paint a rosy picture.
“Economic conditions do not point to any substantial improvement in freight markets in the foreseeable future,” the report said. “In the first quarter of 2024, freight rates remained stagnant, GDP growth was smaller than any of the previous four quarters, and freight shipments and spending both declined at greater rates than in 2023. Retail sales grew in the opening months of 2024 to 3 percent year-over-year in April, but manufacturing production slipped during the same period and erratic month-to-month housing starts numbers remain well below 2021 levels.”
Did disaster loans worsen the trucking downturn? “Everyone wants to know when the market will heat up again, but to make that call, analysts have to know what’s causing the prolonged downturn in the first place,” FreightWaves said. “Plenty of theories have been offered, from operating efficiencies gained from technology to the growing market share of freight brokers, but none of these explanations so far have seemed sufficient to explain the strange shape of the current trucking cycle.”
FreightWaves said it used data from the Small Business Administration (SBA) to formulate its opinion on why the trucking market has been down for so long. At Cass, we study data from numerous sources. In this month’s newsletter, we’re looking at reports showing trucking parts and labor expenses declined in the first quarter of 2024; the trucking market isn’t attracting younger drivers; and U.S. Business Logistics Costs fell 11.2% from 2022 to 2023. Globally, the freight trucking market is forecast to reach $3.76 trillion in 2032. Where those trucks will park, in the United States at least, remains a concern.
Trucking Expenses Hit New High in 2023
“After first cresting the $2 per mile mark in 2022, the overall marginal costs of operating a truck hit a new record $2.270 per mile in 2023. Cost per mile has climbed 62.4 cents since 2020,” a Commercial Carrier Journal (CCJ) article said, citing the ATRI report. It said over the course of 2023, “rising costs collided with low freight rates, straining profitability across the industry.”
The ATRI did point out there may be opportunities for trucking carriers to “attain lower costs” over the coming year.
“Carrier fuel and tire expenses were trending downward in Q1 2024 as were used Class 8 truck prices, and changes in repair and maintenance cost increases are below inflation,” the ATRI said. “Fleets of all sizes who can maintain operational efficiencies and seize cost savings as they emerge will endure this economic environment with success.”
FreightWaves Blames SBA Loans for Prolonged Freight Recession
“The extraordinary length of the trucking downturn is best explained by a government program that flooded small carriers with tens of billions of dollars of cheap, long-dated credit,” the FreightWaves analysis said, blaming what it calls the Great Freight Recession on about $390 billion of “inexpensive credit” the SBA injected into the economy as part of the COVID-19 Economic Injury Disaster Loan (EIDL) program. “In our view, given its vast scale, the SBA’s COVID EIDL program is a sufficient explanation for the unusually long downcycle the trucking market has experienced since 2022.”
ATA: Parts and Labor Costs Continue Downward Trend
The American Trucking Association (ATA) said a report released by its Technology & Maintenance Council (TMC) and Decisiv Inc. in early July showed parts and labor expenses declined by 1.7 percent year over year during the first quarter of 2024. “Lower parts and labor costs are welcome news to fleets, who have been weathering substantial increases for much of the last several years,” TMC Executive Director Robert Braswell said. “This important parts and labor cost analysis report is an excellent tool to help Council members compare how their operations are performing relative to industry trends and plan accordingly.”
Podcast Addresses Truck Parking Shortage
In an episode of The New Warehouse Podcast, Evan Shelley, the co-founder and CEO of Truck Parking Club, explained how the company connects truck drivers with available parking spaces using a two-sided marketplace model. “The easiest way to explain it is we are the Airbnb of truck parking,” Shelley said.
Study Shows Trucking Isn’t Attracting Younger Drivers
None of the company drivers and owner-operators who participated in a CCJ survey were 34 years of age or younger. In fact, 74% of the respondents were age 55 or older, making truck drivers “among the oldest group of professionals in the U.S.,” CCJ said, pointing out that “a lack of young drivers in transportation is also reflected in how long survey respondents have made a career out of driving as 71% … have been in the business for more than 20 years.”
Cass Data Shows Linehaul Rates Declining in May and June
The Cass Truckload Linehaul Index, which excludes changes in linehaul rates exclusive of fuel and accessorial charges, declined sequentially in both May and June, 0.5% and 1.0%, respectively. Year over year, this index was down 1.8% in May and 2.4% in June.
The Cass report said it seemed “unlikely to turn positive quickly.”
Logistics Industry Still ‘Waiting for the Tide to Turn’
“The theme this year: ‘Waiting for the Tide to Turn,’ which refers to the potential for the weak global economic environment — and with it soft freight volumes — to turn upward,” Dan Gilmore, editor of Supply Chain Digest, said of the recently released 2023 State of Logistics Report, produced by the Council of Supply Chain Management Professionals (CSCMP), Kearney, and Penske Logistics. Gilmore wrote that the “headline news” in the report was that U.S. Business Logistics Costs (USBLC) fell on an absolute basis in 2023 to $2.37 trillion, an 11.2 percent drop from $2.6 trillion in 2022.
Global Trucking Market Forecast to Reach $3.76 Trillion in 2032
SNS Insider reported the global freight trucking market is expected to grow from $2.67 trillion in 2023 to $3.76 trillion in 2032. “The increasing e-commerce sector is a key driver of the freight trucking market, with online shopping generating a massive need for efficient door-to-door freight transportation,” it said. “Customers need prompt and dependable delivery, which forces logistics firms to simplify processes and make use of strong trucking networks. Additionally, the demand for freight trucking services is driven by a growing focus across many industries on just-in-time inventory management.”
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