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FTR: ELD Mandate to Put the Squeeze on Capacity

After the U.S. electronic logging device (ELD) mandate is fully implemented at the end of this year, truck utilization could climb to 100%, squeezing capacity and creating demand for as many as 60,000 additional drivers.

Such a scenario, outlined by industry forecaster FTR in a State of Freight Webinar called Preparing for the ELD future, suggested the industry will take a further productivity hit as some operators struggle to comply with the mandate and leave the industry.

As reported by Truck News, FTR transportation economist Noel Perry expressed doubts the industry can fill the void that quickly.

“We believe we can’t, so there’s going to be pressure on capacity until they catch up, some time late in the year,” Perry said.

Such hiring spikes have been required before, most notably in 2004 and 2014.

In 2004, spot market prices rose 15% and contract prices climbed 10%, thanks to a productivity hit incurred by new hours-of-service rules coupled with strong freight demand. In 2014, spot market prices rose 11% and contract rates 4%. One week in 2014 saw spot market prices rise 20% as capacity utilization was at its max.

Already, trucking capacity on the spot market is “scary tight,” Perry said, citing data from Truckstop.com and its loads-to-trucks ratio.

While predicting the full impact of the ELD is far from certain, Perry estimated an over-the-road truck that’s maximizing its hours could see a 5-8% productivity hit. Perry also noted about 40% of U.S. fleets are currently already using ELDs and will have worked through any hit to their productivity.

Perry said the maximum effect of the regulation will occur sometime in late 2018, “assuming reasonable enforcement” of the law.

“The effect at the peak, we think will be 2.5-2.7%, which doesn’t seem like much, but when you consider 3 to 3.5 million trucks and you take 2.5% of that, it equals somewhere around 60,000-70,000 trucks using crude math.”

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