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JOC: No Immediate End to Bullish’ US Truck Market, Capacity Crunch

Shippers looking for some relief in capacity leverage may have to wait until at least the latter half of 2019 – and perhaps longer – based on currently available market data and projections of US economic growth, according to the Journal of Commerce.

The US economy seems able to absorb capacity faster than trucking companies can add trucks and drivers, points out JOC.

“Carriers continue to scramble to get enough trucks on the road to handle the robust freight growth,” research firm FTR said last month when announcing a 153 percent increase in Class 8 truck orders in August. “The surging economy and vibrant manufacturing sector are stretching the logistics system to the limit.”

However analyst Noel Perry thinks truck capacity has reached its peak as the decline in spot rates will continue, pulling down contract rates in 2019.

“Pricing and profits will stay strong in the contract segment through the end of the year, at least, and perhaps through the end of the 2019 first-half seasonal peak,” Perry said in an Aug. 3 column published on his Transport Navigator website. In early September, however, pricing relief still seems far off.

Trucking economist Donald Broughton of Broughton Capital has a different view. Rather than being in the ninth year of an aging economic recovery, the United States is “in the beginning of a recovery cycle,” Broughton told journalist Evan Lockridge on the “PrePass Eyes on the Road” podcast.

“The 2009-2014 period, led by fracking, was the first industrial-led recovery we’ve seen since 1961,” Broughton said. “There really wasn’t a consumer recovery until 2017. We’re now just 18 months into that recovery.” Broughton, author of the Cass Freight Index Report, isn’t expecting a downturn.

Meanwhile, there are signs shippers, 3PLs, and trucking operators are finally recovering from the supply chain network disruption caused by the introduction of the US electronic logging device (ELD) mandate last December and full out-of-service enforcement of the mandate as of April 1.

“I think by and large people have gotten over the hump,” said Andrew Lynch, president of Zipline Logistics, a Columbus, Ohio-based 3PL. “Drivers and carriers have gotten over the hump in that they know how to operate. I don’t necessarily know that the shipping world has gotten over the hump.”

“There are still organizations not putting enough weight on holding a driver for more than two hours.”

Shippers need to apply lessons learned from the multiple crises of 2018 — tight capacity, price increases, the ELD effect — as they approach 2019. Next year won’t be as “nasty” as 2018, Zipline’s Lynch said, but “I don’t see freight markets plummeting back to where they were in 2016 for a very long time.”

Full JOC article here.

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