Last year at this time, I talked about the delicate balance of capacity, and how issues like the driver shortage and ongoing regulations were tipping the scales to create a fairly tight capacity supply. The driver shortage is still with us, and the continued regulatory environment hasn’t changed much, but the apparent capacity supply has tipped back into a much more balanced environment. What’s behind it? Truck tonnage growth is slowing, and last week, DAT Trendline reported a 22% decrease in the spot market YoY. So did the fallout from the weather disruptions in Q1 of 2014 cause an ongoing shortage throughout 2014 that has now softened in 2015, or is there more to it? A few items I haven’t talked about much in the past may now be impacting the market.
- Hours of Service (HOS) Restart. Congress rolled back this provision of HOS on December 16, 2014, and it will remain suspended until at least September 2015. Many industry watchers say that single action has resulted in a productivity gain of between 2% and 3%; in some informal surveys, some carriers reported 6% or more. The rollback could become permanent in September.
- Inventory to Sales ratios are at their highest point since the middle of 2009. As immediate needs are lessened, shipping can certainly slow. Declines in spot market prices seem to reflect some of this activity.
- Carrier Bankruptcies and trucks removed from the market hit an all-time low in Q4 2014. Forty-four fleets representing just 605 trucks were lost from the market. This was a steep decline from the previous quarters that was only matched twice before. Pricing increases, along with the drop in diesel costs, seem to be the main reason for this dropoff. FMCSA also reported high numbers of new motor carrier applicants throughout the year of 2014 and early into 2015.
The new norm appears to be, there is no new norm. Prognosticators are wrong as often as they are right. Today’s trucking market has many different influencing factors with hundreds of tentacles. The economy, regulations, availability of drivers, and diesel prices are only the beginning. And of course, each one of these have many subsets of influencers that go with them. If you want my prediction of what’s going to happen in the second half of the year, I would give a strong, I’m not sure.
Have a safe and enjoyable summer!