Truck News


The freight recession is over

The freight recession is over," stated Jon A. Langenfeld, a trucking industry stock analyst with Robert W. Baird & Company at the National Shippers Strategic Transportation Council's recent annual...

The freight recession is over,” stated Jon A. Langenfeld, a trucking industry stock analyst with Robert W. Baird & Company at the National Shippers Strategic Transportation Council’s recent annual logistics conference in Orlando, Fla. According to tonnage indices and demand trends, the freight economy is on an upswing. Much of the trucking market though won’t feel the impact for another 9 to 12 months.

This view is supported by a number of trucking companies and shippers with whom I have spoken in the past weeks. Several interesting events have been taking place. They include:

• Carriers deciding to no longer serve certain accounts (e. g.”firing customers”) and allocating capacity to better-paying accounts

• Carriers no longer providing capacity to certain freight management companies either on specific lanes or no longer doing business with these companies altogether

• Carriers submitting freight bids on specific blocks of traffic and then pulling their bids

• Carriers submitting rates on designated lanes of traffic and then not showing up to meet with the shipper

• Shippers finding a tightening of capacity and experiencing more difficulty covering some of their loads

The upshot of all this activity is that there is a “buzz”in the industry that has not been there for the past year or two. There is an optimism that this incredibly difficult freight drought is coming to an end.

While there is a modest upswing in demand, there is an ongoing downturn in supply as increasing numbers of carriers close their doors and as the number of trucks and drivers on the road continues to contract. In other words, an increasing demand curve is intersecting with a declining supply curve.

What will this mean for shippers and carriers? Almost everyone you speak to is predicting freight rate increases of 3% to 10%, one of the sharpest rate increases in years. These increases will begin to take effect in the third quarter this year and become more widespread in 2009 as the balance of power begins to shift from shippers to carriers.

Recovering the high cost of fuel will remain a “tug of war” between shippers and carriers. With fuel at $4 a gallon in the US and around $1.35 a litre in Canada, and rising quickly, fuel surcharges are becoming a very high percentage of a shipper’s freight costs. Both sides are wrestling with how to create a mutually acceptable formula. Some shippers are already taking steps to lock in rate stability and capacity with their leading, cost effective and most loyal carriers.

For trucking company owners and shareholders, the key is to survive the next 6 to 9 months. For those that make it through, there will be good opportunities to significantly improve yields and share prices. Typically, trucking stocks lead the market and are set to perform well as the freight recession comes to an end.

It is time to move past the acrimony of the past couple of years and prepare for what could be a significant turnaround in pricing.

Print this page

Have your say:

Your email address will not be published. Required fields are marked *