Why Trucking Demand Hits the Brakes in April

May 21, 2020


Trucking Demand Declines in April

The American Trucking Associations’ (ATA) April index registered 104.9 in April. This is down from 118.4 a year ago and down 12.2% from March, when the index registered 119.5. Freight tonnage was down 11.3% year-over-year.

According to ATA’s Chief Economist Bob Costello, “April’s monthly decline was the largest in 26 years when there was a labor strike in April 1994. Considering that April factory output and retail sales plummeted, the large drop in truck freight is not surprising.”

A Change in Freight Type

Indeed, in late March and into early April, the overall trucking market noted a spike in volumes. “There was a huge divergence among freight types,” said Costello in ATA’s March report. “While freight to grocery stores and big-box retailers was strong in March, especially late March, due to surge buying by households, freight was anemic in other supply chains, like that for gasoline, restaurants and auto factories.”

While lower than March, April Freight Demand noted a similar trend towards those trucking firms hauling food for grocery stores as well as those involved in the online retail supply chain outperforming other fleets. This is likely to continue until manufacturing fully reopens.

However, positive signs are emerging as DAT notes in its latest weekly report that “spot truckload van and refrigerated freight volumes on major lanes continued to build last week”. However, it also cautions that the number of available trucks dropped 17.5%. This could mean that more capacity is shifting to the contract market as economies begin to open up.

What We Can Expect

The trucking industry is adapting to the environment by reducing costs, including capacity. For example, Werner Enterprises reduced its use of independent contractor trucks by 17.8% year over year in the first quarter.

In addition, consolidation is expected not only because of the current environment but also because the trucking industry was already experiencing a slowdown. Comcar Industries, which was already struggling, recently succumbed to bankruptcy. Comcar plans to sell its five subsidiaries.

The current outlook for the trucking industry will be a volatile one as economies begin to reopen. An uptick in bankruptcies will likely continue through the end of this year and carriers will adjust capacity to meet demand. Spot rates will fluctuate based on demand but for now, the demand will be limited to few industries.


ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered.

Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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Why Trucking Demand Hits the Brakes in April

May 21, 2020


Trucking Demand Declines in April

The American Trucking Associations’ (ATA) April index registered 104.9 in April. This is down from 118.4 a year ago and down 12.2% from March, when the index registered 119.5. Freight tonnage was down 11.3% year-over-year. According to ATA’s Chief Economist Bob Costello, “April’s monthly decline was the largest in 26 years when there was a labor strike in April 1994. Considering that April factory output and retail sales plummeted, the large drop in truck freight is not surprising.”

A Change in Freight Type

Indeed, in late March and into early April, the overall trucking market noted a spike in volumes. “There was a huge divergence among freight types,” said Costello in ATA’s March report. “While freight to grocery stores and big-box retailers was strong in March, especially late March, due to surge buying by households, freight was anemic in other supply chains, like that for gasoline, restaurants and auto factories.” While lower than March, April Freight Demand noted a similar trend towards those trucking firms hauling food for grocery stores as well as those involved in the online retail supply chain outperforming other fleets. This is likely to continue until manufacturing fully reopens. However, positive signs are emerging as DAT notes in its latest weekly report that “spot truckload van and refrigerated freight volumes on major lanes continued to build last week”. However, it also cautions that the number of available trucks dropped 17.5%. This could mean that more capacity is shifting to the contract market as economies begin to open up.

What We Can Expect

The trucking industry is adapting to the environment by reducing costs, including capacity. For example, Werner Enterprises reduced its use of independent contractor trucks by 17.8% year over year in the first quarter. In addition, consolidation is expected not only because of the current environment but also because the trucking industry was already experiencing a slowdown. Comcar Industries, which was already struggling, recently succumbed to bankruptcy. Comcar plans to sell its five subsidiaries. The current outlook for the trucking industry will be a volatile one as economies begin to reopen. An uptick in bankruptcies will likely continue through the end of this year and carriers will adjust capacity to meet demand. Spot rates will fluctuate based on demand but for now, the demand will be limited to few industries.

ABOUT SPEND MANAGEMENT EXPERTS

Spend Management Experts provides strategic guidance to optimize your supply chain. Using cost modeling technology and market intelligence, we help companies with their transportation, distribution and fulfillment spend. Often large shippers can reduce their spend across the supply chain by 20% or more. We specialize in reducing distribution costs, increasing efficiencies, dynamic reporting, greater budgeting and forecasting accuracy and optimizing supply chain execution. We leverage our proprietary models to identify savings and build negotiation strategies based on data and business cases. As industry experts, our fresh approach provides clients with straightforward details on exactly how savings are derived. Spend Management Experts is your competitive edge, delivered. Connect with Spend Management Experts on TwitterLinkedIn, and the Spend Management Experts blog.

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