Capacity Balance Offsets Slow Growth in Trucking Industry

The lack of increase in capacity in the trucking industry has helped the industry weather the economic downturn. Since capacity has remained steady from initial cuts, prices have been able to remain high for various forms of trucking.

With the U.S. economy moving laterally, growth in the trucking industry has been slow to recover. Despite the problems abroad in Europe, China and the Middle East, the climb from the depths of the recession is ongoing. Other factors such as regulatory constraints and an unemployment rate that won’t seem to easily fall have not totally thwarted growth in the trucking industry.

Several areas of the trucking industry have shown bright spots such flatbed, reefer and tanker business that have prices moving in an upward direction. Reports from transportation industry analysts, such as John Larkin of Stifel Nicolaus, have trumpeted the good news in the face of the overall slower growth of the economy. Some indicators such as the index issued by the Institute of Supply Managers show that the economy is slowing or almost at a standstill after several months of growth.

Regulation Impacts on Trucking

Higher fuel prices and increased regulation have made an upward trend difficult for the trucking industry. Some industry analysts feel that deregulation is being reversed and gains made since 1980 when trucking deregulation occurred have slipped. Larkin states that 16.2 per cent of the GDP dollar was spent on transportation and logistics back in 1980 and spending got as low as 8 per cent. But recent regulations have pushed that number back up a bit. He is concerned that capacity constraints and federal regulation will continue to cause the numbers to go back up. Capacity is being impacted by the number of federal regulations that may cause capacity losses that could approach 15 percent of the industry.

Changes in Trucking Industry

Many large carriers are diversifying their business into other forms of trucking to get away from the long haul truckload market. They feel that regulations and the slow recovery add to the risks that affect the overall health of their business. Several factors such as the cyclical nature of the business, capital costs, the seasons and the heavy reliance of truck drivers have led to these decisions. In addition to that, many shippers are focusing on the largest and strongest carriers to handle their business. They want to make sure that regulations and capacity does not disrupt their ability to ship their goods.

LTL

Less-than-truckload (LTL) shipping relies heavily on manufacturing but even it is experiencing some diversification. There are five top carriers that control over 55 per cent of the market. Many are branching out into forming partnerships with international shippers. This gives them the ability to develop their less-than-container-load and less-than-truckload services. It could also help stem losses to parcel services. They should benefit from the tightness in the market which should allow for better pricing.

Encouraging Areas

There are some areas that are showing more improvement than in the manufacturing sector. Housing, after years of decline, is finally showing signs of recovery. Despite falling into a deep trough, there are signs that new home sales are rising which is very encouraging. The uptick in housing sales benefits trucking especially in the flatbed sector. Overall trucking tonnage numbers have gotten a boost from flatbed, tanker trucks and reefers. However, other areas of trucking have not seen the same recovery and lag these areas. Given all the issues and changes in the trucking industry, many feel that capacity will help smooth out the other problems. As the economy improves, it is expected to have a positive effect on the trucking industry.

Like this Post?  Click below to like on facebook or post a comment.

Comments

Post new comment

The content of this field is kept private and will not be shown publicly.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.

More information about formatting options

CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.
Image CAPTCHA
Enter the characters shown in the image.