Spot Rates were the lowest they’ve been since the manufacturing recession of 2016, but will they last?
Trucking is a key indicator of general US economic health; trucks moves over 70% of all domestic freight tonnage, both manufactured and retail. American Trucking Associations (ATA), which began in the 1970s providing tonnage index data based on membership surveys, reported 4.3% gains in March seasonally adjusted (SA) truck tonnage for certain business sectors. This was mainly due to surge buying of groceries and other consumer goods, and the delivery of critical supplies to medical centers. However, a “huge divergence among freight types” was also noted, with other supply chains such as fuel, auto manufacturing and the restaurant industry seeing “anemic” buying and freight. Due to the current recession, experts at ATA are expecting tonnage in April to be “very soft”. Read ATA’s full article here.
The impact of COVID-19 on the broader economy is raising questions about what the months ahead will hold for the trucking industry. The economic disruption caused by COVID-19 continues to create uncertainty for trucking in general and on spot truckload rates – one-time quotes for a single, or group of transactions that are negotiated between a carrier and a shipper/broker – in particular. One source reported that the rapid decline in spot rates on high-volume lanes that began in late March continued in mid-April across equipment types including vans, flatbeds, and refrigerated units (“reefers”), echoing rate levels seen during the 2016 manufacturing recession. But how long will this trend last?
As truckers struggle with covering their running costs, spot rates are expected by some to flatten by May and could even spike somewhat in May and June. State restrictions around social distancing are starting to be relaxed, and some seasonal produce is ready for transport and has begun moving on lanes originating in Arizona, Texas and Florida, with California produce harvests not far behind. The question regarding fresh fruits and vegetables is, with schools and universities remaining closed, will enough other businesses – including restaurants and commercial kitchens – open back up to receive it all?
Another source expected to see a gradual third quarter recovery but believes it could take until 2022 for ton-miles to be at pre-COVID19 levels. It’s possible that reefers will continue being the sector least affected, with a projected one percent annual decrease, due to ongoing freight demand for temperature-sensitive grocery and hospital deliveries. Tankers with far less petroleum to deliver could see as much as an eight percent decline in 2020.
Though experts vary mildly in their predictions, there seems to be agreement across the board that with the huge grocery and medical facilities restock of late March behind us, economic recovery for the trucking industry and the country as a whole definitely will not happen overnight.
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