Freight Market Decline Continues
This Editorial appears in the Feb. 2 print edition of Transport Topics. Click here to subscribe today.
Your newspaper this week shows just how difficult things are for carriers these days, as freight rates and volumes continue to nose dive while shippers push for lower fuel surcharges and better deals.
Spot rates for freight-hauling services have fallen to levels not seen since the mid-1990s, even though fleets’ costs are far higher than they were a decade ago.
And December truck tonnage — as measured by American Trucking Associations — fell 14.1% below year-ago levels and 11.1% below the November levels. That represents the biggest drop in freight volumes since the 1994 Teamsters strike.
Recent economic reports don’t offer any relief. Durable goods orders fell 2.6% last month. The Institute for Supply Management’s index of manufacturing activity hit its lowest level since 1980, and its index of manufactured goods orders dropped 50%.
We are likely to see a new wave of fleet bankruptcies, analysts told us, because cheaper fuel isn’t enough to keep many teetering carriers in business.
“Demand, whether measured by loads or tonnage, is falling much faster at this point than the supply of trucks,” ATA’s chief economist, Bob Costello, said.
Shippers, which feel the press of competition in their own industry, are moving to press their advantage over carriers.
“For the last four or five years, carriers had the chance to raise rates to very substantial levels. Now, in 2009, shippers are trying to survive, and there’s a lot of competition out there,” said the head of logistics for American Gypsum.
About the only bright spot has been in fuel prices, which continued to decline, although at a slower rate. Last week, the national average for retail diesel edged down to $2.268 a gallon, the lowest level since June 2005.
Cheaper diesel has encouraged some shippers to demand sharply lower fuel surcharges, or in some cases, the end of them. Carriers, however, have not yet recouped the money they lost when fuel prices were on their unprecedented run-up from late 2007 to mid-2008.
As Congress considered President Obama’s economic stimulus package last week, there were no signs that business was picking up. In fact, one load-matching service reported that loads in January fell more sharply than in December.
We all hope that the new national program gets the credit markets moving and stimulates spending, or this economic winter could continue well into 2009.
