The trucking industry has been experiencing significant changes in rates over the past year. Knight Transportation, a major player in the industry, has noticed the impact on both owner-operators and larger carriers.
The decline in spot rates over the past 12 months is unprecedented. In 2019, there was a similar decline, but it took 20 months instead of 12. The fourth quarter of 2022 was defined by most as not having a peak season, due to the large amount of inventory already in place from the previous year.
According to industry insiders, inventory is slowly being burned off, and the hope is that by the end of spring, the industry will return to a more normal cycle. Contractual rates have remained stable, and industry contract rates have been more resilient since the electronic log mandate in 2018. Customers have gravitated towards trailer pools, which has affected non-asset-based brokers who have not been able to generate volume growth to support smaller carriers that rely on the spot market.
It is a “Tale of Two Cities” for the industry, as larger players who can live in a trailer pool would have fared better than small carriers who cannot. In addition, the shipping community cannot afford to pay detention fees associated with live load, live unload freight, and drivers must be paid if detained. This has bolstered the contract, but small carriers are struggling and some have been forced to give up.
The overall economy will determine what the back half of the year is dealing with. While there is reason to be optimistic for the back half of the year, it is tough out there for small carriers. Supply has gone down, and there is less to haul for the back half of the year. The first quarter is traditionally the slowest freight season of the year, creating a self-correcting mechanism within the industry.
The trucking industry is experiencing significant changes in rates and conditions, and those who can weather the current storm may be in a better position for the future.