Last year was a banner year for trucking companies with there being a full-blown freight boom. Unfortunately, this year hasn’t been nearly as prosperous. In fact, with an increased availability of semi-trucks and a decreasing demand, overall earnings are dropping just before what’s considered the peak shipping season.
As it turns out, a lot of carriers transformed 2018 profits as well as the gains from the 2017 cut into never-before-seen orders for new equipment. This, of course, produced a bigger supply of trucks at the same time cargo volumes across the country have dipped.
Unpredictable weather, slow industrial growth and international trade issues have added to the sluggish business, according to freight executives. Furthermore, companies that yanked imports forward at the tail end of last year to deal with possible tariffs are now working through the surplus inventory that’s stacked in warehouses. Plus, cool temperatures hurt spring shipments of produce, beverages and patio furniture.
“We’re three months into a freight recession,” said Jack Atkins, a transport analyst with Stephens Inc.
This state-of-affairs is dramatically different than last year when bulging freight volumes and limited truck capacity forced retailers and manufacturers to scramble to lock in transportation. A few of these companies blamed skyrocketing shipping costs as the reason for the paltry earnings as carriers got double digit rate increases.
As is stands, shippers now have the upper hand. This shows itself most significantly in the current spot market. When companies now book last-minute transportation, the prices are more unstable than the contract rates truckers usually negotiate with customers. For example, the typical spot market price to employ a big rig was off 18.5% in June as opposed to the same month a year ago.