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The supply (capacity) side of the freight market in 2020 has become very tight, but not because there is a shortage of equipment. More than anything else, a shortage of truck drivers has placed the trucking industry in a position for maybe the next two years to chase rate increases.


Paul Kroes, business insights chief, North America, for Thermo King during a webinar on Tuesday said, “The truck driver shortage is driving the current climate.”


Compared to a year ago, the trucking industry has about 80,000 less available truck drivers, he said. The federal stimulus expanded unemployment insurance and “couched” many drivers who realized they could earn more than being out on the road by staying home, he said.


Due to failed drug test results, most of which were from marijuana use, the CDL Drug & Alcohol Clearinghouse suspended 40,000 drivers, around one quarter of the driving force, from January to September. If a hair follicle testing regulation is issued by the Department of Health and Human Services, Kroes expects that five to 10 times as many truck drivers will become ineligible for jobs.


In addition, due to closures, the industry has seen a 40 percent decline in CDL preparation, about 20 percent of truck schools are still closed, and the rest graduate less students because of social distancing.


Kroes showed a graph comparing the equipment utilization rates for carriers, which usually hover at 90%, to available truck drivers during the webinar. The chart revealed at the end of the third quarter that “there are not nearly enough truck drivers to do the job,” he said, and “the lack of truck drivers will be the driving force for the foreseeable future.”


A record migration from fleet payrolls to owner-operators to chase prospects for higher pay in the spot market is another contributing factor to truck driver shortages. FTR review of new motor carrier registrations reveal a rise in the third quarter of nearly 10,000, which is an all-time high.


In 2017 and 2018, Kroes credited the Trump tax cuts for “bumping up” the freight cycle. Market dynamics were mitigated and 2020 was expected to be a year of rebalancing of supply and demand. Economists have expected a market reversal of 10 to 30 percent going into 2020, he said. COVID-19 made things worse, at least for a brief time, but due to the hoarding of consumer products, freight volumes spiked in April.


Demand fell just as rapidly, but then recovered in the third quarter as inventories were replenished by supply chains. According to the US Census Bureau sales to inventory levels are now smaller than at any point in the last five years.


During the third quarter, publicly traded carriers showed record price (rates) to earnings ratios. Due to the possibility of tight capacity remaining through 2021, carriers have been ordering equipment. A record sum of 50,000 units was hit by trailer orders.


All signs point to a favorable outlook for freight volumes and higher contract and spot prices for the next two years. For large fleets to continue to expand, Kroes predicted industry consolidation will increase. The delivery of the COVID-19 vaccine in 2021 will decide if the economic recovery will continue to be even stronger, he said.




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