You survived 2020. Here is why 2021 might be such a joy in comparison.
Congratulations! You have gone through one of the most unpredictable, volatile and chaotic years in the history of trucking. Or, as some economists like to call it: a “dynamic” year.
At the end of 2020, cases of COVID-19 were still on the rise and regional lockdowns were being implemented in various parts of the United States and Canada. But, vaccine delivery was underway, being first administered to those most at risk of infection. As the vaccine rolls out, we can all look forward to a return to some semblance of normalcy. But what will normal in trucking look like? All signs point to a much better year than the one we just had. Here are five reasons to believe 2021 will be a better year for the trucking industry than 2020.
It’s not 2020:
No one could have predicted what 2020 held in store for global economies, supply chains and the world. the trucking industry itself. The good news is that the trucking shortage was short-lived and the year ended better than many could have dreamed of in April. The best news is that a vaccine arrived and began to be administered at the end of 2020.
This should restore some level of normality in 2021. Although there are pockets of resistance to the vaccine, Bill Witte, industry forecaster for economics firm FTR, said there would be pressures to be vaccinated – and provide proof of vaccination – to enjoy life’s pleasures again like attending events sports, concerts, going to a restaurant or even traveling. For this reason, Mr Witte believes even vaccine skeptics will line up to receive it, as the desire to return to in-person events and activities will outweigh the fear of the vaccine itself.
Rates Should Rise:
Spot market rates surged in the second half of 2020, and contract rates normally follow about six months later. So it’s no surprise that analysts expect contract rates to hike in 2021.
FTR is forecasting 8-10% rate hikes this year. Contract rates for full loads are expected to experience the most substantial increases, reaching up to 10%. In a recent economic update, Paul Kroes, director of market information for Thermo King Americas, suggested carriers could see double-digit contract rate increases next year in the United States.
Speaking of third-quarter results, Ted Daniel, CEO of Titanium Transportation, expressed more modest optimism about rate increases, predicting they will be in the range of 3 to 5 percent. “Customers are worried about reserving [capacity],” he explains.
Fleets want to secure manufacturing slots
Due to improved tariffs and increased transportation demand, carriers are scrambling to book rolling stock manufacturing slots this year.
Trailer orders for the US and Canadian fleets hit their lowest point in the modern era in April, at just 300 units, according to FTR data. However, they reached as high as 54,200 units in October, marking the third best month in history, according to ACT Research. Trailer orders are considered a leading indicator of the conditions in the trucking market.
“Rising freight volumes and rates, along with capacity issues, have prompted fleets to aggressively enter the market,” said Frank Maly, Director of Commercial Vehicle Transportation Analysis at ACT Research.
Orders for Class 8 trucks are also increasing, from a record low of 4,000 units in April to 52,600 in November – also the third best month on record.
“The fleets became much more confident about future transport demand and started placing large orders to replace older units and for expansion purposes as capacity tightened. In just a few short months, the industry has gone from fear, to hope, to optimism. It appears that the industry has so far addressed uncertainties about the pandemic, ”said Don Ake, vice president of commercial vehicles at FTR.
In addition to being optimistic about freight demand, fleets may also be concerned about labor supply and shortages in truck and trailer factories. Mr Ake said the first half of the year will be strong for rolling stock orders, but if the economy does not meet expectations, cancellations could worsen growth rates in the second half.
Driver shortage will continue to limit capacity:
Despite the influx of new rolling stock on the market this year, the driver shortage will limit capacity and keep the price swing in favor of carriers. Drivers, especially older ones, have left the market in increasing numbers in 2020 to protect themselves and their families from the virus. At the same time, the arrival of the next generation has been limited as training schools and fleet training programs have been halted due to social distancing requirements. In addition, the issuance of new permits has been suspended in several jurisdictions.
The growing demand for jobs in the courier industry also attracted some truckers who wanted to stay closer to home.
HR Trucking Canada recently produced a labor market update showing that the unemployment of transport truck drivers was only 3.9% in September, compared to 8.4% for the general population. . RH Trucking said the upward trend in employment is even higher than expected, signaling that a return to pre-COVID labor shortages could occur sooner than expected.
“This factor is an urgent call to action for industry and government to work together to overcome this labor shortage and not hamper economic recovery,” HR Trucking Canada said in a statement.
In the United States, the new drug and alcohol clearinghouse will have about 60,000 drivers sidelined by the end of 2020; they cannot be rehired as drivers until they have completed a return to work program. All of these factors combine to put extreme pressure on the driver market, which is expected to give carriers pricing power until 2021 and limit their ability to add volume.
Inventory Shortages Persist:
Of course, all of the above are great in theory, but only worthwhile if there is a strong and continued demand for trucking services. But that, too, is positive as we approach 2021. Retail inventory shortages continue to create strong demand for freight and the pandemic has shifted consumer shopping habits from “experiences” to trucked goods.
U.S. imports hit record levels at the end of 2020, according to Tim Denoyer, vice president and senior analyst at ACT Research.
“We have a flotilla of container ships south of the Californian coast awaiting unloading,” he said in an economic update presented in mid-December. “This bottleneck suggests that the strong growth in freight volume will continue even after the holiday season, as retailers re-inventory.” According to data from Loadlink Technologies, Canadian spot market cargo volumes set a new post-pandemic high in the third week of November. The latest figures available show that cargo volumes experienced record growth for a seventh consecutive month in November. Capacity was also tightening, with 2.98 trucks posted per load, a reduction of 9% from October and 13% below November 2019 levels of 3.43 trucks per load.