Quarterly Trucking Transportation Market Update: Is the Party Over?
Shippers are benefiting from temporary excess capacity in the truckload market, but analysts say this condition is temporary. The driver situation, increasing regulations, and inventory sell-offs all point to a tighter capacity situation in 2017 and beyond.
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It’s a buyer’s market right now in the trucking industry, particularly in the $320 billion truckload (TL) sector. Excessive inventory and a less-than-robust overall economy are causing excess capacity, which is resulting in some carriers straining to keep their trucks somewhat full by aggressively cutting rates.
According to John Larkin, the veteran trucking analyst with Stifel Inc., the current freight market “remains weak,” with “soft volumes” and very little evidence of the seasonal uptick that we tend to see during the normally robust second and third quarters. The situation is even causing some shippers to press their carriers for further rate discounts.
But a confluence of factors, including what Larkin calls a “cavalcade” of pending federal trucking regulations, may cause financial headwinds, particularly for smaller, lesser-capitalized truckload carriers.
“Some fear that we may be approaching the limit on how far down prices can be pushed without harming the supply of capacity from the smaller carriers,” Larkin warns. Those smaller TL carriers continue to suffer negative setbacks of such price wars due to their higher unit cost structure when compared to the larger, better capitalized carriers.
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