2021 crystal ball for trucking: shippers get ready to pay more, maybe much more

Unusual and unpredictable freight patterns, rebuilding supply chains with new inventory, an influx of owner-operators into the market and the worsening driver shortage for company fleets are causing trucking experts to expect a “very strong” market for industry profitability in 2021.

That’s the word from prominent industry analysts and top trucking executives who are bracing for a post-COVID surge in the new year. They expect retailers to restock depleted inventory and are predicting a long-delayed rebound in manufacturing following the COVID-induced economic shutdown last March.

“We see an improving environment for trucking,” Avery Vise, vice president of trucking for FTR, a leading transportation research company, told LM. “The first quarter is not going to be all that strong. But Q2 will be much stronger and we expect it to continue through the year.”

In fact, FTR is forecasting contract rates in truckload in 2021 to rise “close to 10%,” Vise said. “Spot rates will also be up in the high single digits.” That would be similar to TL rates shippers endured in 2018 before the virus-affected year of 2019 that caused TL rates to rise about 2% overall while some contractual rates were flat or fell slightly.

Experts’ advice for shippers to try and mitigate those rates is to drive efficiency for carriers by reducing waiting times at terminals, offering “driver friendly” freight and trying to save minutes off drivers’ ever-valuable on-duty time during their runs.

“The best that shippers can do is what they usually do,” Vise advised. “We saw that in 2018. Be as efficient at the docks as you can. Try and do drop and hook with trailers. Try to be driver friendly. But it (will be) definitely tough.”

Demand for drivers will intensify, especially in dry van freight. The American Trucking Associations is forecasting a shortage of nearly 58,000 for 2021, although freight demand will play a role in that exact number.

Freight demand will be “very strong” the second half of the year, Vise predicted. “That’s when we expect industrial sector to get its footing.” Industrial forecasts have been uneven during 2019, experts said, and the retail demand levels will largely depend on how consumer spending holds up.

“There is no guarantee,” Vise warned. “There are definite risks we see. It is not a home run.”

One is how flush the American consumer will be, and whether the new Congress (or the lame duck one) finally passes a COVID-related economic stimulus, and how large that might be.

“With the Senate staying in Republican control, that mutes the size of the stimulus,” Vise said. “A targeted stimulus is what we need. But it’s a question of timing.”

Another wild card is truck capacity vs. demand. FTR recently disclosed that there were 6,000 new entrants into the truck market last September, with 7,000 added in October. By comparison, the industry usually averages about 3,000-4,000 new entrants, mostly one-truck operations, in a normal month

“I was quite shocked,” Vise said. “When I saw the data, I was astounded.”

Experts chalked up the late year increase to two factors. One was a return to the market of leased owner-operators, who were cut loose during the downturn in the second quarter. The other factor is low diesel prices.

“They’re buying into a very strong spot market,” Vise said.

But, of course, experts said, it would take about 3,000 of these one-truck operators to make up for the loss of, say, one Celadon. That large TL operation closed in late 2019 because of financial difficulties after two former executives were charged with securities fraud.

“We haven’t gained net capacity,” Vise said of the influx of new owner-operators. “But it might put pressure on core carriers if they try to add surge capacity. It’s a very complex situation.”

But one conclusion we can definitively draw—these new entrants are putting pressure on fleets to try and replenish company driver pool.

“COVID has made the driver situation tougher,” Derek Leathers, vice chairman, president and CEO of Werner Enterprises, the nation’s sixth-largest TL carrier, told LM. “It’s had two effects: hastening retirements of older drivers and dramatically reducing the number of new drivers coming into the market from driver training schools.”

So, as we look forward to a much healthier 2021, there will be other headaches through the supply chains. But shippers should be warned that they will have to budget for significantly higher freight rates come the New Year.