Fall trucking levels surprisingly high as industry rebounds from COVID-19 shutdown

Leading trucking executives and analysts say they are pleasantly surprised by the strength in freight demand coming out of the COVID-19-induced economic shutdown in early summer.

It’s slightly better if your company is hauling retail as the industrial economy remains so-so. But overall, top trucking executives are reporting their trucks are mostly filled heading into the fall peak season.

“Business is back to last year’s numbers, finally,” reports Pitt Ohio President Chuck Hammel, who runs the nation’s 15th-largest LTL company. “We were down 20% in April, 15% in May and 6% in June. July is back to last year’s level.”

Like many other trucking executives, Hammel is hoping this trend continues into the fall. “But with the recent spike in the virus and subsequent closures we’ll see,” Hammel said recently.

 As with everything else with the novel coronavirus, it’s time to keep fingers crossed. But summer freight demand levels reflected nearly everything else about this virus – in other words, predictably unpredictable.

“The trucking recovery has been stronger than we could have expected,” said Brian Thompson, who closely tracks the industry as chief commercial officer at Atlanta-based SMC3. “The freight recovery has been surprisingly strong sequentially.”

 The American Trucking Associations’ advanced seasonally adjusted for-hire truck tonnage index fell 5.1% in July after surging 8.9% in June.

 “After a very strong June, for-hire contract freight tonnage, which dominates ATA’s index, slipped in July for a couple of reasons,” ATA Chief Economist Bob Costello explained.

Costello said one reason tonnage was down was many fleets didn’t have the capacity to take advantage of stronger retail freight volumes. Much of that overflow freight moved to the spot market, which did increase in July.

In fact, spot market indices show exactly that trend. Bucking seasonal trends, the late-summer surge continued in spot market rates across all equipment types, according to DAT Freight & Analytics, which operates the industry’s largest online marketplace for spot truckload freight.

The DAT Truckload Volume Index, a measure of dry van, refrigerated and flatbed loads moved by truckload carriers, rose 2.1 percent from June and was 3.7 percent higher than July 2019. Van, reefer and flatbed volumes and rates all ended up positive month over month, DAT statistics revealed.

“States are reopening at different rates and are being hit by the virus at different times. This is leading to unseasonal peaks and valleys in manufacturing output and consumer demand,” Ken Adamo, Chief of Analytics at DAT, said.

“Carrier networks are out of balance due to inconsistent freight demand at a commodity and lane level, and this is leading to a spike in demand for spot freight to meet the capacity need,” Adamo noted.

Nationally, the July load-to-truck ratio for vans was up for the third straight month to 4.4, up 25% from last month, DAT said.

Other ATA data shows that for-hire truckload fleets are operating 3% fewer trucks this summer than a year earlier. That makes taking on a surge of additional freight difficult – if not impossible because of the driver shortage situation.

Also, Costello said, while retail volumes have snapped back strongly, manufacturing output and international trade freight is lagging “well behind.” 

Despite July’s decline, ATA’s freight index was 3.3% above the recent low in May. June’s increase was revised up slightly to 8.9%, a tremendous surge from the March-April-May doldrums.

SMC’s Thompson said speculation of a second wave of coronavirus might be causing strong rebuilding of inventories. “Combine that inventory restocking with the drive of e-commerce and you have stronger than expected freight volumes, especially for parcel and LTL carriers,” he told LM.

The reason for the rebound can be explained by how quickly most of the U.S. economy shut down in late March in an attempt to stem the pandemic, trucking experts said.

“The trajectory of the recovery has been similar to that recovery from the 2007-2008 Great Recession,” Avery Vise, vice president of trucking for FTR Research, said. “But the difference is it took eight months of the Great Recession to get to what we had in one week in the spring.”

Vise and other trucking experts predict consumer spending, which makes up close to 70% of the U.S. economy, could have a large impact on the freight market in the fall. Market uncertainty over consumer spending may be affected by federal stimulus efforts.

“The entire supply chain is being forced to adapt to changes in consumer buying patterns, which affects everything from the equipment types needed for delivery to warehousing capacity,” DAT’s Adamo said. “Increased online shopping is here to stay and shippers and carriers alike are being forced to adjust.”

If nothing else, trucking fleets will have newer trucks to haul that freight. U.S. Class 8 heavy truck sales were 14,462 in July, its best month since March. But year-to-date sales figures for the first seven months of the year are off 39.3% compared to 2019 Class 8 sales.

One heavy truck operator summed up new Class 8 sales this way: “Not fabulous. Just stronger.”

That could apply to the entire trucking industry at the present.