FTR’s Vise says a trucking capacity crunch is not likely to be in the cards

The current state of trucking utilization and its subsequent impact on the broader carrier and transportation community can be viewed as something that is hard to forecast and is more assumption-based.

That is the word from Avery Vise, Vice President of Trucking for freight transportation consultancy FTR during a recent Webcast the firm hosted, which focused on the impact of coronavirus, of COVID-19, on freight transportation operations.

“We do think that because of the current restocking and all the response to delivering supplies—and everything that needs to continue until at least we restore inventories to where they were—that we will see some utilization pressure for Q2 as well as Q1, which will be an impact of what happens in first two weeks of April,” Vise explained. “But also keep in mind that utilization is a relational thing and involves not only the decline of freight but also the decline in capacity.” 

In the near term, Vise explained that FTR maintains that in the near term that this additional freight pressure, coupled with the number of drivers from carriers not seeing this bump right now, which are primarily industrial-focused carriers will see the capacity in tandem with additional freight will spur a little bit of utilization in the near term, with the caveat that it is going to go quite rapidly.

“We expect freight demand will drop a lot faster than capacity will in the next two-to-three quarters,” he said.

Part of the reason for that, he said, is that there is an expectation for a certain base level [of freight demand], especially on the private fleet side and for dedicated operators, with some of them more likely to keep that capacity in place.  And he added that over-the-road and truckload carriers are the segments that will bear the brunt of capacity losses related to that, with some lessening for flatbed carriers, too.

Another factor identified by Vise is the Federal Motor Carrier Safety Administration’s (FMCSA) national database of drug and alcohol-impaired truck drivers.

“We already saw a sig impact from the clearinghouse before coronavirus, and that is a wildcard in terms of what it ends up doing to available driver capacity going forward,” he said. “It is definitely a risk that coming out of this there will be more pressure on utilization and more fundamentally depends on how many more carriers lose drivers. Until now, we had strong enough freight [levels] pre-crisis that for the loss in carriers we had seen, freight had typically been absorbed elsewhere, and we really were not losing too much capacity and now that is probably not going to happen.”

When asked how he looks at active truck utilization through the fourth quarter of 2020 and into the first quarter of 2021, which would be the timeline for a potential rebound in for FTR’s estimate of a rebound in god transported as precursor to freight demand, Vise

“Some of that is going to effect or will bleed into Q1 next year, and the other key point is that we would expect that because this is a sudden loss of jobs, other than the clearinghouse effect, and a relatively short leash on unemployment benefits, we generally expect to have ready capacity available,” he said.

“This is not a situation like in the great recession, when we did not have trucking jobs available for multiple years and people obviously moved on to do different things. We would anticipate capacity being able to come back, which would then keep that utilization still relatively low even as we are starting to rebound.

And we may start to see as we get into 2021, and if that occurs, we do see it starting to come up mainly due to freight demand. That is our assumption…a rebound in freight will be matched quickly by capacity coming back into the market.”  

As for the possibility of a trucking capacity crunch closer to the end of the year, Vise said that is largely unlikely, as one needs to consider to the current level of job losses he described as “staggering” and hopefully short-term. He said that there is an expectation that lost jobs will come back quickly, with personal finances not being hurt as much, due to the federal CARES bailout, and demand coming back to previous pre-coronavirus levels in short order.

“There is the potential that if this leads to an overheating in the fourth quarter there could then be a capacity crunch, if demand were to outstrip the ability to bring truckers back on, but that is speculative,” he said. “Drivers lost today will be around in the fourth quarter and won’t need to be retrained. The only thing that would tighten capacity would be if we see a heftier rebound in the industrial sector and if consumer comes back with a vengeance. It is hard to see that rebound right now. We will have a little bit of a rebound, but it is hard to see how there will be a huge bounce that will tighten capacity significantly.”