Truck Capacity Still Squeezed

“Trucks will continue to haul the lion’s share of freight well into the future (so those Class 8 trucks will be needed,” said Rebecca Brewster, President and COO of the American Transportation Research Institute (ATRI) and an upcoming speaker at the SMU Steel Summit Conference, September 3 & 4 in Atlanta, Georgia. “Not only do we have a significant driver shortage but the demographic trends in the U.S. are not working in our favor in terms of our workforce continuing to age with fewer young people entering the transportation field.”

Flatbed spot rates last week varied around the country. Average rates were $3.73 in the Northeast, $3.25 in the Midwest and $2.84 in the Southeast, $2.85 in the South and $2.11 in the West. DAT Solutions analyst Mark Montague reports in last week’s blog that “when spot market rates exceed contract rates, that’s a clear indicator of capacity pressure.”

Regulations for truck drivers may be eased by Congress soon, possibly getting more loads on the road. The 70-hour cap on workweeks for drivers may be restored to 82 hours if the American Trucking Association (ATA) prevails. The regulation was intended to make conditions safer for drivers by requiring 34 hours of rest following the maximum 70 hours on the road.

ATA says the rule puts more trucks on the road during dangerously congested traffic hours. Data from ATRI shows congestion on US interstate highways added an extra $9.2 billion to trucking industry operational costs in 2013.

Challenges to the trucking industry, said Brewster, include Hours-of-Service rules changes, CSA (Compliance, Safety, Accountability), traffic congestion, the state of the nation’s infrastructure, and increasing and often significant delays at customer facilities.

Brewster added that the increasing regulations facing drivers put additional pressure on recruiting and retaining commercial drivers. “We’re going to need trucks AND drivers to meet the growing freight demand and how we are able reshape the work environment for commercial drivers to address the challenges above will define our success in meeting the growing freight demand.”

Rail as an Alternative

The squeeze on truck availability has shippers turning to rail transport but rail freight capacity is tight as well. The MID-SHIP Report says loading delays of 1-2 weeks are common at US Gulf ports with anecdotal reports coming in of shippers waiting as much as three weeks for cars to be placed for loading.

The Association of American Railroads reported carloads were up 6.8 percent year over year at 300,936 carloads. Intermodal volume increased 8.6 percent to 269,444 units, for a total combined increase of 7.6 percent compared to the same period in 2013. Of those totals, metal and ore shipments increased by 10.2 percent this past week on a year over year basis.

Not only is rail transport challenging to find, the surge in rail demand may affect coal prices and raw material costs for the steel industry. “If rail capacity can’t keep up with production levels it’s less likely that coal prices will increase significantly as buyers will stay on the sidelines due to delivery uncertainty. On the other hand, if railways can perform, then coal prices should climb dramatically as buyers seek to feed the rise in demand for coal fired generation,” said Matt Preston, principal analyst, North America thermal coal markets for Wood Mackenzie in a recent World Coal article.