ELD Regs, Storms Pushing Up Freight Rates

“The hurricanes have definitely been a factor. They’ve sucked up a lot of capacity. But with the mandate for electronic logs kicking in in December, everyone is in a mad rush to catch up,” added a trucking industry executive.

Carriers are scrambling to meet the Dec. 18 deadline to equip their trucks with ELDs or electronic logging devices, which will replace paper logs filled out by drivers to record their hours behind the wheel. The intent is to reduce the widespread misreporting in paper logs and increase compliance with hours of service restrictions designed to prevent accidents and improve public safety. By some estimates, 30 percent or more of all trucking companies are not yet compliant with the ELD rules with just two months to go.

Service centers tell Steel Market Update they have been preparing their own trucks for the changeover to ELDs for much of this year at considerable time and expense. The hardware and software can cost from $1,500 to $2,000 per truck, not counting a cellular GPS fee that adds up to $50 per month.

Some smaller, marginal carriers are selling out or closing up rather than make the transition. Trucks have to be taken out of service for the ELD installations. Some trucks have been pulled down to Houston and Florida to help with the storm recovery effort. Thus, the supply of trucks is tight, though not to the point it is delaying steel shipments, reported service centers. “We can generally find someone, it’s just a matter of paying more,” said one executive.

Adding to the competition for trucks is the opening of Big River Steel in Arkansas. Ramp-up of the new mill this year has drawn a lot of trucking capacity to the region. “It’s a pain to get trucks out of that part of the world if you are not Big River,” said one service center exec. “Between Nucor, Big River and other folks in that area, there is kind of a truck drain,” agreed another midwestern distributor.

“Big River Steel has been a gamechanger. They built an awesome mill with a good group of people. They have been able to reach out and take [trucking] capacity from competitors,” said Larry Hall, president of HS Express, a small 80-truck carrier owned by PS Logistics and Heidtman Steel. How does Big River do it? The mill is very flexible and excels at turning trucks around quickly, which the carriers appreciate. “They have spent money on systems that really help them manage their freight flow,” Hall said.

Under the complicated hours of service regulations, drivers can work no more than a 14-hour day, and can only be behind the wheel 11 of those 14. Then they must take at least a 10-hour break. Any delays at ports, docks or loading stations count against their 14-hour time limit. By some estimates, from 25 percent to 75 percent of drivers have doctored logbooks to underreport their hours of service. With a paper log, a driver might report that it took just 15 minutes to load and unload the truck, when in fact it took an hour and a half, giving him an extra two and a half hours behind the wheel. With electronic logs, drivers will no longer be able to game the system. Thus, the move to ELDs is likely to uncover a need for many additional drivers to keep trucks on the road.

“Once that ELD unit is in there, if you shave corners and you get caught, the penalty will be severe. People will be hesitant to play games with the system,” Hall said.

Carriers are going to have to hire more drivers, an additional 60,000 by some estimates, which means freight rates will undoubtedly increase. Rates could spike in the six-month shakeout period in the first half of next year. Hall predicts rates will increase by 15-20 percent in 2018.

Recovery from the storms in the South will push the seasonal low out to November and December, followed quickly by a strong building season in the spring. Trucking demand will see the effects of the storms well into next year, Hall said.

The American Trucking Associations reported that truck tonnage decreased by 5 percent in September from the previous month, not seasonally adjusted. “Tonnage gave back some of the solid gain in August, but remains at very high levels despite the weather-related issues during the month,” said ATA Chief Economist Bob Costello. “Going forward, rebuilding from those hurricanes and other natural disasters like the wildfires in California will add to freight demand.”

Despite the cost and the challenges of implementation, Hall views the ELD regulations as a positive for the trucking industry. “Once this [regulatory] storm passes, it is really going to legitimize trucking. It will clean up the market and bring more professionalism to the industry. It will be a much better situation for the driver, and eventually for the fleet owner. Ultimately, this is the best thing that could have happened to trucking and highway safety.”

Written by Tim Triplett, Tim@SteelMarketUpdate