A leading, blue-chip market data firm sounded the alarm in a report Friday that spot rates in the trucking industry are dipping far below costs.
ACT Research published a 56-page report about lower freight costs, partially hastened by softening demand for durable goods. These lower rates will be a “growing deflationary force in 2023,” said Tim Denoyer, ACT Research’s vice president and senior analyst, in a news release.
“While we lower truckload rate forecasts on supply factors, we believe the bottoming process is beginning as spot rates are now further below costs than ever before,” Denoyer said.
Compared to 2021, diesel was 44% higher in the month of October, according to the Department of Energy. That’s the biggest contributor to rising costs for trucking fleets. The cost of parts and truck maintenance are also up from 2021, according to a July report from Truckstop.com.
Meanwhile, according to the FreightWaves National Truckload Index, spot rates are down 23% year over year.
“It won’t be long now before none of us small guys can exist,” said Steve Berg, a Chino Hills, California-based truck driver. “Everything has doubled in price while rates are collapsing.”
Indeed, Berg said he will shut down his authority next month after having been an owner-operator since 2012.
‘Great Purge’ becoming more likely for small trucking carriers
This poses a challenge for small fleets and owner-operators in the trucking industry. Spot rates saw a precipitous drop earlier this year amid soaring fuel costs.
Chris Tucker, Winchester, Kentucky-based owner of truck brokerage Full Coverage Freight, predicted in June that the trucking industry will see a “Great Purge” of small carriers. That means a massive wave of bankruptcies among owner-operators — many of whom started their trucking companies during the red-hot freight market of 2020 and ’21.
FTR Transportation Intelligence, another leading freight intelligence firm, forecasted in its latest Trucking Conditions Index report that negative market conditions will last through much of 2023. The index has been negative in all but one month since February 2022.
“Trucking companies that managed their businesses well during the good times should remain healthy and outperform those that had relied on a robust market to remain afloat,” Avery Vise, FTR vice president of trucking, said in a news release.
Do you work for or own a trucking company? Share your experience of 2022 with rpremack@freightwaves.com.