ATRI releases June update to operational cost of trucking report

Insurance premiums and truck and trailer payments saw notable increases in 2023

Thomas Wasson

5 months ago

ATRI operational cost of trucking June update

The American Transportation Research Institute has released a June 2024 update of its operational cost of trucking analysis. The report, first published in 2008, provides benchmarking data in the for-hire fleet segment. The data in the report was collected directly and confidentially from motor carriers of all sectors and sizes, with nondisclosure agreements signed on request. ATRI respondents varied by sector: 31% of respondents were truckload, 48% less-than-truckload and 20.7% other/specialized. The report then compared this with the entire U.S. for-hire trucking space, which is 58% truckload, 27.5% LTL and 14.5% other/specialized.

The release noted, “The soft 2023 freight market posed many challenges for operational efficiency, as tracked in the report. Deadhead mileage, a critical financial drain, rose to an average of 16.3 percent for all non-tank operations, and driver turnover rose by five percentage points in the truckload sector.

“These pressures combined with low freight rates strained profitability across the industry. Average operating margins were 6 percent or lower in all fleet sizes and sectors other than LTL. The truckload and specialized sectors experienced drops in per-mile or per-truck revenue, and most saw ‘other costs’ – expenses outside of the core marginal line-items – increase as a share of total revenue.”

The report notes that the total marginal cost of operating a truck in 2023 was $2.27 per mile. While that’s a new record, it is an increase of only 0.8% compared to 2022. The largest change in operational costs came from declines in fuel costs, which fell 8.8 cents per mile. Other notable increases came from insurance premiums and truck and trailer payments. Removing fuel costs, the total marginal cost of trucking was up 6.6% instead of 0.8%. The removal of fuel costs saw costs rise from $1.61 per mile in 2022 to $1.716 in 2023.

Buttigieg promotes Vinn White to head FMCSA

On Tuesday, U.S. Transportation Secretary Pete Buttigieg announced the promotion of Vinn White as deputy administrator of the Federal Motor Carrier Safety Administration. White had served in the Biden-Harris administration since 2021 and was the Department of Transportation’s acting chief artificial intelligence officer, which oversaw implementation of Executive Order 14110 on the advancement and governing of AI.

FreightWaves’ John Gallagher writes: “Prior to joining FMCSA, he was responsible for coordinating DOT initiatives on emerging transportation technologies, including policies related to automated driving systems, drones and advanced air mobility systems. He also helped launch the department’s Transforming Transportation Advisory Committee.”

White’s career in transportation spans over 15 years, including a stint as a senior adviser to New Jersey Gov. Phil Murphy. Heavy Duty Trucking’s Jack Roberts writes, “During that time, White worked on transportation and mobility policy and engaged closely with the NJ Department of Transportation, Motor Vehicle Commission, NJ Transit, and the Port Authority of New York and New Jersey to inform state strategies and approaches.”

He takes the place of Sue Lawless, who since August had been the assistant administrator of FMCSA and its chief safety officer. Since the departure of previous administrator Robin Hutcheson on Jan. 19, Lawless was the acting deputy administrator.

Market update: Spot market rates make minor moves ahead of July Fourth week

The nationwide all-in dry van spot market rate saw modest increases in the week leading up to July Fourth week, according to the FreightWaves National Truckload Index 7-Day Average. NTI rose 3 cents per mile week over week from $2.29 on June 19 to $2.32. When removing an estimated fuel surcharge based on the average retail price of diesel fuel divided by 6.5 miles per gallon, spot market linehaul rates saw a similar increase. NTIL rose 2 cents per mile w/w, from $1.71 to $1.73.

Compared to the dry van segment, while the flatbed segment saw a slight increase, reefer spot market rates declined. The FreightWaves Flatbed Truckload Index (FTI) rose 4 cents per mile all-in w/w from $2.78 to $2.82 while the Reefer Truckload Index (RTI) declined 4 cents per mile all-in from $2.61 on June 19 to $2.57 per mile.

FreightWaves SONAR spotlight: Dry van outbound tender rejection rates reach levels last seen in December 2022

Summary: Nationwide dry van outbound tender rejection rates continue to rise, reaching the highest level since December 2022, which persisted through the weeks of Christmas and New Year’s before sharply falling. VOTRI is at 5.46%, an improvement of 52 basis points week over week from 4.94% on June 17.

This summer rally, while gradual, is a positive sign for carrier pricing power and has the potential to create fertile ground for rate volatility if external supply chain shocks like a major hurricane make landfall. Outbound tender rejection rates above 5% suggest parity in truckload supply relative to demand, as many contracted carriers need 95% tender compliance, or a 5% rejection rate. If the rally continues and extends to 7% to 10% rejection rates, the next indicator to watch is if these rejected outbound tenders are making their way into the spot market.

The July Fourth holiday and the weeks following will be the first test of whether this rally is holiday capacity-driven or volume-related. Both contracted and spot market capacity will decrease in the week leading up to the holiday. If VOTRI continues at or above 5%, this can create a scenario in which truckload conditions are at greater risk of disruption from external events, as truckload capacity relative to demand is near an equilibrium.

Disruptions can come from a natural disaster like a hurricane, in which a surge of demand is generated in an impacted area while disrupting the existing markets. The addition of tens of thousands of disaster relief loads can quickly swamp a region in excess demand and pull existing truckload supply from adjacent markets and regions depending on each carrier’s internal network. The current rate of truckload capacity destruction, especially in the volatile and smaller volume spot market space, suggests conditions are improving for this scenario if this behavior extends past the upcoming holiday.