Impact of the ELD mandate exists, but it’s muted: FTR’s monthly analysis

Any discussion of the tight trucking market will inevitably get to the question of the ELD mandate sooner or later. It didn’t take long for FTR’s monthly trucking market webinar to do so late last week.

Jonathan Starks, FTR’s COO, said the company’s response to a recently-completed survey showed that 12% of the respondents said the ELD mandate had a severe impact on trucking capacity, and that 60% said there was a moderate impact. That wasn’t that much different in the severe category for a January survey, in which the severe number was 11%. The moderate number at that point was a little more than 50%, he said, and the minimal impact figure at that point was 34%. “So there was a little bit of a shift from minimal to moderate, but we’ve seen no significant change on those seeing a severe impact,” he said.

Avery Vise, vice president of trucking research, reviewed the positive outlook for the economy and said he could identify only one area of concern: inventories have risen. “But it’s possible that as consumers embrace faster deliveries, inventories we once thought of as lean might not be feasible,” he said. But tied to that, Vise said truck capacity is so tight with higher rates that the growing inventories could be a safeguard by companies concerned about having adequate stocks to meet that demand for on-time deliveries but not being able to find trucking capacity to meet it.

Vise said that beyond surveys, the best indicator of ELD impacts is the spot market. While showing a graph entitled “Evidence of ELDs evident in spot market,” Vise noted significant periods of a rise in spot markets in week 51 of 2017–as the soft enforcement period was kicking in December 18–and in the week when hard enforcement began April 1. The source of his data was FTR’s proprietary Market Demand Index. Vise noted that spot rates dropped soon after the April 1 spike, which could be the “typical” reaction in markets right after Easter, which coincidentally was April 1, the start of the ELD hard enforcement. Whatever it was, Vise said, “the numbers do not suggest any kind of catastrophe related to hard enforcement.”

Vise showed another graph on the level of ELD violations. Noting that the data–drawn from the Federal Motor Carrier Safety Administration and from FTR data–does have issues of time lag, it did show that ELD violations dropped sharply after the April 1 enforcement start date. “It could be that companies waited to install ELDs, or it could mean they stopped driving,” Vise said. “Either would account for it that. But if it was the latter, we would expect to see a huge imbalance in the spot market, which we do not see, at least not in van or reefer,” a tacit acknowledgment of the extraordinary strength in flatbed markets.

But the data does show one clear pattern: if you’re smaller, you’re more likely to be violating the ELD rule. In the period between December and April, 38.3% of the ELD violations were handed out to companies with 4-19 trucks. If your fleet was you–one truck–that size took 22% of the violations. Fleets of 2-3 trucks got 18.3%. Fleets of 20-100 got 17.5%, 101-999 got 3% and 1,000 plus got 0.9%. “It confirms what you probably already know,” Vise said. “Non-compliance since the mandate has been totally at the bottom end of the market in fleet size,” he said. “This is a story of smaller companies.”

On the issue of flatbeds, data shows how strong the market is. In the latest DATA weekly report, flatbed load posts recorded by DAT were flat–no pun intended–but flatbed truck posts were down 3%. The load-to-truck ratio is now up to 111, which means 111 loads for every 100 trucks. It’s been above 100 for six consecutive weeks, DATA said, and the average rate is $2.72 per mile. By comparison, the van rate was at $2.18 in the latest DAT report.

Vise said the overall strength in the MDI is being fueled to a large degree by flatbeds. He cited several possible causes of that flatbed strength, including the bullish market for manufacturing and solid petroleum activity. And every discussion always seems to come back to ELDs. Vise said that there is buzz that the ELD mandate is hitting the flatbed market particularly hard, “because they have been traditionally laggards in adopting technology.” But he added: “It could be true, but it’s hard to establish by the data.”

In some other key points made by Vise and Starks in the webinar:

–Intermodal traffic is rising, “but it is under stress,” Starks said. Average train speeds are down about 1 mph this year, “and that doesn’t sound like a big deal, but it is,” he added. Railroads face the same labor constraints that the trucking sector does. The slide used to illustrate the discussion on intermodal was entitled “Intermodal not poised to respond.”

–Vise was asked about the declaration by OOIDA that “there is no driver shortage” but rather a lack of adequate pay and other considerations. He described it as a “big question…it sort of comes down to what you define as a shortage. If you are talking about a pool of people who would be drivers in this scenario (but aren’t driving), there’s some truth to that.” He said the numbers indicate that there are many CDL holders who are not being represented in current data, and that there also, even with technology additions, a disconnect between hiring needs and matching up with the people available. “I still maintain that if ultimately you can not stabilize enough drivers, you have a shortage,” he said. “If the reason is that they aren’t being paid enough (as OOIDA contends) that’s fine. But ultimately it becomes an academic discussion.”

Categories: Intermodal, News