Lumber prices to the moon 🚀 - WTT [newsletter]

Welcome to the WHAT THE TRUCK?!? newsletter. In this issue, skyrocketing lumber prices, where’s the Tesla Semi, two brokerage bankruptcies and more.

Will it fall under $3?

Downhill skiing in spring — The Truckstop.com seven-day dry van rate per mile continues its three-plus-weeklong slide, falling another 4 cents to $3.04. Although rates are declining, both freight volumes and capacity have remained stable. According to the Outbound Tender Reject Index in SONAR, carriers are still rejecting more than 1 in 4 loads.

“Spot rates were roughly 30% to 70% higher year-over-year throughout the first quarter. Rates are 80% higher in the latest week.” — FreightWaves’ Todd Maiden

Human capital — With drivers still in short supply, carriers are having to increase wages by as much as 20% in some cases to help fill the seats. According to TCA data, insurance costs as a percentage of revenue jumped 16% in the first two months of ’21. Some analysts have looked at these headwinds as a stumbling block in the first quarter and they anticipate a full year of strong growth.

Word on Wall Street — With earnings rolling in, many carriers are hauling in the profits now. Covenant declared its strongest first quarter in its history. However, if sustained elevations in both pay and insurance premiums don’t keep pace with rates, decisions made now could come back to haunt carriers later in the year.

No lumber support

Got wood? — If you’ve tried to purchase lumber recently, you know firsthand just how out of control prices have become. In fact, they’re up 232% since the start of the pandemic and could “spiral out of control” in the next few months, according to Fortune.

Echos of the pandemic — Much like with semiconductors, decisions made during the early days of COVID have led to massive shortages a year later. Dustin Jalbert, a lumber industry specialist at Fastmarkets in Burlington, Massachusetts, told Yahoo! Finance that when mills “saw 20 million unemployed, they shut down production.”

Where’s the supply? — The above bet, that with lockdowns and unemployment, people wouldn’t be buying homes or spending on home improvement projects proved to be wrong. Instead, housing starts hit a 15-year high in March. With the rise of remote work and public places like parks shutting down, people needed home offices and swing sets in their yards.

“The homes that we’re building now are from the 300s to the 350s. Last year, before we started the development, we were gonna sell those houses for around $275,000 to $290,000.” — Johnny Hollins of JG Hollins Builders to Click2Houston

Who it’s hurting — Builders aren’t eating the margin but home buyers and home improvers are and it’s making inequality worse. Not only have costs escalated but project times have been extended from weeks to months. That’s a long time to wait when you’re between homes. Personally, I have been going back and forth with fence companies for a month to get one put in at my home. Want to learn more on how construction impacts industrial freight? Take a deep dive with this white paper.

Brokerages go belly-up

Revenue dropped 92% — FreightWaves’ Clarissa Hawes reports that Guardian International Inc., doing business as Guardian Freight, owes several trucking and logistics companies hundreds of thousands of dollars after declaring Chapter 7 bankruptcy on April 14. The company booked over $2 million in revenue in ’19 only to see it drop 92% to $164,000 in ’20.

Lawsuits and lack of assets — In its bankruptcy filing, the shuttered brokerage had only $50,000 to $100,000 in assets, with liabilities between $500,000 and $1 million. The company had been ruled against multiple times in court for nonpayment. The most substantial judgment went to Loth Logistics LLC, which Guardian Freight was ordered to pay more than $247,000 last October.

Another one bites the dust — Hawes also reports that Dsecargonet Inc., formerly doing business as Global Partners Logistics USA Inc., filed for Chapter 7 bankruptcy on 4/20. In this case, the company owed transportation and logistics companies $884,000. Money, they say, went up in smoke.

When will Tesla Semi see the road?

The wait — When Tesla unveiled the Semi in December of ’17 with the promise of a 400-mile range and 30-minute recharging times, the freight world was a bit skeptical. At the time, Musk promised a ’19 street date for the electric rig and speculated that 100K would be assembled by ’22. On its latest earnings call, Tesla walked back these projections and now says that the truck is “in the background.”

Getting out of the gate — While it is unknown when your average fleet can buy a Tesla Semi, FreightWaves’ Alan Adler reports, the company could build a small number of Semi models at the Tesla gigafactory in Sparks, Nevada, to fulfill an order for Pepsi Co.’s Frito-Lay distribution center in Northern California.

“Q1 had some of the most difficult supply chain challenges we’ve ever had in the history of Tesla. The chip shortage is a huge problem.” — Elon Musk

Sense of urgency — Unlike most of Tesla’s products, the Semi hasn’t had a sense of urgency around it. In September 2020, at Battery Day, it literally was in the background as it sat parked in a lot out of camera shot. While the Semi didn’t play much of a role in the event, it seemed clear that Tesla is waiting until it can manufacture batteries to support the vehicle. It confirmed as much in its last Q4 earnings call, though it still left the end of ’21 open as a production target for the first few builds.

Record profits — Why rush the Semi when Tesla is doing fine without it? The company saw first-quarter revenue nearly double from a year ago. It also made $101 million in profit just from selling 10% of its bitcoin holdings. What do you think? Will we see Semis rolling out by the end of the year?

These islands are electric

Electric vehicles, including the freightliner eCascadia and eM2 trucks made by DTNA, charge at DTNA and PGE’s Electric Island charging site

Open to the public — While the Tesla Semi may still be in limbo, more and more places are popping up for you to charge them. Last week, Daimler Trucks North America and Portland General Electric opened the first EV charging Island location specifically designed for medium- and heavy-duty trucks aligned to the blueprint of the West Coast Clean Transit Corridor Initiative.

“Today, the charging station at Electric Island, the first known freight charging station on the I-5 corridor, shows that Oregon is the ideal place to innovate and develop 21st century transportation infrastructure.” — Oregon Gov. Kate Brown

Innovation nation — The eight-vehicle charging stations are open to the public and will serve as an innovation center for DTNA. The company plans to use the site to monitor electricity usage, cost and even its own trucks’ performance. According to the company, the site is designed to keep Electric Island future-proof, allowing the chargers of today to be replaced with new charger technologies of the future, including the planned 1+ megawatt chargers, when they are released. The West Coast Clean Transit Corridor Initiative plans to electrify 1,300 miles of I-5 to provide publicly available charging for freight and delivery trucks.

Make your own impact — Interested in lowering your carbon footprint and want a cool shirt? Sign up for a demo of FreightWaves’ Freight Carbon Intelligence (FCI) tool right here.

Generations

Check out FreightWaves Insiders on podcast players everywhere and FWTV

This week on FreightWaves Insiders — On a personal level, this was such an amazing experience. After last year, with COVID keeping my family 1,500 miles apart, it was awesome to share the stage with my dad. He is responsible for first getting me into this business and he had a storied career at Roanoke Trade. On this episode, we get into everything from the history of general average to the Suez fallout, how marine cargo insurance works, how to be an intrapreneur and the value of equity. Listen in here.

WTT?!? is on another mission to Mars

Get to the choppa! — Wednesday on WTT it’s another NASA episode as we welcome Joshua Ravich, the NASA Jet Propulsion Laboratory mechanical engineering lead on the Mars Ingenuity helicopter. Ravich knows all of the details that went into the logistics of packing the helicopter for transportation between the various places it went during its development and he will talk about how the rover transported Ingenuity around Mars.

With featured guest —Craig Nickol, NASA Armstrong Flight Research Center’s Low Boom Flight Demonstrator project manager, is in charge of building the X-59. Nickol will speak at length about that phase of development, about the vehicle and about its mission. How will NASA’s first piloted experimental aircraft in decades fly faster than the speed of sound over land?

And — Omar Singh, founder and president of Surge Transportation, and Jennifer Miller, senior director of operations for DHL Supply Chain.

Then on Friday — We’re coming to you live from DroneWaves. Register for free right here.

Catch new shows live at noon ET Mondays, Fridays and Wednesdays on FreightWavesTV, FreightWaves LinkedIn and Facebook or on demand by looking up WHAT THE TRUCK?!? on your favorite podcast player.

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