In August of 2019, the trucking industry had to cut over 5,100 payrolls. The job losses seemed to be the biting crescendo to a year that many referred to as the year of the “trucking bloodbath”. So when the numbers started to show up at the turn of the year, many stakeholders hoped that 2020 would be an excellent year for growth.
It has been eight months since the first case of COVID-19 was confirmed in the U.S. on January 20, 2020, in Washington. The Centers for Disease Control and Prevention then reported the first non-travel case on February 26 and 28.
Source: CDC’s COVID-19 cases since January 20, 2020
The news sent shockwaves across the trucking industry. Many stakeholders were concerned about safeguarding their drivers, new social distancing regulations, and how their customers’ businesses would do.
Drivers were concerned about engaging in the typical activities involved in trucking daily.
Some drivers preferred to keep away from home, hoping to keep their families safe if they became infected.
Geotab, a web-based analytics company in trucking, showed jarring statistics. Between mid-March and the first week of May 2020, the U.S. commercial transport industry operated at 83% of regular activity.
Maritime commercial activity had also slumped to 73% of the regular business in previous months. The trucking industry has been resilient. While car traffic reduced to 66% of regular traffic, trucks remained at 88% of all vehicles on the road when baselined with data from February 1 to March 15.
Source: Geotab; Heavy and Light Duty Trucks were the busiest.
Fuel consumption by trucks also increased.
Both findings echoed what the industry was experiencing; Heavy-duty trucks delivering essential goods to stores while light-duty trucks made short-distance deliveries from e-commerce platforms to homes.
In some states, such as New York and New Jersey, the numbers told a worse story at 66%. Coronavirus shutdowns may not have hit the industry too hard at first. But Politico obtained a Federal Emergency Management Agency report that foresaw a “freight cliff.”
Source: Politico on Twitter
In April 2020, shocking reports showed trucking companies had let go of close to 90,000 employees. That meant the worst single-month job losses in 30 years, which eroded all job opportunity efforts that had accrued since 2014.
The current situation continues to roll out interesting insight that truckers can use to empower their lines and anticipate a new normal in trucking.
The rise of online shopping has been a notable phenomenon in the last several months as people practiced social distancing by ordering essentials online. Geotab’s intelligence did also confirm the rise of e-commerce in March 2020.
U.S. online sales saw a 76% and 55% increase in the months of June and July 2020, compared to the June and July 2019, respectively. In its analysis, Adobe noted that the figure dropped in July 2020 because more brick-and-mortar retail stores started to reopen in June.
Still, Adobe expects online purchases in 2020 to outdo the total online sales of 2019 by October 5, 2020.
Overall, e-Marketers forecasts that U.S. e-commerce will see an 18% growth in 2020, a massive shift from the modest 2.8% that the firm had projected back in February 2020.
What does that mean for the trucking industries?
Some truckers had already noticed the shift and warmed up to e-commerce contracts to keep their engines running.
They re-routed more capacity towards hauling consumer goods from storage facilities and dispatch points owned by e-commerce businesses to customers’ premises in light-duty trucks or parcel delivery vans. Truckers can still consider investing in short-distance deliveries and building profitable partnerships with e-commerce players.
E-commerce activity will undoubtedly drop as walk-in retail stores reopen in more significant numbers. But a Wundermann Thompson Commerce survey found that a substantial number of people will still prefer to shop online post-pandemic.
Meanwhile, large retailers such as Amazon and Walmart are testing new business models that will make cashless payments and online purchases even more commonplace than pre-coronavirus to retain the gains they have made.
That means willing and able owner-operators may decide to partner with local e-commerce companies to make timely and flexible deliveries from branch to branch and from branch to end customers with trucks and delivery vans.
Trucking companies will also want to watch out that the online retail giants do not poach their best truck drivers.
For example, Walmart is on record for offering drivers close to $90,000 in annual salaries plus loyalty and safe-delivery bonuses.
Considering truck drivers have repeatedly raised issues about low pay, carriers will want to figure out a more attractive compensation program to retain the best drivers post COVID-19.
Since March, the FMCSA has issued national emergency declarations that have offered relief to commercial truckers to ensure they provide essential items where they are needed across the nation.
On August 11, the FMCSA revised and extended the COVID-19 Emergency Declaration duration in fifty states and the District of Columbia through September 14.
The FMCSA’s waiver on medical certification, CDL, and CDF licenses will also extend until September 30. The revisions mean carriers can have more time to adjust to new safety rules, health, and operational recommendations on contactless dealings.
Smart truckers will want to be proactive and adopt the guidelines the Centers for Disease Control and Prevention recommends before the FMCSA goes back to enforcing all regulations.
For struggling carriers, the Paycheck Protection Program came as a relief. More than 3,200 long-haul carriers applied for the loans and received them.
The Small Business Association reported that 3,205 truckers received a minimum of $153,000 each, with 33 companies receiving between $5 and $10 million. By August 8, the transportation and warehousing industry had received 229,565 loans, summing up to more than $17.5 billion.
Source: The SBA
The SBA reported some $134 billion remains. Could there be another round of funding that truckers can still apply for?
A bill in the House of Representatives seeks to allow companies that want a second round of funding to re-apply for part of the unclaimed loan money.
Perhaps the first consideration would be to see if the PPP loans have helped truckers’ engines to roar back to life and avoid the bankruptcy bloodbath that the industry witnessed in 2019.
In Memphis and Shelby County, JNJ Express Inc is a trucking company among 11 companies that have already reported that they have used the funds to save a total of 4,054 jobs.
Conclusive data on the impact the funds have offered across the national trucking industry will come out in weeks and months.
Results will certainly be interesting to analyze, seeing that there have been more than 34 PPP loan fraud cases already.
The ongoing trade war between the U.S. and China may have dropped trade volumes between the two top world economies.
But North American neighbors have been building bridges in the form of the USMCA agreement to promote more trade among themselves. However, implementing the deal has been murky business amidst the pandemic.
The U.S, Mexico, and Canada agreed to keep their borders closed to non-essential crossings until September 21 to curb an increase in cross-border COVID-19 infections.
But, commercial trucks are still allowed to move in and out of either side to supply essentials.
The Canada Border Services Agency reported from August 10 to August 16 that the number of truck drivers entering Canada dropped by 4,395, a 3.9% drop compared to arrivals recorded in the same period in 2019.
The CBSA also summarized that crossing through land and airports fell by 88% and 93%, respectively, during the week, a consistent trend from the previous week.
Mexico became the top U.S. commercial partner for the first time in early February 2020, outdoing Canada and China.
While $243 billion worth of trade passed through the U.S.-Mexico border by June 2020, forecasts for the El Paso and Laredo custom districts show a 50% reduction.
The country was already in a threatening economic situation pre-pandemic, and then the coronavirus struck.
But, Mexico is a major supplier of fresh produce to the U.S. Providing the essentials and taking advantage of other USMCA benefits may help the country stay out of a recession in the coming months.
The FTR indicated that the U.S. GDP sunk 32.9% in Q2, 2020. The result was a 42.2% plunge in the goods transport sector, despite exports increasing more than imports.
Contrary, a 9.5% contraction in the economy led to a quick trucking capacity shortage in Q2. According to ACT Research, the capacity crunch, in turn, drove spot freight rates to a two-year high.
Spot market rebounding?
The aftermath was that July recorded a nine-month high in the number of North American Class 8 truck orders. ACT Research reported that the orders topped 20,300 in July against 14,400 in June. The number of requests was also a 98% jump from figures recorded in the same period last year.
Interestingly, in August, there were commendable performance reports by the world’s largest shipping company that owns the Maersk shipping line brand–even as many companies suffered losses.
A.P. Moller-Maersk netted $443 million in Q2, 2020. That was almost triple the income the shipper made in Q2, 2019. The company said it was propped up by a strengthening spot freight market, powered by rising spot rates due to tight capacity.
The company’s CEO also gave credit to using digital spot booking platforms. He stated the platforms were a new normal and that his company would continue using them because they worked for their primary spot market business model.
What about the indexes?
The DAT Truckload Volume Index increased by 2.1% in July as well. The index measures the volume that truckload carriers moved in the form of dry van, flatbed, and refrigerated loads. Reefer, flatbed, and van volumes saw a month-over-month positive.
However, for-hire truck tonnage dropped in July after a strong performance in June, according to the American Truck Associations. The ATA’s index showed for-hire truck tonnage remained 3.3% above May’s, but 8.3% below July 2019’s.
Truckload tender rejections have moderated at rather high 21.26% as the spot market rallies volume and rates upwards.
According to ACT Research, truckers can expect excess freight capacity to rise to 16% in Q3 before it rebounds in Q4 or early 2021.
ACT Research’s President, Kenny Vieth, stated that the rebound would be visible when the economy soars towards pre-pandemic levels and excess capacity evaporates.
The FTR forecasts that the U.S. GDP will rebound 20% in Q3. But it also warns that it will be early-to-mid-2022 before the U.S. economy fully recovers from the impact of COVID-19.
Growth in multiple-mode and warehousing activities will occur when the economy starts to grow again, in any case.
A McKinsey & Company study shows how the U.S. economy has recovered after a trade contraction, such as in times of a recession. Some industries, commodities, and markets will recover faster than others.
The study notes that trucking will likely rebound the fastest among the various modes.
In July, the research company suggested how long and the depth of impact many companies would experience depend on several macroeconomic factors.
But McKinsey & Company did provide a chart showing rebound expectations across various sectors of the economy.
Agriculture/food, chemicals, and paper/forestry sectors will lead the way to recovery. Areas such as automotive, textiles, and machinery production may rebound at the slowest pace.
Freight companies in the various sectors can use the forecast to plan out a rebound or coping strategy, respectively.
The construction sector has also seen the highest numbers since July 2018. Data by DAT Solutions indicated the industry contributed a national flatbed load-to-truck ratio of 24.8 in July.
And even though flatbed volume was down 6.6% compared to July 2019, the July 2020 volume remained steady compared to June 2020 activity.
The pandemic disruptions continue to disrupt the trucking industry as the U.S. economy struggles to rebound. Experts warn it could be late to early 2022 before the impact of COVID-19 on U.S. trade can rebound to pre-pandemic levels.
But multiple reports such as the DAT Index, FTR, and McKinsey & Co. show a promising fourth quarter of 2020 for the trucking industry.
Some truckers are already taking advantage of the rising spot freight market as more trucking sectors rebound.
Truckbook is helping 10,000+ trucking companies rebound from the impact of COVID-19 by availing a digital marketplace and trucking community. You can find CDL drivers, buy/sell/lease out/rent a particular truck, and learn recovery tricks from other truckers all within the mobile app when you download Truckbook today
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