The ACT Research Market Vitals Seminar, held in Columbus, IN, at the end of August, provided a comprehensive overview of the current state of the truckload market, including challenges and opportunities, with valuable insights for industry stakeholders.
One of the central topics addressed during the seminar was why the truckload market has experienced such a prolonged downturn, with unprecedented highs and lows during and post-Covid. According to the experts at ACT Research, several factors have contributed to this extended downturn:
Low Operating Costs: Many operators, particularly owner-operators, are running trucks and equipment that are fully paid off, reducing their operating costs and allowing them to stay in business despite low rates. By eliminating the financing expenses, these owner-operators and small fleet owners have reduced their operating expenses from $1.80/mi to $1.50/mi on average. This has prolonged the downturn, as fewer operators are forced to exit the market due to financial pressures. The analogy used during the seminar likened this to lengthening the runway for carriers, allowing them to stay afloat longer during tough market conditions.
Record Investments in Private Fleets: There has been a significant influx of investment into private fleets, further depressing demand in the spot market by pivoting volume from for-hire carriers to internal fleets. Similarly, these private fleets also participate in the spot market with highly competitive rates that are significantly below their operating expenses, allowing these private fleets to absorb more freight volume from other shipper networks that would otherwise have hit the for-hire spot market. This private fleet utilization comes at a price however, as the operating expenses for a private fleet average around $4/mi (roughly 122% higher than for-hire fleet operating costs).
Increased West Coast Port Activity: Port activity is returning to pre-pandemic levels in Southern California, particularly at the Long Beach and Los Angeles ports, which had seen a decline as traffic moved to East Coast and Southeast ports during the pandemic. Factors such as droughts affecting the Panama Canal and disruptions in the Red Sea have influenced this shift. As more goods begin shipping through West Coast ports, there will be a renewed demand for trucks to move these goods across the country, especially to the eastern half of the U.S. This return of port traffic to the West Coast could reduce capacity in the for-hire market as trucks that typically serve the Eastern markets may now be required to handle the increased demand on the West Coast.
ACT Research has grown into a leading authority in the field, offering market intelligence that helps guide decision-making for a wide range of stakeholders across the transportation industry. Fetch Freight works with partners like ACT Research to help our customers make informed decisions in a rapidly changing market, looking at the comprehensive view of current market conditions, challenges and opportunities, and navigating the complexities of the freight market as we move towards 2025.