High fuel and equipment prices, labor concerns, shipping rates, inflation, talks of a recession, and other economic factors have followed trucking into what is a historically quiet season for imports and consumer demand at the start of a new year. Because of these lingering headwinds, for the first quarter, carriers are likely concerned about a decrease in rates due to an oversupply of capacity built up from 2021.
The market, however, is cyclical, and trucking remains the most relied-upon freight transport mode in the U.S., with trucks moving some 12.5 billion tons of freight valued at more than $13.1 trillion, according to the newly released Bureau of Transportation Statistics 2022 Transportation Statistics Annual Report.
“I think this year we will see a lot more normality in the market or a lot more seasonality,” explained Dean Croke, principal analyst at DAT Freight & Analytics. “From the time of the pandemic through the end of [2022], we saw little seasonality in the market. There were hints of seasonality, so you saw a little bit of a bump in rates because of the building season in the spring, but the whole peak season never materialized.”
“I think seasonality will emerge this year, but the overarching economic factor right now is higher interest rates and talk of a recession or whether we may already be in one,” Croke added, noting the industry may have already gone through a freight recession of sorts.
Although Croke and the team at DAT forecast that the first quarter of 2023 will be particularly tough for trucking because of waning consumer demand and lower import volumes, the top 50 lanes in DAT’s network are averaging about $2.30 a mile, with most carriers operating above break even. Currently, costs for a long-haul small-fleet carrier or owner-operator are between $1.70 per mile and $2.05 per mile, depending on the length of time in the industry, equity levels, and insurance costs, according to DAT’s 2023 Freight Focus market update.
There are also potential boons to look forward to due to anticipated increases in infrastructure spending this year.
On Jan. 4, the U.S. Department of Transportation’s Federal Highway Administration announced its first round of large bridge project grants from President Biden’s infrastructure law’s bridge investment program. This program is one piece of the administration’s investment in highway bridges and invests nearly $40 billion over five years to help repair or rebuild 10 of the “most economically significant bridges in the country along with thousands of bridges across the country,” according to the administration.
“When they start building and the ground thaws in the top half of the country, you’ll see a lot more materials move related to infrastructure spending,” Croke told FleetOwner. “That eventually flows over into long-haul trucking and flatbed, but also short-haul trucking for things like aggregate, gravel, steel, concrete, and asphalt, which will require a lot of petroleum products to help build the roads and bridges.”
“If you’re a short-haul, regional carrier, I think it’s going to be a wonderful year, as it is every year because that market doesn’t really change,” Croke added.
According to the BTS report, a high percentage of truck freight in terms of both value and weight is moved over relatively short distances—fewer than 100 miles. The report points out that trucking was the leading transport mode for all distances in 2020 by value, even for distances greater than 2,000 miles. In terms of tons, trucking was the preferred mode to destinations from below 100 miles and up to 749 miles.
But what about those high operating costs?
The annual transportation statistics report from BTS tells commercial trucking companies what they’ve been experiencing for nearly two years now. In 2021, the costs for rail, truck, and water transportation services reached their all-time high level, suggesting an increase in the costs businesses face for providing these services.
Truck transportation service saw the largest price increase of 12.8% from 2020 to 2021, followed by water (7.5%) and rail (4.9%), the report points out.
Inflation remained persistently high at 8.2% year-over-year in September, dropping slightly in October. In addition, diesel prices dropped in late summer but stayed above $5 per gallon throughout fall. The Fed raised interest rates for the sixth consecutive time in November, marking the fourth time the hike was 0.75%.
“This suggests that there will be a recession of some degree in 2023,” according to DAT’s market update.
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