Over the last year, rates have changed significantly in the trucking business. Knight Transportation, a significant participant in the market, has noted the effect on both owner-operators and bigger carriers.
Over the last 12 months, spot rates have decreased unprecedentedly. A similar fall occurred in 2019. However, it took 20 months rather than 12. Due to the substantial quantity of goods left over from the prior year, the fourth quarter of 2022 was generally seen as needing a peak season.
The goal is that by the end of spring, the sector will revert to a more typical cycle, according to sources in the business, as inventory is progressively being burned off. Since the electronic log requirement in 2018, contractual prices have stayed consistent, and industry contract rates have become more robust. Customers now prefer caravan pools, which harms non-asset-based brokers who cannot develop volume to serve smaller carriers that depend on the spot market.
The industry is in a “Tale of Two Cities” situation, with bigger players who can live in a caravan pool faring better than tiny carriers who cannot. Additionally, the shipping industry cannot afford to pay the detention costs related to a live load and live to-unload freight or compensate drivers held in custody. As a result, the contract has been strengthened, but small carriers are having difficulties, and some have been forced to quit.
In general, the status of the economy will determine what occurs in the second half of the year. Although there is cause for optimism for the second part of the year, the going remains difficult for small carriers. There is less to transport during the second part of the year since supply has decreased. Since the year’s first quarter is usually the slowest for goods, the industry has a built-in self-correcting mechanism.
Rates and circumstances in the trucking sector are changing significantly, and those who can weather the present storm may be better off in the long run.