Some signs of market tightening are occurring, signaling shifts in the industry, according to a motor carrier analyst and key truckload executive.
Overall attrition continues with trucking firms leaving the market, Werner Enterprises CEO and Chairman Derek Leathers said last week at the Wolfe transportation conference.
On a weekly basis, the carrier tracks the number of trucking businesses that have their operating authority halted, and it’s repeatedly noted a trend of more trucking businesses shutting down than entering the industry.
But that ongoing shift “hasn't played out to the point yet that we have true inflection,” Leathers said.
Consultant Dave Lazarides shared similar takeaways in an update before the Unified Carrier Registration Plan Industry Advisory Subcommittee this month. The plan collects annual registration fees for states from motor carriers, private carriers, freight forwarders, brokers, and leasing companies.
While the transportation industry had 247,930 new entrants in 2021, that turned into 214,101 new entrants in 2022 and 169,235 in 2023, according to a report shared with the subcommittee.
“We're not obviously done with ’24, but we're on a trajectory that suggests that we're at least about to maybe break even with ’23,” Lazarides said. That level could rise 5% to 177,159, per the report.
Carriers have noted how capacity can play a role in rates, suggesting that bigger firms are better positioned in the long run. But analysts have noted how demand may be a more important indicator to follow.
During the transportation conference, Leathers provided remarks similar to messages he’s given on earnings calls last year. He also provided new details on how, in Werner’s analysis, new entrants have stayed afloat for so long, defying industry expectations.
The pandemic’s strong demand meant “anybody could make money in trucking during that time,” and a variety of stimulus programs meant firms could bring in a level of cash reserves of around $100,000 per truck, Leathers said.
“We think those are burnt through now,” Leathers said, suggesting that’s what’s leading to early indications of some tightening in the market.
The effect of International Roadcheck this May, where many drivers avoid traveling during the annual inspection blitz, was also notable. Leathers said there was a more normal impact, and ACT Research weighed in with similar remarks.
“Spot rates moved up a bit more than normal during Roadcheck this year, but except for two days last week, spot rates remain below year-ago levels,” ACT Research VP and Senior Analyst Tim Denoyer said in a May 22 statement. “The load/truck ratio is now up y/y, and the trend of the past six months has improved as capacity has contracted.”
Denoyer said that the research firm observed “tighter dynamics” that suggested improving spot rates.
