Rate War Sunk Trucking Industry Revenue Last Year

August 15, 2017 by Jerry Hirsch, @Jerryhirsch

A rate war sparked by too many trucks and not enough freight pushed U.S. trucking industry revenue lower last year.

The American Trucking Assns. said in its ATA American Trucking Trends 2017 report released Monday that trucking generated $676.2 billion in revenue last year, a 4 percent decline from $704.3 billion in 2015.

The industry accounted for 79.8 percent of the nation’s freight bill in 2016, compared with 80.2 percent in the prior year, the nation’s largest trucking trade group said.

But the amount of cargo carried by the industry rose slightly to 10.42 billion tons, or 70.6 percent of all domestic freight tonnage, compared with 10.17 billion tons, or 69.5 percent of freight in 2015.

The increase in freight tonnage combined with lower industry revenue is a sign of a tough rate environment for motor carriers, said Bob Costello, the ATA’s chief economist.

ATA Tonnage

(Source: ATA)

In 2015, the industry added “a lot of trucks,” but freight demand grew minimally. “That’s not going to end well for the industry,” Costello said.

But there are clear signs the market is turning up this year.

Freight volume already is growing, and rates will follow because the industry is not adding hauling capacity.

“It is the flip side,” Costello said.

Shipping contract rates have started to turn up over the last several months, said Mark Montague, DAT Solution’s industry pricing analyst.

Meanwhile, the number of loads available for hauling on the spot market last month stood 53 percent above the same metric in July 2016, according to the DAT North American Freight Index. Although truckload freight availability declined 19 percent from a two-year high in June, many lanes, or trucking routes, set all-time records for loads moved during the final week of July.

“It’s uncommon to see a high volume of truckload freight at this point in the summer,” Montague said.

Van freight volume was particularly strong on lanes that connect markets in the Southeast and Midwest to large population centers in the Northeast, he said.

“Those lanes are associated with retail freight, indicating consumer confidence,” he said.

Montague said the decline in trucking revenue was less severe than it looked. The figure included fuel surcharges paid by shippers. Diesel fuel prices averaged $2.70 per gallon in 2015, but only $2.30 per gallon in 2016, according to the U.S. Energy Information Administration. That translates into a smaller surcharge and less industry revenue, he said.

`ATA revenue

(Source: ATA)

Still there are pressures on trucking.

Costello said that pipelines are taking a growing share of transporting fuels and other materials.

Industry employment remains steady at about 3.5 million, according the ATA report.

Texas and California reported the highest numbers of jobs in the trucking industry, 134,102 and 106,760, respectively, in 2015, the latest period for which the trade group has data. Combined, they account for more than 17 percent of all U.S. trucking employment.

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