Many freight experts have seen a slower ride this year as a weakening economy has forced home builders, retailers and other businesses to cut back on shipments during what is traditionally the peak holiday season for trucking companies.
After two years of surging freight markets caused by COVID-related disruptions, spot rates have softened over the past several quarters. Previous freight recessions — such as 2008 and 2019 when carrier after carrier of all sizes shut their doors — haunts the memories of many freight professionals.
David Owen, founder and president of the National Association of Small Road Freight Companies (NASTC), said small carriers are like “canaries in the coal mine” that often demonstrate what lies ahead for the U.S. economy.
“The freight community in trucking, particularly small trucking companies, are about six months ahead of predictions in the marketplace,” Owen told FreightWaves. “So freight has been depressed for probably most of this year.”
NASTC was founded in 1989 and is based in Gallatin, Tennessee. The association represents about 15,000 trucking companies by helping them control costs through managed purchasing, consultation and advocacy.
“Almost all of our 15,000-plus members are small businesses in the full-truckload long-haul market,” Owen said. “Being small operators in the marketplace, typically, they have to deal with spot market freight and on contract freight, dealing with a lot more sensitivity in the marketplace. A good solid small trucking company can go from doing very well to being broke in about three weeks or a month if a perfect storm comes along, which we seem to be riding through a series of right now.”
Most who have been around the freight business long enough have felt the industry’s ups and downs. As small and medium-sized motor carriers and owner-operators try to steer through another downturn, Owen and other road freight industry professionals share some anecdotes and tips about surviving another recession.
Take care of your drivers and other assets
Randy LaValley started his company, Lavalle Transportation (LTI), with one truck in 1995. Today the Potsdam, New York-based firm has about 440 trucks and 422 drivers, according to the Federal Motor Carrier Safety Administration.
Like most trucking companies, LTI was challenged by the economic downturn of 2008-09. There was still freight that needed hauling, but it often came at much lower bids than previously.
In 2008, LTI was an owner-operator-driven carrier, and LaValley said he made a choice to pay “just about everything we were getting paid for the load” to the drivers.
“We wanted to keep the owner-operators healthy, because at that time there were a lot of trucking companies that were dying off, dropping every quarter in big numbers,” LaValley told FreightWaves. “We took care of them and made sure that they made it to the other side of the recession, not quit and or leave the industry entirely.”
LaValley said for most of 2008-09 they were extremely cautious about spending any money. He figured that when the recession was over and demand returned, somebody needed to be ready to supply transportation.
“We were just keeping enough for the company to barely keep our heads above ground and keep going,” LaValley said. “As soon as I saw the light at the end of the tunnel, I doubled down and did a bunch of stuff and picked up more business and bought more trucks and trailers. We came out of the last quarter or six months of that recession, and we were ramping up with a full head of steam.”
Another lesson LaValley learned from his years in the industry is to find a niche and stick with it.
“… [One that’s] not being serviced [well] and then get in there and do a hell of a job and stay in your lane,” he said.
Texas Trucking Association (TXTA) President and CEO John Esparza said he has been through several freight recessions and slowdowns and agrees with LaValley that taking care of your employees while saving money are some of the most important things any company can do when times are tough.
TXTA, founded in 1932 in Austin, boasts 1,000 companies ranging from small businesses to Fortune 500 companies and serves as a legislative advocate for its members and the transportation industry.
Esparza said the companies that often survive freight recessions are the ones that continue to employ individuals, even at great risk and debt to themselves.
Fuel price increase: A bleak festive season for road freight companies
As of Wednesday, the cost of diesel for transporters will increase by R1.42 for 500ppm and R1.43 for 50ppm. That will raise the prices to R25.49 and R35.75 per litre respectively.
The price of both grades of petrol, 93 and 95, will increase by 51 cents per litre.
Consumers as well as road freight transporters will feel the pinch as the year draws to a close, with prices of goods set to increase even further.
Diesel cost R12.15 and R21.78 in January 2022, and has doubled since December 2021.
The Central Energy Fund attributed the price hikes to rising international fuel prices and the weakened rand.
According to the Road Freight Association (FRA), road freight transporters, who use diesel as the energy source for their vehicles, have had to increase their pricing to cover the ever-increasing fuel costs.
Prospective increases will be driven by transporters needing to fund operations, whilst only being paid months after the work has been done – in some cases up to three months afterwards.
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“In the meantime, the next load needs to be moved, and so on, and that all needs fuel for the vehicles. There just aren’t limitless reserves of cash to continue the high level of fuel expenditure against the delayed payment for work already done,” the association lamented.
Less stock moved
The association explained that in some cases, customers and/or businesses will reduce volumes to be transported, or even curtail stock movement, depending on consumer consumption levels.
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