With all of the supply-side issues prevailing in the economy today, it’s easy to think freight levels are stagnant. That’s not so, according to the American Trucking Associations (ATA) For-Hire Truck Tonnage Index for January, which indicates that freight levels are continuing their upward trajectory.
The January ATA index totaled 115.5, an increase of 0.6% from December’s 114.9. The index uses the year 2015 as a baseline, so the January index totaled 15.5% higher than the base.
“January’s gain was the sixth straight totaling 4.4%,” said Bob Costello, chief economist for ATA. “The index, which is dominated by contract freight with only small amounts of spot market truck freight, is off 3.9% from the all-time high in August 2019 and only 1.5% below March 2020, when the pandemic hit.”
It would appear the negative effects of the pandemic are gradually being overcome.
The ATA numbers are compiled using data submitted by ATA member carriers, typically the larger ones, and are seasonally adjusted to account for the variance in monthly freight flows. The consecutive months of increase are an indication that contract rates, which are generally far less volatile than spot rates, are continuing to rise.
“In January, truck tonnage was helped by rising retail sales and factory output,” Costello said. “While housing starts fell last month, which is another important driver of truck tonnage, it remained at high levels.”
Housing starts may have declined from December numbers but still represented 13,000 more new units than January 2021, according to Dean Croke, principal analyst for DAT iQ and blog author at DAT.com.
That’s good news for flatbed operators, who saw average national spot rates rise five cents per mile to an average of $3.12 per mile.
Rates for van freight on DAT load boards rose even more in the month, from $2.99 to $3.10 per average mile. Refrigerated rates rose even higher, to an average of $3.59 per mile.
Capacity continues to be constrained across all modes of trucking. The larger carriers, with few exceptions, aren’t able to buy enough trucks to grow their fleets and take advantage of the higher rates. That may be good news for owner-operators, who benefit from the higher rates and better load selection that results when the supply of available trucks isn’t enough to meet the demand for them.
Another issue is the inability of carriers to find qualified drivers for their fleets. Some relief may be on the way with the pilot program allowing 18- to 20-year-olds to drive interstate, but it will be months before the program is completed, and it may not proceed, depending on the data.
In the meantime, new Federal Motor Carrier Safety Administration (FMCSA) training requirements for new CDL holders are likely to slow the pipeline of new drivers into the industry, at least until the bugs are worked out of the system.
A condition that truckers are benefitting from is the struggling railroads, according to the January Cass Freight Indexes, published by Cass Information Systems. The firm’s freight index for shipments showed a seasonally adjusted decline from December shipment levels of 7.4% and a decline from January 2021 of 2.9%.
The Cass report blames the COVID Omicron variant for the decline, citing absenteeism and quarantines as factors in why shipment counts weren’t higher. The report also points to the container ship backlog at U.S. ports. There was good news for Southern California, as the number of container ships waiting to unload dropped to 79 from a peak of 109 in December. At the same time, backlogs have been growing at other ports, including Houston, Charleston and Virginia.
Container chassis for railroads are still in short supply, despite an increase in production that has closed the gap. Many additional chassis are needed to move offloaded containers from ports to their destination.
In the meantime, trucking is picking up at least some of the slack with more available intermodal loads as well as other loads that are unloaded from containers and subsequently loaded into trailers for the journey to their final destination.
The Cass report shows a 7% year over year increase in shipment expenditures for trucking, but data for all modes of transportation, including rail, ship, barge, pipeline and air, are on track for a 20% increase in 2022. That’s good news for freight rates — but bad news for fuel and other costs.
Another report, the DAT 2022 Freight Focus, predicts no slowdown in freight levels well into 2022. The report cites fewer trucks being built, fewer used trucks available and a shortage of qualified drivers as factors that will keep both shipment levels and freight rates high.
The report cautions, however, that a market correction is coming. Also noted are rising prices for fuel, tires and insurance that add to operating costs. Shortages of parts, plus the increased maintenance required by trucks that remain in service longer, will push those costs upward, too.
Of course, Russia’s invasion of Ukraine and the turmoil created on world markets will also impact the industry. Fuel prices have already increased and are expected to continue rising for the foreseeable future.
This could be an interesting year.
Cliff Abbott is an experienced commercial vehicle driver and owner-operator who still holds a CDL in his home state of Alabama. In nearly 40 years in trucking, he’s been an instructor and trainer and has managed safety and recruiting operations for several carriers. Having never lost his love of the road, Cliff has written a book and hundreds of songs and has been writing for The Trucker for more than a decade.