Businesses go bankrupt, it happens. Truckers are business so yes they do go bankrupt. If you are paying attention you are seeing more trucking companies go bankrupt now than last year at the same time. The number of trucking companies that went bankrupt in the first quarter of 2015 was 85. The number for the first quarter of 2016 is 160. That translates to 3500 tractors and trailers off the road. Even though that is a pretty good increase from year to year, it’s still not alarming. Compare the losses to the meltdown during the recession o0r even the first quarter of 2014 and it will make you feel better about today.
Even though the sky is not falling does not mean the losses won’t impact you. There is seldom anything in business not connected to something else, and something else, and then something else. The trucking industry is no different. Bankruptcies are expected to continue through 2016. That’s a possible sign there are more trucks than loads so rates may experience downward pressure through summer into fall. Rates may not drop too much as they are fairly low already, but there may be some pretty good spot rate deals out there for the immediate future.
I know the American Trucking Association (ATA) reported a seasonally adjusted 7% increase in tonnage for February after a flat January so you would expect capacity to be tight, but I am not buying it. I think the ATA got this one wrong somehow. Tonnage has been fairly flat for the last quarter of 2015 and the first quarter of 2016. Seven percent (7%) seems like too big of a number considering the end total of Oct, Nov, Dec, and Jan, was only a net .3% rise and carriers seem to still be hungry for loads. The projections for continuing bankruptcies through 2016 also go directly against the 7% number if people were taking it seriously. My gut tells me you will see a balancing drop for March that will neutralize much the big Feb number.
Why the flat numbers? Even though it seems the economy is fairly sound, to me there is a good chance as consumers we are being slackers and not consuming enough. Many economic indicators are looking better these days; but consumer confidence and spending are not joining the party in a big way. In an economy desperate to improve the basics, consumer spending will not cooperate meaningfully and is depressing manufacturing and transportation. Even the Wall Street geeks are having a hard time supporting their inflated numbers with the basics not following the plan.
On the flip side of lagging tonnage, the yin and the yang of things are keeping trucking rates low for shippers. Enjoy your flat rates while you can. There will be two forces coming in late 2016 and continuing in 2017 that will more than likely flip the script on you and your low rates. There will be a loss of carriers due to natural selection and flat tonnage numbers. This will bring the loads available closer to the trucks looking for loads threshold and begin the rate recovery.
Also do not discount the impact of the electronic log device (ELD) mandate coming in December 2017. Simply put no more paper log books. Small carriers who are already broke may find themselves in a pickle when it comes time to outlay cash for ELD equipment and services. Moreover drivers who fudge log books to get an extra load hauled every week won’t be able to do that anymore. Even though the results for ELD’s are positive and will improve safety, ELD’s will likely reduce both capacity and drive hours. Even though the drive hours prior to the ELD mandate will be illegal, they are still production. With the lower capacity coming and lost truck production the industry will find upward pressure returning on rates. That’s the great thing about capacity and rates in transportation. They are like the weather in Florida. If you don’t like the way it is right now, just wait a little while and it will change to something new.