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Transportation industry trends

Transportation Industry Trends: October 2021

Understanding major transportation industry trends remains essential to developing successful strategies. Here are a few of the significant trends impacting the transportation industry as we head into Q4 2021:

The global dearth of semiconductor chips is still the primary limit to Class 8 vehicle production. Fleets are waiting on new vehicles to meet increasing freight demand across the United States. Class 8 and trailer orders have fallen to the fewest since summer 2020. In its September 2021 members-only report, ACT Research noted that ~20,000 built but unfinished class 8 tractors are awaiting parts.

Raw material costs are increasing, which causes an increase in equipment prices. Steel prices have surged since early 2020. Rubber prices also appear to have peaked in 2021—but aren’t coming down. Increasing equipment prices could eventually become an issue for those purchasing trucks; these increasing prices are hurting OEM and supplier profits.

Growth in freight volumes and rates is keeping pace with U.S. economic growth. FTR forecasts that the development of GDP goods in transportation—the portion of national GDP that generates freight—is expected to grow by 6% in the final quarter of 2021, as freight volumes remain healthy through the end of 2021.

A September 3, 2021, Bureau of Labor Statistics report (https://www.bls.gov/news.release/empsit.nr0.htm) noted that transportation and logistics jobs showed a substantial increase in numbers. In Q1 2021, the industry saw 2,741 new truck transportation establishments created with one or more employees—the most ever made in a quarter, surpassing Q3 2020, the prior record.

Spot market tension remains a hot transportation industry trend

Meanwhile, the U.S. spot market remains under tension due to COVID-19 impacts, economic turmoil, supply chain disruption, and the trucking labor shortage. Flatbed rates remained flat. Spot rates remain at record levels and continue to buck seasonal trends. Some lanes are breaking weekly records, such as the Los Angeles to Las Vegas lane where reefer spot rates recently broke $6.00/mile, according to DAT (https://www.dat.com/industry-trends/trendlines ). The market lacks elasticity to handle significant weather or other disruptions.

Ocean import services continue to experience long delays. Access to 40′ high cube containers in China for import to North American ports is becoming scarce, as both Los Angeles and Long Beach continue to experience long delays.

Cross-border shipping and trade are experiencing a trade imbalance leading to rising prices for Canadian outbound trucks as demand surpasses supply. Meanwhile, Mexico’s SAT (the equivalent of the U.S. IRS) will delay the Complemento Carta Porte legislation until January 1, 2022, giving companies more time to prepare and implement the required process changes. Carriers are increasingly declining loads within Mexico that have a history of long dwell times.

Intermodal shipping volumes remain stable with some localized capacity challenges and service volatility. The volume will likely remain vital for intermodal service through the second half of 2021. Service volatility, coupled with demand, may lead to additional network disruption through lane metering and capacity allocations. Overall, intermodal is mainly open and continues to participate in the broad freight flows and migration of loads.

Less-than-truckload (LTL) tonnage forecasts show some softening but are still at historically high levels. The industry continues to demonstrate pricing discipline and strength as it optimizes trucks and networks. Despite LTL investments in their driver communities, LTL carriers still have trouble hiring drivers and dock workers. Real capacity growth in LTL today comes from increasing the driver pool.

Peak season(s) will impact small parcel capacity and costs. FedEx has already updated its peak surcharges, including new additional handling, oversize, and residential delivery surcharges based on a shipper’s volume. UPS is following suit with similar categories and surcharges. Surging 2021 peak season volumes of an estimated +5 million packages per day will strain parcel delivery infrastructures, with overflow impacts like delayed shipments and damaged packages.

Infrastructure mandates remain in play while $3.5 trillion reconciliation package impacts remain unclear. In August, the U.S. Senate passed a bipartisan infrastructure bill after the U.S. House passed their infrastructure bill (the INVEST Act). The reconciliation package currently under discussion may include significant spending, coupled with various tax increases on both corporations and the wealthy. Democrats on the House Transportation Committee aim to use the reconciliation package to fund some of their top priorities, including transit, high-speed rail, and efforts to improve the environment.

Time to think about flexibility and capacity

With all the upheaval as we head into the most chaotic part of 2021, it’s a great time think about how you can secure the flexibility and capacity you need.

Axele helps carriers deal with all kinds of transportation industry trends by finding the most profitable loads by connecting to a variety of load boards. Axele factors in driver preferences and hours-of-service availability to secure feasible loads that generate the most money for carriers. Contact Axele today.

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