September 1, 2023

Loaded and Rolling: Small fleets and owner-operators gain market share


Small fleets and owner-operators gain market share

(Source: FreightWaves SONAR)

In an article published Tuesday, FreightWaves CEO and founder Craig Fuller made a case that the trucking industry is not consolidating anytime soon. The prevailing wisdom following the Motor Carrier Act of 1980 was that there would be rapid consolidation as previously highly regulated unionized trucking companies, operating under the older regulations from the Interstate Commerce Commission (ICC), went bankrupt and nonunion trucking companies grabbed that market share. What happened instead was a rapid rise in small fleets and owner-operators who flooded the market, driving down rates and upping the competition.

The freight brokerage and small carrier debate is a contentious one. Depending on the trucking business cycle, brokers and carriers frequently accuse each other of gouging and acting opportunistically. One thing for certain is that as more carriers enter the marketplace, freight brokers will continue to search for them while soliciting customers to find more freight volumes. This very act makes industry consolidation extremely difficult due to competition.

The rise of brokerages and their efforts to find capacity to haul freight cannot be overstated, since large nationwide truckload carriers prefer making bids directly with a customer. For small fleets and owner-operators, brokerages gaining more access can grudgingly benefit them, as they typically use brokers to find backhauls back to their main committed customer. Fuller notes, “In 2000, trucking brokerages represented less than 6% of all truckload freight, according to Statista. By 2018, that hit 19%. FreightWaves estimates that brokerages accounted for as much as 30% of truckload freight during the COVID peak.”

ATRI annual top industry issues survey launches

(Photo: Jim Allen/FreightWaves)

The American Transportation Research Institute (ATRI) opened up its annual survey asking industry stakeholders to rank their top concerns. This is the 19th year for the annual survey, which includes data on how topics are ranked by both motor carriers and drivers. The survey will remain open for submissions until Sept. 29, and results will be released on Oct. 14 during the American Trucking Associations’ Management Conference & Exhibition in Austin, Texas.

The overall results from the 2022 survey highlighted fuel costs, which replaced a shortage of drivers as the top spot. Lack of truck parking came in third, followed by driver compensation and the economy to round out the top five concerns. Breaking down the data between fleets and drivers, the survey noted in 2022 that of the 4,200 total respondents over 47% were professional drivers while 39% were motor carrier executives. Parking, fuel costs and driver pay were the top three concerns among driver respondents, while motor carriers picked the driver shortage, driver retention and fuel costs. 

You can fill out the 2023 survey here.

Market update: Outbound tender rejection rates highest level since January

(Chart: FreightWaves SONAR)

Nationwide outbound tender rejection rates, a measurement of carriers willingness to accept contracted load tenders, surged on Thursday to 4.26%, its highest level since Jan. 13. Over the past 30 days, OTRI rose 93 basis points. Part of this increase can be attributed to a rise in outbound tender volumes, which are up 2.81% or 315.51 points from 11,211.4 to 11526.91 in the past month. Rising rejection rates can signal growing tightness in the contracted full truckload space, as carriers rejecting contracted volumes indicates a lack of contracted truckload capacity at a time when truckload supply remains saturated in the spot market relative to demand.

If higher outbound tender volumes persist past Labor Day, this can suggest the worst of the freight downturn may have passed and create expectations for small but incremental increases in spot rates. Current spot market conditions suggest higher rates due to capacity leaving the market right as shipments rise for the Labor Day weekend. The FreightWaves National Truckload Index 7 Day Average (NTI) rose 2 cents per mile week over week from $2.24 per mile all in on Aug. 23 to $2.26 per mile. Removing a fuel surcharge, NTI spot market linehaul rates (NTIL) rose 2 cents per mile w/w from $1.57 to $1.59.

FreightWaves SONAR spotlight: Trucking authority decline continues amid historic capacity glut

(Chart: FreightWaves SONAR)

Summary: Truckload capacity is still leaving the market as carriers saddled with higher operating costs and lower rates reckon with lower truckload demand. The Carrier Details Net Changes in Trucking Authorities (CDNCA) ticker, released Tuesday, highlights the net gain or loss when looking at revocations in operating authority and granted operating authorities. 

Operating authority data is useful, as the net increase or decrease in motor carrier counts for each month is one indicator of the overall health of the trucking business environment. One outlier in the over 10 years worth of viewable data is the significant growth of new fleets in 2021 that joined the market due to record truckload demand that caused skyrocketing spot market rates. At this time, there appear to be further headwinds for smaller carriers and owner-operators, who are more exposed to spot market rates. While total fleet tractor count continues to rise, fleets with one to six power units dramatically increased during the freight boom caused by consumer buying patterns focused on goods over services that came from COVID lockdowns.

These same owner-operators who joined the market over the past two years are the most at risk as spot market conditions continue to deteriorate. While some owner-operators will migrate to the relative safety of a larger fleet, many may simply park their trucks, stop paying insurance and submit forms to the Federal Motor Carrier Safety Administration to revoke their operating authority.

6 charts reveal freight industry is bouncing back (FreightWaves)

Mexico truck driver strike delayed after officials, carriers reach deal (FreightWaves)

Knight-Swift executives take pay cut amid cost reduction efforts (FreightWaves)

Trucking numbers in BMO earnings again show weakening credit performance (FreightWaves)

A trucker’s view of autonomous trucks (Land Line)

A first for Werner: Small group of workers votes to unionize (FreightWaves)

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The second annual F3: Future of Freight Festival will be held in Chattanooga, “The Scenic City,” this November. F3 combines innovation and entertainment — featuring live demos, industry experts discussing freight market trends for 2024, afternoon networking events, and Grammy Award-winning musicians performing in the evenings amidst the cool Appalachian fall weather.

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