Truckload supply remains tight

Good demand has combined with tight supply to give truckload carriers some market strength to hold to rates.

Morgan Stanley's (www.morganstanley.com) proprietary Truckload Freight Index indicates truckload volumes remained strong into late November. This is the first time in the 10 years of the Index that shipment volumes have not tapered off during the last weeks of November.

The stronger-than-expected freight volumes may be an early sign that the long-awaited economic recovery is starting. Two weeks don't make a trend, but the combination of strong volume and tight capacity is expected to translate into higher rates. Carriers will need those rates to offset increased operating costs as they begin to comply with new hours of service rules.

Supporting some of these conclusions, Tucker Company (www.tucker.com), which performs freight management services, says it has seen business surge since August. That growth can be traced to various sectors of its customer base, from finished products to capital goods. The company has seen trucking firms reducing fleets and observes that “trucking firms simply haven't had the ability to hire new drivers fast enough.”

Most truckload carriers announced driver pay increases to induce drivers to remain and to deal with hours of service issues. (New hours of service rules tend to reduce the time drivers are actually driving. Over-the-road drivers are paid by the mile, so this reduces their take-home pay.)

The Department of Transportation's Federal Motor Carrier Safety Administration studied the impact of the new rules and estimates the driver shortage will exceed 80,000 drivers. This is more drivers than are employed by Schneider National, Swift, Heartland and several other truckload carriers, combined.

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