These are tough times for freight carriers in trucking, rail/intermodal, and ocean, as demand is collapsing across the globe in the midst of the coronavirus crisis.
While primarily truck freight has remained strong in moving food and other consumer staples, it is plummeting for other product categories, and even in food of late volumes are at times uncertain.
Supply Chain Digest Says...
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"We believe the next three to five quarters will be an extremely difficult time for small and mid-size carriers and for bigger truckers with limited liquidity," wrote transportation sector analyst Jack Atkins. |
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In a New York Times profile last week, independent trucker driver Ingrid Brown, who hauls mostly loads of food literally from coast to coast, said that even that freight is now much less predictable than it was just a few weeks ago. (See Truck Drivers Really are the New First Responders in the Virus Crisis Era.)
On the trucking side, the dreadful market conditions come after a very weak 2019, following several years of strong volumes and rates, leaving carriers already weak financially as this new virus-driven demand drop comes out of almost nowhere.
Small carriers and independent owner-operators, which actually handle a majority of US freight versus larger carries, are especially vulnerable due to low levels of cash reserves, no lines of credit, etc., though even many larger firms are certainly at a financial risk.
A recent article in the Wall Street Journal quoted Tony Signh, owner of Virginia-based Sam Trucking, which normally runs just seven trucks, as saying "There's no freight, no freight at all."
Loads that would command $1,000 last month hauling food now have fallen to $300 or even less – below operating costs.
"Nobody can survive six months like this," Singh said. "How can I pay my guys, the payments on trucks, the insurance?"
His small fleet is mostly parked currently.
While there isn't near enough freight to go around in the sst term, if and when th eeconomy and freight volumes return to something like normal, the widely noted driver shortage may be exacerbated if thousands of small carriers and tens of even hundreds of thousands of independent drivers go under or leave the industry.
Carriers with six or fewer trucks comprise more than 90% of the US trucking firms, according to the American Trucking Associations.
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Last year, in the freight downturn, more than 1,000 trucking companies went under, the majority of them small carriers.
Large carriers though, are hardly immune from the financial pressures. Last week, truckload carrier Werner Enterprises said that high profile CEO Derek Leathers would take a 25% cut in base salary, with other executives seeing pay reductons of up to 15%.
Other carriers are making similar moves.
It could get really ugly.
"We believe the next three to five quarters will be an extremely difficult time for small and mid-size carriers and for bigger truckers with limited liquidity," transportation sector analyst Jack Atkins of Stephens Inc. predicted in a recent research note.
The Wall Street Journal quotes Jeff Tucker, CEO of freight broker Tucker Company Worldwide, as saying that "All those carriers that have heavy exposure to automotive and other products not deemed essential are really, really badly hurting now. We're starting to see pricing well below what it takes to run a truck. That can't continue."
It is probably too late to save many small carriers and independents in the short tern. How that will impact the medium and long term is the key question.
How bad is it now for truckers? Will tens of thousands go under? Let us know your thoughts at the Feedback section below.
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