B1 visa drivers and illegal operators are not the same thing. Here's the difference and why conflating them is hurting the industry.
FMCSA cracks down on MC numbers. A $158M trucking Ponzi. Middle East surcharges.
Despite earlier optimism of a Q1 recovery, new numbers from industry leaders and other key performance indicators have sparked a wave of hesitation.
Happy National Poker Day. We're taking bets on when the freight market will recover. Second half of 2024, first half of 2025? or later? Experts in today's feature story share their projections and reflections on how long this Great Freight Recession will last.
🤔 Question of the Day: Knight-Swift cut its earnings expectations by ___% for the first half of 2024. Scroll to the feature story for the answer.
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🐔 WHAT’S COOKIN’ IN FREIGHT
🚢 Imports Grow Despite Challenges. In May, U.S. imports are expected to top two million TEUs for the first time since last fall, driven by Chinese factories reopening after the Lunar New Year. Despite issues like droughts and port closures, we're looking at 11.7 million TEUs in just the first half of the year—an 11% increase. The shift back to West Coast port dominance continues, while some East Coast ports adjust for Baltimore’s outage, West Coast ports are getting busier. Experts say the strong demand from American shoppers keeps these numbers high.
🚛 Freight Firm Shuts Down, Blames AB5 law. After nearly 25 years, California Intermodal Associates Inc. (CIA) is closing down, blaming the state’s strict AB5 law, which restricts independent contractors. The family-owned carrier and brokerage has a fleet of around 30 trucks. CEO Gabriel Chaul shared that converting to a full employee driver model spiked operational costs by 30%, making them less competitive. Despite trying to comply, the uneven enforcement of the law made it tough to keep up with non-compliant rivals. Chaul said, "It seems like as soon as our customers knew we were complying...there was no incentive to use CIA anymore."
🔋 Multiple Shifts Toward Electric. A few months ago, California mandated electric drayage trucks by 2035, sparking a push toward EVs. Lime, the electric scooter company, has partnered with Hight Logistics, committing to zero emissions for all North American cargo from port to hub by 2040. DFDS, one of the top European logistics companies, has recently placed an order with Volvo for 100 electric trucks, bringing their total to 225. As American companies adapt to shifting policies, these companies are helping to identify the most sustainable path forward.
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The freight industry's downturn seems to stretch on endlessly, and everyone’s asking: When will things get better? Despite earlier optimism of a Q1 recovery, new numbers from industry leaders and other key performance indicators have sparked a wave of hesitation.
The market took a hit after J.B. Hunt and Knight-Swift reported disappointing earnings.
J.B. Hunt's earnings per share fell short at $1.22 against expectations of $1.53, a sign of the persistent difficulties across the industry.
"The ongoing freight downturn has been more severe in terms of depth and duration than previous ones." – Shelley Simpson, J.B. Hunt President
Plus, Knight-Swift had to trim their profit forecasts, pointing to an oversupply of capacity and heightened competition that's pushing freight rates down. The company slashed its H1 2024 earnings expectations by 58% (QOTD Answer)!
These reports have investors shook, resulting in a pretty big drop in shares for J.B. Hunt and Knight-Swift. This tells us just how much concern is floating around about the road to recovery. These first gloomy reports have set a wary tone for the market's outlook.
Craig Fuller, CEO of FreightWaves, suggests that things might look up soon. His data shows tender rejections have slightly improved: "OTRI indicators suggest that conditions are better than they were a year ago, albeit not by much," he writes.
FreightWaves' prediction? "We believe that we are now at the bottom of the market." The company reports that recovery will most likely occur in fall 2024, but certainly by spring 2025.
Kevin Hill of Brush Pass Research gave us a bit of hope but kept it real: "Volumes and rates are down sharply again...the only data point up is length of haul," he observed. It means recovery isn’t just around the corner.
Echoing Hill's caution, AscendTMS CEO Tim Higham addressed Fuller's article: "Craig Fuller did posit today that we've hit the bottom. The question is, of course, how long does the "bottom" last."
There are just too many trucks and not enough freight. Paul Svindland from STG Logistics mentioned, "The floor keeps getting lower," as he talked about having to cut rates just to keep business.
Supply chain professor Jason Miller points out a big problem: weak demand. With imports increasing, it may seem like transportation is going to take off, but the actual need for trucking services isn't growing.
"Domestic manufacturing still produces the bulk of for-hire trucking demand, and freight-weighted domestic manufacturing remains in a deep slump." Jason Miller, Supply Chain Professor
Right now, we're in a bit of a slump, with the ton-miles (think of it as the trucking world's odometer) lower than they were this time last year. We're not seeing trucks hit the road as much because domestic goods outpace imports. So, more local goods mean fewer long hauls needed. Miller clarifies that you can't rely only on imported data for analysis and projections.
The prevailing view is that we'll need to hang tight a bit longer for any real upturn. With the recession going into its third year, we may see the holdovers from the Covid-era boom finally tap out. This will help push the market into recovery as demand and rates improve.
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AROUND THE FREIGHT WEB
🚛 Trucking Invoice Downturn. The average invoice size factored by Triumph Financial has been stagnant for a year, reaching its lowest point in the past five quarters and continuing to decline this April.
🤖 AI Interpretation. A new demo from Fleetworks impressively showcases their AI's capability to seamlessly interact with distinct accents, a valuable insight for the diverse trucking industry.
👩⚖️ Legal Twist. A Philadelphia judge has overturned a $25M verdict in a truck crash lawsuit, calling it "clearly inappropriate" and highlighting the judicial skepticism towards large punitive damages, AKA "nuclear verdicts."
🚂 Railroad Woes. Despite delivering 3% more freight, CSX saw a 10% profit drop in Q1. CSX attracted more business through better service while weathering a struggling market.
🇲🇽 Trade Ties. US-Mexico trade reached $67 billion in February, with Mexico retaining its spot as America's top trading partner.
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