Truckload failures take a welcome step back in Q2, according to Avondale data

Just a few years ago, it was beyond commonplace to see just how dire market conditions things were for so many truckload carriers.

To pick just one reason why would be next to impossible, given the plethora of issues truckload carriers were up against, and some of them remain challenging still, even though overall market conditions have taken steps in the right direction.

Among these issues were: high diesel prices, lack of available drivers (still an issue today, too, of course); the onset of some onerous regulations; and lack of credit availability, among others.

Putting the renewed strength in the truckload market into a very positive perspective is a report issued by Avondale Partners analyst Donald Broughton, which was released yesterday. Entitled, “Q2’15 Trucking Capacity; Goldilocks Era Continues,” Broughton explained that in the second quarter only 70 truckload fleets failed, or exited the business. That number may seem high to some, but it is not, especially when you consider that the second quarter of 2014 saw more than five times as many truckload carriers, 375 to be exact, exit the business.

Those 70 carriers had an average fleet size of 14 trucks, the report said, and took roughly 995 total trucks off of the road. A year ago, that tally accounted for the aforementioned 375 carriers and 9,435 trucks.

Why are things that much better, or Goldilocks-like, just a year later? Broughton cited several factors, including:
-pricing heading up by single digits (with rates expected to head up between 4-9 percent in 2015, an estimate that has been stated by various industry stakeholders);
-more “relaxed” motor carrier hours-of-service regulations, coupled with demand still outpacing available supply; and
-the ongoing decline in fuel surcharges that is enabling carriers to raise base rates

For the last point, Broughton said: “Shippers, left with a favorable variance in their budgets as a result of lower fuel costs are willing to accept higher base rates if they can be guaranteed capacity.”

That is something that cannot be overlooked at all, especially with the holidays around the corner. While supply chain sourcing executives have likely already placed their bets on holiday orders, a hefty amount of truckload (and less-than-truckload) capacity will be required to get the shelves stocked in advance of the buying frenzy for in store and online shopping.

The good thing, as based on Broughton’s data and analysis, is that the trucking sector is currently in a good spot and ready in the short-term. When the EOBR mandate becomes enforced on what he termed “a wholesale basis,” it is likely to be another story, but that is for another day…for now anyhow.