Generous Covid-19 stimulus checks in the U.S. “couched” many drivers who chose to stay home, a new drug and alcohol clearinghouse has put about 1% of tested drivers on the sidelines and the potential for more widespread use of hair follicle testing could increase that number substantially.
At the same time, a fifth of U.S. truck driver training schools remain closed due to the pandemic and throughput of new entrants has decreased by 40%.
Many drivers, meanwhile, have left large fleets to chase higher-paying spot market loads as independent contractors.
“In the third quarter of 2020, we had the highest number of net new for-hire carriers ever formed,” Kroes said, citing FTR data. However, since they are mostly small or solo operations being formed, little capacity has been added to the market.
The trucking industry’s inability to add needed drivers, coupled with low retail inventories should point to “a very good 2021-2022 freight market outlook,” Kroes said.
“We are in a severe imbalance,” he said of the supply and demand for trucking, favoring truckers, noting there are about 80,000 fewer professional drivers available today than a year ago in the U.S.
Consumer buying habits have shifted from services to products, which has been a boon for truck freight. A holiday demand surge will further pressure inventories and supply chains will need to scramble to get consumer goods where they’re needed, Kroes said.
“Consumers have gone to spending on the retail side because they still had the money, despite unemployment remaining incredibly high. The government stimulus had to go somewhere,” he explained. “Things are going to be very tight in what you see on the shelves of your local supermarkets. It will get better, the supply chain will correct itself eventually, but it’s probably going to get worse before it gets better and that is going to send rates even higher.”
The Classes 5-7 segments, which Thermo King breaks down into more than 40 sub-segments, are also performing well, primarily due to growth in e-commerce. The refrigerated food and beverage sub-segment, however, has been hard hit as a result of restaurant and venue closures.
Medium-duty dealers are not likely to see the spike in equipment orders Class 8 and trailer dealers have seen, since medium-duty trucks can sit idle and don’t “age out” like on-highway equipment does, Kroes said.
“If a piece of truck equipment is sitting idle, the clock is stopped,” he said of medium-duty trucks. “The clock will restart when it gets put back into service.”
The spike in local delivery requirements driven by online ordering has seen more entrepreneurs getting into final mile delivery, which has come with an increase in rental activity.
Looking ahead to 2021, Kroes predicted increased consolidation. “The big trucking companies will get bigger, and the smaller fleets are likely to get absorbed,” he said.
Contract rates will surpass spot market rates with a 10% rise in contract rates likely to be realized. More drivers will be taken out of the industry due to drug violations, thanks to the clearinghouse and a growing list of states legalizing marijuana, which accounts for the vast majority of failed tests. Ultimately, when CDL training schools reopen, higher trucking rates will need to be passed on to drivers to encourage new entrants to get into the industry, Kroes said.