Now that we are well into 2021, we can see that 2020 was one of the most volatile years for the trucking industry. From drivers to dispatchers, load chain managers, planners and logistical professionals all were able to keep the cargo moving under the most strenuous circumstances.
Even under these incredible constraints that the pandemic brought upon us the transportation sector including heavy haul trucking companies followed a similar annual pattern. In the fourth quarter, the eCommerce boom raised and compensated for any change in the usual pattern. Shopping online started an eCommerce boom that replaced the usual trips to brick-and-mortar businesses with purchases from home office supplies to holiday presents causing ripple effects well into the trucking market.
Flexibility and Peace of Mind Over Flatbed Freight Rates
As we came to the end of the bid season, we could see that the shippers that had enough volume to secure annual pricing in fact set contract rates at higher levels as compared to 2020. These higher levels are keeping the trends on track with historical performances showing typical behavior as 2021 progresses.
Shippers are placing a higher value on flexibility and stability relying on larger investments with the best providers guaranteeing consistent volume. We saw weather cause a shipping backlog, especially in Texas. Ice and snow in areas that do not usually fall below freezing caused infrastructures to fail and roads to close. This created the backlog in the first quarter taking days to recover from and in some cases weeks to restore services.
Capacities were forced to tighten in the interrupted infrastructure causing a hike in rates. Looking into these demand trends a little deeper we find a V-shaped recovery from 2020 when looking at the wider economy.
Consumption, Industrial Production, Inventory to Sales are looked into to determine demand trends and are running negative numbers; but trending in a more positive direction in 2021. Industrial production is driven by consumer spending and in turn causing an increase in flatbed trucking companies shipping commitments. This increased production is moving from although currently still minus to an upward trend.
As consumption trends upwards in 20121 shippers will increase production to fill store shelves meeting the consumer spending demand and cause an increase in freight and equipment hauling. Diesel fuel prices and class 8 truck orders are watched closely to determine the health of the supply base.
Fuel rates represent 30% of a carrier’s overhead cost and any increase will have a large impact on their bottom line, especially if it rises faster than the rates offered. Seems like the new administration and the push towards green energy will leave a bad taste on the price of diesel fuel this year and moving into 2022.
The orders for class 8 trucks continue in an upward trend as the profits from higher rates have allowed increased investments for capacity fulfillment. This increase in contract rates is expected to continue through 2021 as shippers will continue to appreciate flexibility and peace of mind over bargain flatbed freight rates.