July 13, 2024
1 year ago

It will be ‘really tough’ for trucking companies to stay in business if things don’t pick up by Memorial Day, says an American trucking association

Business Insider | by Nidhi Pandurangi | May 5, 2023

  • Executives at trucking giant JB Hunt recently sounded the alarm about a freight recession.
  • OOIDA, an American trucking association, is echoing the sentiment.
  • It will be “tough” for truckers to stay afloat if the recession does not let up soon, an OOIDA analyst said.

An American trucking association is the latest to sound the alarm over a “freight recession” gripping the US, saying it will be tough for trucking companies to stay afloat if the slump in freight rates does not subside soon. 

If things don’t pick up by Memorial Day, analysts expect the freight market to stay around current levels for the rest of the year, Andrew King, a research analyst at the Owner-Operator Independent Drivers Association, or OOIDA, told Insider.

“That will be really tough for a lot of carriers to stay in business,” he added.

OOIDA is a nonprofit organization that represents over 150,000 small trucking business owners and owner-operators, according to its website.

OOIDA’s warning comes weeks after trucking giant JB Hunt posted lower-than-expected results. Company executives on an earnings call were downbeat about a broader economic slowdown that was causing a freight recession, meaning fewer trucks delivering goods across America.

Even industry gauges are signaling a slowdown: The American Trucking Association’s for-hire contract truck tonnage index dropped by about 6% month-on-month to 95.8 in March, hitting the lowest level since August 2021.

This pullback has been hitting the prices of commodities such as diesel, a key industrial fuel.

Higher inventory levels and overstocked warehouses are one of the key reasons truckers are facing a freight recession.

While some sectors — such as general merchandise stores including Walmart and Target — are experiencing destocking, “furniture and home furnishing wholesalers, household appliances, and electrical and electronic goods wholesalers still have very high inventory levels,” OOIDA’s King said.

But it’s too soon to celebrate, another industry expert says.

Despite the ongoing destocking process, a slowing demand for goods and services means there is “no identifiable restocking for the peak season,” Jonathan Chappell, a senior managing director at global advisory firm Evercore, told Insider, referring to the freight uptick in August and October in the lead-up to the holiday season.

Chappell, however, has a pragmatic outlook on the lingering effects of a freight recession on trucking companies: “Capacity will certainly leave the market, but trucking is cyclical.”

“Capacity will leave in droves, demand will recover, pricing will go up, and capacity will come back in droves,” he added.

Source: It will be ‘really tough’ for trucking companies to stay in business if things don’t pick up by Memorial Day, says an American trucking association (msn.com)