Truckload Market Update: April 22, 2020

April 22, 2020 Andrew Herpich

Andrew Herpich, SVP Carrier Sales Coyote Logistics

After settling into a new normal over the past couple weeks, the state of the market is starting to get more complex.

Truckload volume — and subsequently spot rates — continued their descent, and are starting to drive capacity out of the market.

Fuel prices fell off a cliff, and there is a lack of consensus about how and when to reopen the economy.

We will start to get a clearer picture over the next couple weeks, but in the meantime, here are some key things to keep in mind. 

 

8 Things for Logistics Professionals to Know this Week: 

  1. Truckload volume continues to decline, putting more pressure on carriers
  2. Fuel prices continue to decline
  3. States (and consumers) are divided about when to reopen the economy
  4. Consumer confidence in the U.S. supply chain is growing
  5. Shippers are taking action to keep employees and drivers safe
  6. Cargo security needs to be at the top of everyone's mind right now
  7. The Government is adding more support for small businesses
  8. Produce season is having a muted impact

Let's dive deeper into each topic.


 

1. Shipper Demand (and Volume) Continue to Decline

Most of the the country remains under some form of shelter-in-place order. As people stay at home, consumption has slowed down dramatically, bringing down truckload volumes across most industry sectors. 

This lack of shipment volume is pulling down spot rates with it, ramping up the financial pressure on carriers, particularly small carriers, who make up 90% of the industry. 

We talked about it last week, carriers are now faced with a decision: continue to search for profitable opportunities, or park their trucks. Unfortunately, many carriers are being forced to choose the latter. 

Though we have been in similar rate environments during previous market cycle troughs (i.e. 2013 and 2016), there is far more uncertainty surrounding the current situation.

As capacity pulls out of the market, it will likely put a floor on spot rate declines. Chris Pickett, Coyote's Chief Strategy Officer, stated in his recent, updated market forecast

It is unlikely that there is much more room for market rates to go lower from here — regardless of how low diesel prices ultimately drop.

But until there is a recovery in underlying demand, driven by an economic recovery running on COVID-19 time, there won’t be anything to drive rates much higher either.

 

2. Fuel Prices Continue to Decrease

Fuel has now dropped for the 15th week in a row, and with barrels of oil trading at negative levels, that will not likely change in the near future. 

Lower fuel prices have kept carrier operating costs lower than usual, but it is proving to be a double-edged sword, as the wiggle room is allowing spot rates to drop lower than they would in a normal diesel environment. 

The current drop in fuel is one of the key differences between today and the Great Recession in 2008. Even though demand fell off a cliff, fuel spiked, which drove capacity out of the market faster and spot rates higher.

 

3. To Open Or Not to Open, That Is the Question

Everyone agrees: we want to start reopening the economy — but there is less consensus on when and how. 

As sheltering-in-place drags on, a debate has emerged: reopen the country for the sake of the economy vs. staying closed for the sake of public health.

According the Consumer Brands Association research Americans are evenly divided, with 41% leaning toward reopening the economy and 42% leaning toward staying closed.

Not only are consumers divided, but importantly, so are states. 

  • Some states, like Wisconsin and New York, are extending lock downs
  • Others, like Georgia, Tennessee and South Carolina are starting to plan for a reopening

As different states open up at different times in different ways, it will add to the overall complexity, and volatility, in the U.S. supply chain in the coming weeks and months. 

 

4. Consumers Are Feeling More Confident 

Shippers and carriers have been working hard and risking their health to keep essential goods on the shelves, and Americans are taking note.

According to the Consumer Brands Association, food and beverage access concerns, which was the top category for several weeks, dropped again to 64%, 13 points lower than its peak on March 18.

 

 

In contrast, concerns over access to household cleaning products has increased over the past 7 weeks, and is now 20 points higher than early March (74% of respondents total). 

The industry is working overtime to produce as much as possible, with many companies changing production lines to meet demand.

"All things considered, the supply chain of critical goods is working — it’s strained, but it’s working."

- Geoff Freeman, President & CEO of Consumer Brands Association from our live panel, now available on demand

 

5. Shippers Are Taking Action to Keep Employees and Drivers Safe

Though most active shippers have been successfully producing, we are not out of the woods yet. Several large food shippers have had to temporarily shutdown locations after COVID-19 outbreaks at a facility. 

To help keep their people, and incoming drivers, safe and healthy, we're seeing shippers making huge efforts, implementing policies that would have seemed radical just a few weeks ago. 

 

What We Are Seeing From Shippers

  • Widespread use of personal protective equipment (PPE), including face shields, masks, and gloves
  • Increased testing 
  • New production and break room configurations to ensure social distancing
  • Temperature checks of incoming drivers
  • Facemask requirements for incoming drivers

 

Shippers are working together, learning from each other and adopting best practices. To learn more about the top challenges shippers and carriers are facing, check out this recap of our coronavirus expert panel discussion. 

 

6. Cargo Security Is a Priority Right Now

According to CargoNet, there has been a 300% increase in cargo theft over the past month (compared to 2019 figures). 

There are two key issues, arising is response to the COVID-19 crisis, driving this increase in activity:

  1. Prisons are releasing non-violent offenders
    In and effort reduce the spread of COVID-19 in the private and public prison systems, many non-violent offenders — like cargo thieves — are being released into an environment where work is scarce and many goods (food, beverage, household essentials, medical supplies) are in high demand. 
  2. Law enforcement is limiting its scope
    Since many jails and prisons are releasing non-violent offenders, in several highly populated regions, police officers have been instructed to focus their resources on violent offenses. 

 

Right now, everyone in the supply chain should take a proactive and preventative approach to cargo security. 

 

Theft Prevention Best Practices:

  • Keep stationary freight in secure, well-lit areas with fences, controlled access and CCTV whenever possible
  • When parking, back the trailer against a wall or another trailer
  • Utilize padlocks or glad hand locks
  • If you are a driver, conduct periodic inspections of your vehicle, especially after stopping
  • Work with providers you know and trust

 

7. Government Stimulus Package, Version 4

As of Thursday, 4/23, it is looking likely that Congress will pass a $484B relief package, the bulk of which is going to replenish the Paycheck Protection Program (PPP), giving more support to small businesses.

The relief package will include:

  • $310B for the PPP
  • $60B specifically for community banks and smaller lenders
  • $75B for hospitals
  • $25B for testing
  • $60B for emergency disaster loans and grants

 

The recent $2.2T stimulus package included $349B for the PPP. Loans were offered on a first come, first served basis and quickly ran out.

If you would like to read more to find out if you're eligible and how to apply, we compiled a basic Q&A that might be helpful.

You can also visit the the Small Business Association's site for more information.

 

8. Produce Season Update

Produce is shipping, but it is not having the impact it normally does at this time of year.

With the splintering of traditional supply chains, we're seeing a lot more volatility on inbound and outbound Florida lanes, with the typical rate dynamic (cheaper in, more expensive out) not always being the case.

We also usually experience a shipping surge from flower, plant and other nursery loads, but many stores and nurseries are shut down. 

Generally speaking, the usual suspects at this time of year (southern Florida, Texas and California) are experiencing some volatility, but the wider slowdown in freight has kept capacity readily available.

 

Need Help with Anything?

We are here to support you. You can get an instant freight quote or talk to a Coyote specialist, 24/7.  

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Truckload Market Update: April 29, 2020
Truckload Market Update: April 29, 2020

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