Truckload Market Update: April 15, 2020

April 15, 2020 Andrew Herpich

Andrew Herpich, SVP Carrier Sales Coyote LogisticsOver the past week, we've seen a continuation of recent trends as sheltering-in-place stretches on: volume is tapering off as demand continues to drop and after an unusual March, things are settling down as Americans settle in.

Here are 6 things to keep in mind over the next week as you continue to work through this pandemic.

6 things for supply chain professionals to know as of April 15, 2020:

  1. Carrier costs are starting to bottom out
  2. Market volatility is on the horizon
  3. Consumers are preparing for the long haul
  4. Industry volume is down, but CPG is still moving
  5. Hand sanitizer is on the way
  6. Produce season update

Let's dive a little deeper into each topic. 


 

1. Carrier costs are starting to bottom out

As we mentioned last week, until sheltering-in-place measures start to peel back, volume — at an industry level — will be muted.

As demand is decreasing, so are spot rates. This isn't true of every lane in all regions, but generally speaking, freight rates are deflating fast. 

While the operational costs for carriers to manage a truck haven't changed in the last four weeks, the cost per mile they are typically receiving has lowered significantly. This dynamic is putting financial pressure on carriers.

We are getting closer to the point where carriers are going to have to make a choice:

  1. Continue searching for any and all available freight, and try to keep trucks loaded
  2. Park some of their equipment

Though a few have started opting for the latter, it isn't happening at a widespread level yet, aided by the fact that diesel has decreased 14 weeks in a row.

That said, every week that goes by pushes many carriers closer to a rate-per-mile level where parking the truck makes more fiscal sense than running it.

 

2. Market volatility on the horizon

Though this dynamic isn’t good for anyone, it isn't necessarily a surprise either — it is the volatile nature of the U.S. truckload market that we have been observing for years, albeit happening at a much faster pace than is typical.

Just because we have reached a little more stability in the past couple weeks (compared to March), doesn't mean that it will remain that way. As capacity exits the market due to declining rates, it will alter the supply/demand balance. 

We anticipate the next several months to be choppy as these two forces vacillate — each week the market could look different.

To watch Coyote leadership discuss the current state of the market and updated forecast, tune in to our live expert panel on 4/16 @ 10:00 AM CDT.

 

3. Consumers are preparing for the long haul 

According the CBA, 91% of Americans are concerned about the impact of the coronavirus. This has driven Americans to play their part in defeating the pandemic, which means stocking up and staying home when possible.

76% of Americans now feel they are prepared for the coronavirus’ impact on their life, a significant improvement from a month ago.

While this is a positive development, our collective hope of when normal activities will resume has also decreased — 67% think shelter-in-place orders will be lifted by early summer, compared to 75% in last week's survey. 

Long story short: now that many have stocked their pantries and don't anticipate a return to normalcy for several weeks at least, overall volume will likely continue to drop. 

 

4. Consumer Packaged Goods are resilient

Not all volumes are down. At a time when many shippers are slowing down (or going dormant), some industry verticals are booming. 

Consumer packaged goods (CPG) manufacturers are ramping up production and grocery stores are implementing item limits to prevent overbuying.

After the initial surge, supply is starting to catch up  — according to a Consumer Brands Association survey, 55% of respondents are seeing more availability and restocks of high-demand items. 

So what's in high demand? Cleaning supplies, personal care items, food and beverage and OTC medications, with well over half of respondents concerned about access to each product. 

Most concerns have slightly decreased, with the exception of household cleaning products.

 

 

5. Hand sanitizer is on the way

Speaking of cleaning products, the U.S. Department of Transportation (specifically the Pipelines and Hazardous Safety Materials Administration) recently granted an emergency order for the ground transport of hand sanitizer. 

Requested by UPS and reported to us by their SVP of Transportation Policy Tom Jensen, this permits the shipping of alcohol solutions used to manufacture disinfectant products as limited quantity shipments under federal hazardous material transportation regulations.

In short: it will now be easier for re-purposed distilleries, now producing alcohol for cleaning products, to ship these healthcare products. 

You can read how Eastern Kille Distillery in Grand Rapids, MI worked with Coyote to get hand sanitizer to our network carriers on the front lines. 

 

6. Produce Season Update

The pandemic doesn’t mean produce shipping will stop, and a generally softer market across the country won't stop Florida and Texas spot rates from rising. 

Though these markets will not see the kind of rate spikes that is typical, and capacity is generally available, Florida (particularly the southern half) and Texas (particularly Laredo) are noticeably different markets than the Midwest and other areas of the country right now.

 

Need Help with Anything?

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