2016-The State of the Freight

December 31, 2015


Gosh, what a change a year brings.  We started 2015 coming off one of the craziest trucking years for freight in the history of trucking.  In 2014, a combination of weather, strikes at western ports and a supply/demand balance that finally shifted to the carriers, allowed ACT and many carriers to raise rates significantly for the first time in a long time.  We were busier than I have ever seen and we simply couldn’t cover all the loads.  The timing couldn’t have been better because this coincided with the most severe shortage of good drivers in the history of trucking.  Raises to customer means we can raise drivers which we did…several times.  The way this works is we get the increases from customer, then we increase driver pay. In many ways this was a perfect storm for ACT and its drivers.

2015 was much different.  Although our numbers show that we delivered a similar number of loads as 2014, the freight seemed softer.  Throughout the trucking industry, carriers, economists and industry analysts talked about how it was softer.   Yet, the memories (and lessons) of 2014 were still fresh in the customer’s minds and again we were able to increase rates and driver pay.  As we conclude 2015, we know that customer’s inventories are bloated and normally this is bad for truckers until this is worked off.  Yet, we had some record weeks leading into Christmas.  Now some customers are feeling like they can get rate reductions.

So what is going on?  If we could all predict that we would make a fortune.  But there are some things I can say with confidence.  For one, I know that when it is slow here at ACT it is slow everywhere.  How do I know that?  Because we have extensive contacts throughout the trucking industry and are in touch with those folks on a regular basis.  We have Wall Street analysts call us on a regular basis to find out what is going on.  At the same time we pick their brains for what they know and what they hear from other carriers and shippers.  We keep current with all the industry and economic publications.  So we are plugged in…at least as much as you can be.  What we have seen throughout the years is that whatever we are feeling is usually what others are feeling.  I will say that others have been feeling slow.  Fortunately at ACT, although things are slower than 2014, it seems that we are doing a little better than most companies.

We are also tuned in to the seasonal aspects of trucking. We know that January and February are usually bad months.  We do have a lot of winter friendly freight.  Batteries and insulation do well during the winter.  By March our three home improvement store retailers are usually gearing up nicely.

It is important that drivers understand the state of the freight.  In the past, I have often seen what I call the “Spring Migration.”  We see our turnover go up and our recruiting go up.  What is going on?  Well, after it has been slow for a while drivers start leaving….not just here but everywhere.  So as our trucks empty of drivers who know ACT, they fill with drivers who don’t.  This really adds punishment to the pain for drivers who job jump when it gets slow.  The freight conditions are similar at the carrier they leave to go to as it is for the carrier they leave.  The go from a system they know to one they don’t.  And they waste a week in orientation.  All this costs that driver money.  And it doesn’t change their problem, which is that they did not store their nuts for the winter.

What can we expect for the first quarter of 2016?  We know that customer’s inventories are too high.  When this happens, they quit building things until their inventory is lower.  This hurts manufacturing.  All manufacturing indexes are down to their lowest levels in years.  What is the solution?  Eventually their inventory sells out and they must start building and shipping again.  We have a strong Dollar.  This hurts manufacturing because many customers sell their products overseas.  When the Dollar is strong their price is higher.  Thus fewer people buy their products and fewer are made.

One highlight in the economy is the price of fuel.  This is one of those things that helps some and hurts others.  If you work in the oil industry you are probably hurt and laid off.  If you don’t you have seen your disposable income rise as you spend less of fuel.  70% of the economy is consumer spending so anytime consumers have more money that is a good thing.

Automotive and housing are great right now.  Good for us as we are involved in automotive and insulation other items such as flooring and appliances.

So all in all it is mixed bag.  We are adding salesmen to make sure we are out finding the best freight 52 weeks a year.  We know the winter is slow for everyone.

At some point electronic logs will become a big deal and reduce capacity.  That leaves more freight for us.

All in all, I think 2016 will have decent freight….not like 2014, but pretty good.

Happy New Year and Happy and Safe Trucking!


We're Ready When You Are.

Interested in driving with ACT? Call us today to speak with a recruiter or if you're ready, go ahead and fill out an application.