Overall, 2016 was a year of relatively loose capacity. Don't count on the same for 2017. A number of looming factors could put a squeeze on capacity in the coming year. Here are five:
The biggest factor affecting capacity is, of course, the volume of freight that brokers are asked to move and the number of available, qualified trucks to move it. And although demand started out weak at the beginning of 2016, it sure did not end the year that way. Beginning in mid-2016, there began a steady climb in the load-to-truck ratios for vans, reefers and flatbeds. These ratios represent the number of loads posted for every truck posted on DAT Load Boards, and are an indicator of spot market demand relative to capacity.
The December DAT Freight Index revealed that spot market demand increased for six straight months in the latter half of 2016. Comparing December 2015 to December 2016, van freight availability increased 52 percent, reefer demand was up 55 percent, and demand for flatbeds increased 48 percent.
The ELD mandate is now less than one year away. That means that after December 17, 2017, all heavy-duty trucks (with a few exceptions) must use electronic logging devices (ELDs) to log their hours of service. While large carriers have been using ELDs for years, many small fleets and owner-operators have yet to make the switch from paper logs.
Industry predictions about the reduction of capacity following the mandate vary from 3-5 percent, to 6-10 percent. In our recent blog post Brokers Concerned About ELDs Too, one broker noted that fewer than half of his carriers currently use ELDs. Another said he intends to poll his core carriers to see how many have implemented ELDs—and update the figures monthly throughout 2017.
Increased scrutiny of drivers
In a time when truck drivers are already hard to find and retain, there are a number of new regulations under consideration by the FMCSA that could further chip away at the number of drivers. There are proposals to test drivers for sleep apnea, use hair testing to check for drug use, and to create a database of drivers who have failed a drug or alcohol test.
In addition, the FMCSA recently completed public comment on a speed limiter rule that could force drivers to drive slower than the posted speed limit in certain states. A reduction of even a few miles per hour, multiplied by the thousands of miles a driver logs each year, would be yet another hit to productivity.
Rising fuel prices
Diesel prices have risen 59 cents per gallon since February, and analysts are predicting prices to continue to rise in 2017. The Organization of Petroleum Exporting Countries (OPEC) announced that they plan to cut production this year and, at current prices, there's not much incentive to increase U.S. oil production.
For carriers, the cost of fuel is their second-highest expense, behind personnel costs. When fuel prices rose sharply in 2008, the number of carrier bankruptcies also spiked. Fleets and owner-operators who have hobbled along financially while prices have been low, could be pushed over the edge if fuel prices rise significantly.
As traffic congestion increases, productivity decreases. Highway funding bills have hit roadblocks in congress and are often short-term measures that maintain spending at current levels. Although the incoming Trump administration has proposed big increases in infrastructure spending, it's unclear whether Congress will support the new president's aspirations.
Underfunded infrastructure exaggerates other trucking problems, such as the lack of parking for truck drivers to take their mandated breaks. This problem will only get worse with the ELD mandate, as electronic logs won't allow any wiggle room when drivers needs to take their required rest breaks or stop for the night.
Freightliner’s Team Run Smart is partnering with DAT to offer a special on the TruckersEdge load board to its members. Sign up for TruckersEdge today and get your first 30 days free by signing up at www.truckersedge.net/promo717 or entering “promo717” during sign up.
* This offer is available to new TruckersEdge subscribers only
About TruckersEdge®, powered by DAT®
TruckersEdge® Load Board is part of the trusted DAT® Load Board Network. DAT offers more than 68 million live loads and trucks per year. Tens of thousands of loads per day are found first or exclusively on the DAT Network through TruckersEdge.
This article was originally featured on DAT.com.