North American Freight Market Insights

TOP STORY: The expansion of truckload capacity

Trucking jobs returned to pre-pandemic levels

February’s report from the Bureau of Labor Statistics (BLS) offered that trucking jobs were about 2.5% greater than pre-pandemic. The primary growth area for trucking jobs is the local trucking sector, with long-haul and LTL just over pre-pandemic levels and specialized trucking like flatbed, tanker, and dry bulk still lagging pre-pandemic employment numbers.

The BLS Preliminary March numbers appear to show little change from February. This apparent ongoing struggle with trucking employment seems a bit incongruent with the growth of the for-hire truckload market in 2021.

Capturing the self-employed trucking jobs is a bit problematic and it is accepted that BLS figures miss some percent of those jobs, suggesting that trucking employment is likely even stronger than shown in these figures.

The growth of small carrier fleets

The below graphic shows the company sizes that make up U.S. for-hire truckload fleets for 2021.

Here are some top line insights from this work:

• Capacity growth continues to be concentrated in the smallest fleets
• Within each fleet size segment shown, the distribution of companies is concentrated to the smaller sized fleets
• The U.S. truckload market continues to fragment—with an increasing company count and tractor count in the owner-operator community
• Registration data suggests that growth in the 2021 fleet was driven by new entrants or returning drivers versus solely migration from large to small carriers

How we develop the graphic
Using the MCMIS data from FMCSA, C.H. Robinson works with the data to discern the for-hire truckload capacity from the vast array of transportation companies in the dataset.

When studying the carrier market, one challenge is in discerning the market role of the smallest carriers. Are they serving as an owner-operator or as an independent contractor to a larger carrier?

As capacity migrates, it leaves the possibility of some tractors being included in a larger carrier count both as independent contractors and as an owner-operator. We have continually improved our methodology since 2015, but largely follow a similar process, giving confidence in the broad market trends and consider these insights directionally accurate.

• We encourage you to engage your C.H. Robinson representative with questions about this work and insights on the market.

Market speculation: Will there be another shift in capacity?

With the lessening of tension in April, there are some forecasting material contraction of capacity due to bankruptcy. The argument is that the combination of the rapid rise of diesel pricing and the softening of tension will result in lower cost per mile in the spot market and cause undercapitalized carriers to experience negative operating ratios and file for bankruptcy.

The apparent correlation between rising diesel costs and bankruptcy
The rapid change in the price of diesel is problematic for carriers as they can’t amend pricing fast enough to offset the portion of diesel expenses (empty/repositioning, idle, and looking for parking miles) not included in fuel surcharges.

Data to prove this out is problematic, but looking at voluntary revocation of operating authority supplied by the DOT, we see that through Q3 2021, roughly 4% of revocations of operating authority were voluntary each month. Q4 brought increases of 5 and 6%.

It is likely that the current environment will cause some percent of the smallest carriers to either leave the industry or sign on to a larger carrier as an independent contractor. The first results in some loss of capacity while the latter shifts capacity.

Of note, a driver leaving the industry does not necessitate that the tractor is parked or scrapped. Especially in today’s robust used truck market, the likelihood of the tractor being sold and put into service at another carrier is very plausible (and at that, carriers still could face a loss because these new entrants, likely purchased the equipment at a premium). As such, reduction of the active carrier community does not necessarily reflect a one-to-one loss of capacity.

Please connect with your C.H. Robinson account team to discuss the market further and discern if your transportation strategy might benefit from some amendment to address today’s capacity market and long-term trends through the cycles of an ever-expanding small carrier industry.

Roadcheck 2022: an opportunity to prepare

The Department of Transportation (DOT) schedules a three-day event each year to focus on roadside safety inspections of commercial vehicles. Historically this event has been in June. In 2020 due to the pandemic, it was rescheduled to September and in 2021 it was moved forward to the first week of May. This year, the annual event is scheduled for May 17–19.

Historically, the trucking market has seen some undefined percent of truckload capacity takes some time off during this annual event, effectively reducing the active truckload capacity in the United States.

Planning insights for this year’s Roadcheck event
Using our insights on the spot market during past Roadcheck weeks and early insights from active research C.H. Robinson has sponsored at MIT’s Center for Transportation and Logistics, here is some perspective to plan for the annual event.

DAT’s load to truck ratios during Roadcheck week are shown in the visual below for the dry van spot market. The key insights are this:

• There is a notable reduction in posted trucks to DAT for four days, showing a one-day lag after the three-day event for capacity to return
• When the spot market is at exceptional tension levels (like 2018 and 2021 shown here against an 11-year average) the impact is substantial
• The 11-year average shows an immediate contraction of active capacity that lasts roughly four days (Day 1 through Day +1)

Preliminary results on current research sponsored by C.H. Robinson with MIT-CTL on route guide performance suggests Roadcheck week impacts route guide performance as well. These are only preliminary findings, final results will be available later in 2022.

• Route guides do experience some reduction in first tender acceptance (the tender to the primary/awarded provider).
• It is the lower volume lanes that see the greatest rejection of tenders from primary suppliers leading to coverage from back-up providers or the spot market.

Be prepared for some capacity challenges in any market during this period. Our research of spot and contract markets covers both low- and high-tension markets. The higher tension markets see many more issues than low tension, but all markets show consistent underperformance for four days.

Spot market, committed market, and capacity insights

Spot market under continued pressure

As discussed in the opening of this report, all three primary truckload segments are showing improvement in load to truck ratio (LTR) tension in the spot markets.

The charts below show six years of DAT’s LTRs. The red line represents 2022. A 3:1 LTR for dry van can be considered a reasonably balanced market, while balanced for refrigerated is closer to 6:1 and flatbed considers 20:1 balanced. The spot market is a leading indicator of the broader contract market, providing insights to market tension and direction of evolving price.

The year opened with January and early February showing the impact of reduced active capacity because of increased absenteeism from COVID-19 Omicron infections. As absenteeism has subsided, more stability has come to the active capacity market and LTRs for van and refrigerated equipment have lessened.

March brought a trend of fewer loads being posted in the spot market against reasonably consistent truck postings, resulting in lower load to truck ratios and with it, a lower tension experience.

Normally, the broader contract market would see this as indicative of price relaxation forthcoming. The current lessening of the spot market, while notable, will likely not see as severe contraction in pricing as some might expect due to the very real increases to the cost of trucking in 2021, which was around 16% and forecasted for 2022 at roughly 9%.

These increased costs come from increases in labor, new equipment, repair and maintenance, finance charges, and insurance. The floor cost of operations correlates with the market floor. As pricing approaches the cost of operations, capacity exits the market through business closures and retirement of aged assets. This in turn brings tension back to the market and pricing stability for carriers.

Dry van LTR

The dry van LTR is currently in the range of a balanced market. Watch the economy, any resulting load volumes, and potential contraction in capacity.

Refrigerated van LTR

Like dry van, refrigerated LTR shows a similar pattern of softening to a more balanced market. However, the refrigerated market is at the beginning of produce harvest season. There is normally a slow drift upward on this LTR visual from this point forward due to the increased volume of fresh produce shipping.

Flatbed LTR

As shown below, flatbed started the year greatly elevated from historical norms with improvement starting in week 11. This lag in softening as compared to the other modes may be a result of the persistent driver shortage (as compared to pre-pandemic) in specialized transportation that the Bureau of Labor Statistics has been citing. See the flatbed section of this report for more insights on the industries/products driving the flatbed experience.

The first half of 2022 is offering a shifting experience. Keep a close eye on these early forecasts due to key influencers on the economy and freight market. Inflation, consumer shifts in purchasing, and the Russian invasion of Ukraine, are just a few influencers with a possible impact on supply chains and the global economy.

Dry van DAT LTR by region
The 6-year aggregated view of the U.S. spot market shown above is broken down below for the dry van spot market by 3-digit ZIP code regions. This view helps demonstrate the meaningful variance across markets—some have plentiful capacity, while others struggle to keep up with demand.

The 3:1 national average has regional ranges between 1:1 to over 16:1. Most notable is the relaxation of pressure on the West Coast after months of record capacity issues. This relaxation of pressure exiting California has however made inbound routes to California problematic as carriers struggle to find loads back inland.

Mexico’s cross-border situation continues to be out of balance with the flow of goods Northbound being double to triple those moving Southbound.

Most (75%–85%) of the U.S. for-hire truck market is moved through commitments most often managed via hierarchical route guides. What follows are some perspectives and notes on today’s contract truckload environment.

Companies commonly use waterfall (or hierarchical) route guides to manage awarded freight on lanes with some level of demand pattern predictability. The following insights are derived from TMC, a division of C.H. Robinson, which offers a large portfolio of customers across diverse industries throughout the United States.

Two key metrics of route guide performance are first tender acceptance (FTA) and route guide depth (RGD). RGD refers to how far into a route guide a shipper must tender shipments before carriers accept loads, or the average number of tenders per load. FTA is a percentage of how often the awarded primary transportation provider accepts their shipment tenders.

The chart above from TMC, a division of C.H. Robinson, reflects weekly RGD regionally across the United States through the week of April 10–16, 2022.

During the week of April 10-16, 2022, the overall RGD improved to 1.45 from 2.16 a month ago. This meaningful change was driven by all distance bands and regions. The week of April 10th saw the Midwest struggle some, but the longer trend of it and the other regions has been continual improvement since the first week of March. TX lost some performance, largely associated to the Laredo cross border region, with the South East states of AL, GA and the Carolina's holding or worsening with produce season under way. The Midwest saw the most route guide degradation with SD dropping back 9%, IA losing 15%, MO down 5% and IL off 3%.

March’s FTA showed continued improvement

• The month saw another percent improvement to 82% from February's 81% and the pandemic period low at 79% in January. For perspective, February 2021 FTA was 82%. 80–82% FTA has been the range of performance since the reopening of the economy in 2020 with the exception of December 2021 and January 2022. For some additional context:
• Week of March 3, 2019, FTA was 89% and RGD was 1.21
• Week of Feb 23, 2020, FTA was 90% and RGD was 1.17

It is helpful to watch both FTA and RGD metrics. While FTA has largely been consistent during the pandemic period, it is RGD that provides additional context on the contract freight market. Shippers are likely first seeing RGD numbers improving as back up carriers are more able to accept primary carrier rejections. What follows is continued improvement of FTA and sending fewer loads to back up carriers. Should the market against start to display tension due to increased load volumes or some contraction of capacity, then FTA and RGD will show some erosion.

RGD across distance bands

• For March, all three distance bands experienced improvement in RGD as tertiary providers increasingly accepted primary provider rejections. For additional perspective we offer the first two weeks of April and pre-pandemic comparison:
• Short haul (less than 400 miles) continues to outperform the longer distance bands since April 2020 with minimal variance just under 1.4 RGD, which is still elevated from 2019 and the first half of 2020 levels, which were in the 1.1 to 1.2 range.
• Middle distance (400–600 miles) dropped just below 1.5 for the first time since pre-pandemic only to bounce back up the week of April 10-16 to about 1.55, which is much elevated from 2019 and the first half of 2020 levels, which were in the 1.3 to 1.4 range.
• Long distance (over 600 miles) has the been the distance band to struggle the most since pre-pandemic but has steadily improved since the week of February 20th from about 1.85 to 1.45 the week of April 10-16. Like the other distances, it is well above 2019 and the first half of 2020 levels, which were in the 1.1 to 1.3 range.

The C.H. Robinson 2022 forecast has been through multiple amendments from our initial December forecast of a 3% Y/Y annualized average rate per mile increase to 9% (including fuel). With the current environment showing decreasing tension, our forecast continues evolving to reflect the ever-present market influencers.

With both the lessening of tension in the market and the elevated cost of diesel, this latest forecast is offered net of fuel. Shown below is the forecast without fuel. The end of year continues to show correction to a lower cost from the COVID-19 Omicron disruption of January and February and where the market started the year. The Y/Y annualized increase is now at 0% without/net fuel where it was 8% in our February forecast.

Note the precipitous drop in load to truck ratio starting in mid-January. The Omicron variant of COVID-19 created a meaningful amount of absenteeism in the trucking industry, effectively reducing active capacity against decent load volume demand. As absenteeism improved and capacity returned, balance was restored, and the market started to feel the growth of the owner operator capacity of 2021.

Current load to truck ratio of 3:1 is at a level that is historically seen as a balanced market. However, perspective is warranted, by drawing attention to the five-year average of 1.8 load to truck ratio. Today's market is considerably tighter than average and at the bottom of the annual cycle. It is from this point on that the compounding events of produce season and holiday imports in the latter summer bring freight volumes and sustained pressure. The open question is, will 2022 be a year of average, above, or below that five-year trend line? Watching key economic and freight indices in the coming weeks and months will be helpful in discerning how the balance of the year unfolds. Finally, the DAT spot market Van cost per mile (CPM), CPM including fuel (red) and without fuel (dark blue) demonstrate the impact of diesel freight pricing.

Forecast models will evolve due to dynamic variances

As many model inputs continue experiencing variances, expect this model to evolve as inputs vary. Additionally, C.H. Robinson will continue to apply its broad market costs and market experience to the forecast and continue to present updates on a regular cadence.

Imports and inland transportation

The following insights offer some perspective on global import freight flows and the impact on the transition to North American surface transportation moves

Disruptions in China

Supply chain disruptions due to COVID-19 infections in China continue as Shanghai’s three-week lockdown continues to help control the spread of infection.

Additionally, Guangzhou infection cases are increasing, while the situation is fluid, continue to monitor regularly.

These disruptions create supply chain gaps and irregularities in shipping across North American ports, inland trucking, and intermodal services.

Labor negotiations face upcoming deadline

West Coast port labor negotiations continue with a July deadline. Some shippers are considering port diversification strategies to mitigate risk.

Airport terminal statuses

Many U.S. airport operations continue to have elevated recovery times for import goods—creating long dwell events for trucking—compared to pre-pandemic conditions. However, there are fewer extreme delays as demand has softened in the first quarter of 2022 and historically challenging terminals at LAX are operating rather smoothly.

Your C.H. Robinson account team is ready to help with port and inland strategies. For additional ocean, air, and global insights, view our April Global Freight Market Insights report.