Investigative Report: 2016 Trucking Industry Forecast/Expectations

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As the backbone of the American economy, the trucking industry is also an accurate barometer of its health. This industry alone is the impetus behind the movement of almost 70 percent of the freight shipped in the United States. Knowing what is forecast for 2016 — and beyond — helps industry insiders plan accordingly while also creating viable solutions to any perceived challenges. Key findings, expectations and forecasts, gleaned from industry experts, are detailed and consolidated below.

Truckloads

In order to meet the continued demands of the recovering economy, experts within the trucking industry expect the number of truckloads moved by carriers around the country to increase in 2016. According to the American Trucking Associations (ATA), 81 percent of the total revenue seen in the shipping sector was the result of activity by trucking companies. Steady increases are expected with revenues swelling by 66 percent by 2022.

LTL Freight

Already the rates for LTL freight have seen increases that are set to go into effect early in 2016. First, FedEx Freight, the country’s largest carrier of LTL freight, announced in October 2015 that they would start imposing a rate increase of 4.9 percent in January 2016. The second largest carrier of LTL freight in the United States, Con-Way Freight, soon raised their rates as well. Con-Way freight’s rate hike of 4.9 percent, slated to go into effect in fall 2015, is limited only to those businesses that are not under a contract with them and that also use rates that are based on tariffs.

Diesel Fuel Cost Expectations

According to the United States Energy Information Administration (EIA), 2016 should see a continuation of the trend of low energy costs. While diesel fuel is predicted to fetch a price no higher than $2.87 a gallon in 2015, a slight jump to $3.12 the following year is expected. There are several factors that continue to support this prediction. Middle Eastern countries — most notably Saudi Arabia — opted to purchase market shares by dropping prices, but not production while the United States saw its producers of shale oil increase their output. As Denton Cinquegrana, an Oil Price Information Service chief oil analyst noted, domestic producers of shale oil are better at their jobs and more productive these days. Fluctuations in fuel prices could still be expected regionally in 2016 though the overall pricing structure is predicted to remain low.

Trucking Rates

A number of factors are expected to come together in 2016 that are predicted to push trucking rates upward. Not only is the country’s economy expected to continue on an upward tick, the global economy is shaping up for healthy growth as well. Globally, the economy is predicted to grow at about three percent while the United States should see a growth rate of nearly four percent for 2016.

While much of this growth since the recession has been attributed to industry, some analysts think that a significant driver of growth for 2016 will be from consumers. Daniel Broughton, Avondale Partners’ managing director and a trucking industry economist, noted that retail and manufacturing inventories have so far outpaced sales. Consumers will need to step up their purchasing in order to right this imbalance between sales and inventory.

Driver Shortage

The driver shortage that has been a constant issue within the industry is expected to continue to worsen during 2016 as well as for the foreseeable future. The two primary reasons for this shortage — retiring personnel and growth within the trucking industry — are not expected to abate soon. According to the American Trucking Associations (ATA), a deficit of 48,000 drivers is expect as the new year approaches. If the current trend continues, the organization predicts that the shortage will surge to almost 175,000 by 2024.

While retiring truck drivers — the average age of a truck driver is 49 — are the factor behind nearly 45 percent of all new hires, Bill Graves, ATA President and CEO, noted this shortage is not simply one in which the numbers don’t add up. Instead, the quality of applicants is not up to par with minimum industry standards. Through their extensive research, ATA’s chief economist, Bob Costello, stated that the organization found that, “88 percent of carriers said most applicants are not qualified.”

Capacity

In order to accommodate the projected growth of the country, the shipping industry — including trucking companies — will see their capacity reach its threshold. Many within the industry are expected to answer this expectation by increasing their rates or moving toward servicing primarily those shippers that are preferred. In the latter scenario, trucking companies work closely with shippers to hammer out a contract that is mutually beneficial. Doing so ensures that the trucking company’s productivity is maximized while saving their customers time, money and frustration. Another possibility is that shippers will form their own private fleets of trucks to help alleviate their inability to find a trucking company that can accommodate their schedule.

Revenue

According to predictions by the American Trucking Associations (ATA) that are laid out in its report, U.S. Freight Transportation Forecast to 2026, a jump in the revenues for the trucking industry is expected. By 2026, revenues are expected to climb to $1.52 trillion. This trend is expected to continue following occurrences such as the ten percent jump in combined revenue experienced by the 50 largest trucking companies in the country in 2014. That figure represents a growth rate that is nearly double the one seen in 2013. The Journal of Commerce noted that the 21 trucking companies that it follows saw year-over-year revenue increases of 12.2 percent and 10.4 percent in the second and third quarters of 2014, respectively.

Tonnage

Economists with ATA predict that tonnage will fluctuate over the next few months. Much of this change is seen as normal as consumer demand for products ebbs and flows due to seasonal changes. For example, the tonnage index for 2015 was at its highest earlier in the year at 135.8. By August, that figure had dropped to 134.2 even though it represented an increase of more than two percent when compared to August 2014. The ATA Forecast report expects that though the trucking industry will continue to dominant shipping, its share of tonnage will drop slightly. By 2026, that will equate to a 64.6 percent share compared to a 68.8 percent share in 2014.

Some Final Insights

Expect to see more trucking companies launch expansions in the form of an increase in their truck fleet and/or the addition of new trucks. Many of these new trucks will be the Class 8 trucks as projections expect their numbers to increase to 3.98 million by 2026 from 3.56 million in 2015. More trucking industry capital will be poured into recruiting high-quality drivers to meet the demands that the next year will put on these companies. While there is already some of this happening among those carriers that have the resources to do so now, experts predict this trend to continue. The number of acquisitions and mergers will ramp up as company executives remain optimistic about what 2016 holds for them.

Sources:

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