Trucking industry to feel full force of federal regs by 2017

Impact of speed limiters and logging devices will be apparent on truckload capacity by 2017, with 2015 likely a transitional year in which carriers see fewer disruptions, according to investment advisor Stifel.    The transportation and logistics research group of the investment bank Stifel is presuming that the Federal Motor Carrier Safety Administration’s regulatory agenda will not be delayed and that final rule makings for electronic logging devices and speed limiters will be issued by the end of 2015.
   That would require that both rules be fully implemented within two years of the issuance of the final rules – meaning the end of 2017 – Stifel said in an investment note last week. The group concluded these rules will significantly squeeze truck capacity by that time.
   “While many trucking companies may wait until the 11th hour to become compliant with these new rules, others are large enough that they will, as a practical matter, have to feather the new devices into their fleets in 2016 and then in 2017, evolve,” Stifel said. “Therefore, by 2017 we expect that somewhere on the order of 5 percent-plus of the industry’s capacity will vanish as carriers will no longer be able to reduce unit costs by driving too many hours and by driving faster than the posted speed limits.
   “This should create the beginnings of the ‘mother of all truckload capacity shortages’ by the second half of 2017. Truckload freight will spill over into the less-than-truckload industry in a more pronounced way and intermodal volumes will continue to grow as truck lines and railroads forge deeper, collaborative relationships. Railroads will handle a larger portion of the truckload freight moving in long-haul high density lanes, thereby freeing up scarce compliant drivers to serve the shorter haul, less dense markets that cannot typically be handled economically via rail intermodal.”
   Stifel’s estimates are based on steady economic growth through 2017 (around 2 to 3 percent GDP per year) and no other major disruptive factors, like a war or major terrorist attack.
   “We continue to believe that 2015 will be somewhat of a transition year for carriers as 2015 freight flows appear to be less disrupted than 2014 freight flows,” Stifel said. “The year-over-year weather comparisons have been easier in all but a few portions of the U.S. Intermodal service appears poised to improve year-over-year, in spite of some recent discouraging deterioration in service. The West Coast port delays should be cleared up by mid-2015 while some displaced shale workers are re-entering the driver labor pool. All in, 2015 will be a good year, but it may be difficult for some carriers to replicate the contract price increases they received in 2014.”