KeyBanc warns investors of a ‘trucking winter’ amid anemic economic conditions

Spot rates have already declined by 30% compared to last year, Fowler and Blake wrote. And now, they’re expecting trucking’s larger contract market to suffer as well — to the tune of mid-single-digit percentage declines. 

“[G]iven macro pressures to slow economic demand and the potential related impact on freight activity, we are more inclined to prepare for a ‘trucking winter’ before a ‘trucking spring,’” they wrote.

Is trucking’s ‘Great Purge’ ahead? 

Some trucking insiders believe the industry is headed for the “Great Purge” or even a “bloodbath.”

Part of that is thanks to unusually high inventory levels at retailers like Target, Kohl’s, Walmart and Amazon. Many retailers appear to have prepared for the holiday season earlier this year, anticipating disruptions in importing goods from manufacturing hubs in East Asia. 

However, the growth in consumer demand has slumped from 2021, and it’s left retailers with more stock than they may have anticipated. That means the traditional peak season that carriers experience each fall may be muted. 

Meanwhile, spot rates in America’s $800 billion trucking industry have collapsed in 2022. According to the FreightWaves National Truckload Index, spot rates have declined by nearly 33% from the beginning of this year to the beginning of October. Meanwhile, the costs to run a trucking company, particularly fuel spending, have only increased — putting the pressure on small truckers in particular to make ends meet.

This decline is driven both by overcapacity, in which too many truck drivers jumped into the red-hot market of 2021, and softening demand.

Spot rates are now 25%-30% below contract rates, KeyBanc’s analysts wrote. Usually, those rates are 5%-10% above the contract market — and that’s why the team believes contract rates will decline by mid-single digits.

Do you work in trucking? Are you seeing the “trucking winter”? Email rpremack@www.freightwaves.com.