Loaded and Rolling: Knight-Swift CEO pans under-21 driver push; falling contract rates shutter North Carolina carrier

“This had an immediate and very devastating impact on our ability to make payroll, let alone cover our rent, truck payments and other expenses,” said Joyce Siqueira, vice president of operations for FreightWorks, in the video reviewed by FreightWaves. “Several other events that same day compounded these already overwhelming challenges. In an incredibly weak freight market, we are simply unable to replace this lost freight with enough profitable work for us to be sustainable.”

One challenge for medium-size carriers is the lack of varied customer mix, which can be a detriment if rates fall below operating costs. FreightWaves’ Clarissa Hawes noted: “The company had survived previous freight recessions because FreightWorks was largely insulated by its contract customers. Siqueira assured employees and drivers that concessions demanded by its customers ‘were solely due to market pressures’ and had nothing to do with the truckload carrier’s execution and performance.”

Market update: LMI data shows record transportation price decline

On Tuesday the Logistics Managers’ Index released February data showing transportation costs falling 5.9 points, the fastest rate of contraction in the 6.5-year history of the index. Compared to the January reading of 42, February came in at 36.1 index points. A quick reminder: Any reading above 50 on this index equals an expansion, while a reading below 50 signals a contraction.

Regarding reasons behind the drop, the report noted: “After Transportation Prices increased in January, we had postulated that this could be a sign of recovery in the transportation market. It seems now that was not necessarily the case. While the freight recovery has not yet begun, it does seem that we may have hit, or at least gotten close to, the bottom of the market.”

The decline in transportation prices are also being reflected in spot rate declines. FreightWaves’ Todd Maiden wrote, “The rate commentary in the report was similar to the movements seen in FreightWaves’ spot truckload rates. Spot rates stepped notably higher in late December and early January but declined through February.”

FreightWaves SONAR spotlight: Spot-to-contract spread widens

Summary: The gulf between contracted and spot linehaul rates less fuel continues to widen. The 84-cent difference between the two indicators continues to put pressure on carriers to prioritize contracted committed volumes, but carrier size and the access larger carriers enjoy continue to bifurcate the freight environment. 

For large carriers, this phase of the trucking business cycle involves soliciting new and existing customers for lanes while adjusting rates to remain the incumbent carrier through rate concessions or service-level improvements. Lower rates turn the focus toward improving revenue miles, reducing dwell times and eliminating empty miles.

The only winners at the moment are shippers, who are receiving a welcome reprieve from record transportation costs brought by pandemic-related consumer demand changes. Their challenge during this cycle is how deep and to what extent they push for rate reductions. How they manage their routing guide will be key if predictions that rates will level out by the second half of 2023 come to fruition.

The Routing Guide: Links from around the web

FMCSA’s Hutcheson: Revised guidelines by summer for drug hair testing (FreightWaves)

Tom Love, co-founder of Love’s Travel Stops, dies at 85 (FreightWaves)

FreightWaves Academy learning platform launches (FreightWaves)

ATRI asks carriers to share per-mile costs in annual survey (Transport Dive)

Why Class 8 truck orders are outperforming shaky economy (FreightWaves)

A new deal will make Lunchables more powerful than ever (FreightWaves)

Like the content? Subscribe to the newsletter here.