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Soaring inflation and crashing rates are sparking trucking’s ‘Great Purge’ 

The last trucking market crash was in 2019. The current market could end up worse for small truckload fleets.

The freight market crash in 2019 was caused by two factors – a freight slowdown due to tariffs on Chinese imports and a surge of new fleets flooding the market, even as rates continued to fall. 

Until 2019, we had never seen that many new fleets enter the market, especially during a market downturn. During 2019 an average of 7,200 fleets entered the market per month compared to an average of 5,200 fleets per month during 2008-18. 

Chart showing total count of new trucking fleets

The 2019 drop in freight volumes wasn’t significant. At their deepest trough, tender volumes registered a 4.6% drop in year-over-year load requests, and that lasted for just a few short months (May-July).

Chart showing Outbound Tender Volume Index

Trucking is a commodity and anyone that has been around commodity markets understands that it doesn’t necessarily take a dramatic move on one side of the market to change the balance of supply/demand and cause significant price swings. 

In 2019, the trucking market already had too much capacity relative to demand. The year-over-year decline was only in the mid-single digits. But, it was enough to push rates below carriers’ operating costs.

Removing the cost of diesel from the spot rate, here is what the market looked like in 2019 (van per mile): 

Low: $1.51

Average: $1.59

High $1.75

Chart showing FreightWaves National Truckload Index

We are nearing 2019’s rock-bottom, inflation-adjusted spot rates

Trucking companies have much higher operating costs now than they did in 2019, even when removing fuel from the number. Every fleet’s operating cost will be different, but using data from TCA, ACT, and FreightWaves’ own analysis, we can draw some conclusions about the cost increases that a fleet would experience in 2022 compared to 2019. 

Assuming a fleet averages 6,500 miles per truck per month and purchased a four-year-old used truck in 2019 at $50,000, plus sales tax, financed for five years at 5% interest, the monthly payment would cost around $0.15/mile. With used truck prices surging during the pandemic, a four-year-old used truck last fall would run $77,000. If the vehicle was financed with similar terms, the per mile cost would be around $0.23/mile.   

Chart showing used truck prices

A driver employee with experience working for a top-paying fleet can expect to make around $0.62/mile. In 2019, the same driver would have made around $0.47/mile. 

Higher variable operating costs include insurance (+$.02/mile), maintenance (+$.06/mile), equipment (+$.08/mile) and driver wages (+$.15/mile). 

All in, variable costs have increased at least $0.31/mile more for fleet operators in 2022 compared to 2019. These numbers are likely understated, as they don’t include increases related to back-office operations and support staff, which can vary widely among fleets. 

Adjusting the 2019 numbers, the rates per mile total: 

$1.82 (low) 

$1.90 (average)

$2.16 (high)

The current spot rate (net fuel) is $1.95/mile. On a variable cost-adjusted basis, the trucking spot rates have matched 2019 since May 2022 – $2.16/mile and since have dropped $0.21/mile. It’s likely to get worse. The month of May typically has among the highest rates we’ll see all year, with July and August being some of the weakest months. 

FreightWaves National Truckload Index

It is conceivable that spot rates will drop below the inflation-adjusted 2019 low of $1.82 per mile in July, since there doesn’t seem to be any near-term market catalysts to drive additional demand. 

U.S.- bound container volumes, which have been driving a substantial amount of the freight surge in the U.S. trucking market since 2020, are seeing a significant drop, as reported by Henry Byers, FreightWaves’ senior global trade analyst.  

There are also the economic challenges that are apparent in the economy, including record-low consumer confidence, declining construction and industrial activity, surging inflation, and a Federal Reserve that is determined to slow the economy down to tame inflation, even if it means putting the economy into a recession. 

All of this means that the freight market will likely encounter additional headwinds and there are more reasons to believe that trucking spot rates have further to fall. 

Capacity matters 

Of course, trucking is a two-sided market. Demand is only one part of the equation; capacity also matters. 

Capacity is really just a function of how much dispatchable capacity is in the market. Like 2019, the trucking industry has seen a record number of new entrants enter the trucking market to take advantage of what were strong market conditions and record high spot rates created because of government stimulus over the past two years. The number of new entrants into the trucking industry nearly doubled the 2019 monthly record average. Since 2020, the monthly average of new fleets entering trucking has increased to 13,370 per month, up from 7,200. In April, the number hit 23,479. 

Count of new truck fleets authorized for hire.

This large number of new entrants means that the trucking industry has many companies that are brand new, have higher cost structures (because they joined when the freight market was peaking) and that have never experienced a downturn. 

This massive surge of dispatchable capacity was built for a market that had much more freight activity. If the economy contracts further, it could spell disaster for many of the most vulnerable operators. 

The summer doldrums 

Even if the economy doesn’t contract, July and August are always slower than June. It is the time of the year when supply chains take a break and get ready for the retail surges that typically begin after Labor Day. 

The retail surge is a really important part of the freight calendar and often offers some of the highest spot rate opportunities. In the first half of the year construction, auto, beverages, and fresh produce drive the surges in trucking. 

In the second half of the year, surges are caused by retailers scrambling to get inventories placed for the holiday shopping season. That may not happen this year, with many retailers’ inventories overstocked. Since their warehouses and distribution centers are full, they are reluctant to add additional inventory to their supply chain and will focus their efforts on liquidating what they currently have in stock. 

Trucking spot rates will not increase significantly until the Great Purge is over

As long as the market has excess capacity, freight rates will remain depressed. It will take a substantial purge of capacity before spot market carriers can expect relief. 

FreightWaves editorial director Rachel Premack covered this topic last week in her article titled “the Great Purge.”

The unfortunate reality of trucking is that the market is often “feast or famine” and with so many new mouths to feed, the famine this year could be much worse than was experienced in 2019. 

Are you interested in accessing the high-frequency data presented in this article? SONAR is the leading platform for supply chain market intelligence, built around high-frequency supply chain data and analysis.  

9 Comments

  1. I look forward to the day that new freight broker company comes riding into USA. It will provide full transparency showing actual load rates with the rate confirmation. Which will show that they only keep 15% of the load instead of 50%. This freight broker will be providing justice to all carriers of all sizes. That day all the corrupt and money hungry freight brokers will then find themselves entering the Great Purge!

  2. Mr. Fuller,

    You state that the freight market crash of 2919 was caused by two factors…tariffs on Chinese imports and surging capacity. The first reason may be valid, but you didn’t mention- too many interest rate hikes by a rookie Fed Chairman, trying to reign in the booming Trump economy (resulting from his tax and regulations cuts).

    We feel your “tariffs” angle puts the onus on Trump, who took the chains off the economy after eight years of it being strangled by Obama…whose average annual GDP expansion rate was 40-45% worse than all preceding presidents!

    TR Sorvlet
    Director
    OTR Truckers’ Guild

  3. Stop pulling cheap loads and the brokers will have to give you the whole rate. The shipper’s are still paying the same amount to get there frieght delivered. However articles like this make broker’s believe they have leverage. I pull a load every other day for 980 if I book it during the day. The load would pay 480 however I wait until 2 hours before the load gets picked up 980. The money was always there they just didn’t want to give it to me. If a fish bites an empty hook would you ever use bait.

  4. It doesn’t help things when every Tom, Dick, Harry, Karen, Janet, and Paula thinks they can just go get a CDL from a run of the mill training company, go out and buy a used truck, and go out on their own and start making the big bucks! There’s a term we use for wanna be drivers like this…..Wheel Grabbers! They think that all you have to do is climb in truck and drive, which is pretty much what the law makers that make a lot of these stupid regulations think we do! There’s a HELL of a lot more to it than that! A purge is what we need right now! There’s way to many trucks out here, but unfortunately, we will lose a lot of good drivers in the process! I pray that the good ones have enough experience and support to survive this purge! Hang in there Gear Jammers, it’s always darkest before the dawn!

  5. So where’s bottom? My fuel cost with reefer fuel is a dollar a mile due to fuel cost at 5.90 my cost in Montana. Factor in maintenance and repair costs at 15 to 25 cents a mile, insurance and miscellaneous (not including inflation) that’s pretty much everything spot market rate is now.
    The lack of freight on top of everything else even companies with the equipment paid off and low overhead lie mine are headed for disaster of epic proportion.

  6. Well, first off number #1: the freight rates haven’t changed in over 10 years and now,broker’s are taking alot of advantage of, another words if the rates stay the same and one broker contracts a load, can’t broker it,it gets passed down at a lower rate and so on from one broker to the next.
    Number 2: Company driver pay, I drove otr for 16+ years and back in ’07 company driver’s were making any where from .37 to .60,now take a look at driver’s pay today,not much,if any difference,even with inflation and now a days, inflation is a word that makes people curse our current government.
    Number 3: I prefer to drive(as a company driver) at a percentage rate,but wit even companies and brokers taking advantage of…
    Another words,if a company driver gets a load,let’s say a 1200 mile run that only pays $1800,you do the math, there’s No profit,plus companies are pulling running costs off of the top. Another words,if at $1800 – (Say) $700 fuel….
    Number4: Truckstop prices Which No One regulates!!
    If you say there’s a shortage on driver’s (Which I say is completely B/S) then start with the truck stops,regulate them…
    For example: I go into a Truckstop to grab a bite,average meal is $20 and isn’t even quality food,let alone, I Won’t even go there about healthy food.
    I went into a subway to test the pricing of these Truckstop,for example I bought a black forest ham with egg and bacon with extra tomatoes inside the Truckstop at $11.98,kept the receipt,for comparison, couple of days later, I found a subway across the street (outside)the Truckstop,ordered exact same thing….black forest ham,egg,bacon with extra tomatoes and the cost(which Won’t Surprise actual driver’s)
    Was $5.65¢ you do the math!!
    A 5 year old can see the difference, something Needs to be Done!!
    Let alone,now the fuel prices…..
    Say a truckstop diesel is at $5.65 a gallon for #2 diesel,say you drop your trailer and run to Walmart, maybe 3miles away.
    The price of fuel (#2 diesel) there is $5.05. Now people, I can see the word…convenience,but to me That,my friend is “Price Gouging”!! With no regulations.
    Now that’s Not the only gouging going on,for example: a cheap pair of plyer’s at the dollar store would cost you probably around $3 to $5 dollar’s(ok, today’s market) $4 to $7 dollars,but a cheap(Japan made) pair of plyer’s at the truckstop is a Whopping $12 to $15 dollars!!
    Now,you average that into what we make,then the company driver isn’t putting much into the bank,at least not what he should be putting into the bank!!
    Number#5: DOT(Department of Transportation) Normally, I applaud these guys for what they do,say during a dot inspection because, actually,if I don’t do a pre-trip and they catch me on a defect and write me up and fine me, personally, I deserved that,but I Always do a Pre-trip!!
    Ok,for example, I had a 53′ spread, sliding axle,now mind you,the same rules that apply to a ’48’ sliding axle trailer Does Not Apply to the 53′
    Another words if you have 4′ over hang on a 48′ flatbed,you put red flags and your legal to run….any where!!
    On a 53′ flatbed,you have 4′ over hang,That,my friend is an Oversized Load. What kind of sense does that make??!!
    Now,that being said, I got loaded on the 53′ and started travel to the house,got down the highway to the nearest truckstop and scaled my truck and was legal,now mind you, I had the rear axle slid forward which left a 4′ gap in between the axles,now anybody that’s pulled a tandem axle knows(if you’ve done your pre-trip) that the tandem axle doesn’t spread apart and usually you can only get a fist or a little more in between. So I traveled onward,no problem right?? WRONG!! I get to Illinois scales and flagged in,no problem, at least I didn’t. Pulled up on the scales,he kept me there, probably 5minutes and by then, I was like,ok, what’s up??
    He preceded to pull me around to the rear and bring in my paperwork and I’m like,ok, maybe a bit of random check, I walk inside and he begins writing me up for over 2000# on my spread axle, I say No Sir, it’s a spread axle, I can carry 40,000# on it and he claims it’s a tandem axle due to the spread in between.
    Now I have to get the rear axle to slide just to appease this guy.
    Got it slid, eventually, without calling a wrecker to help(Whew)
    Got my ticket and went on down the road,searching here,there and every where for the actual rules on this. Found nothing but a certain footage between the drives and rear axle,in which I Did take pictures of where it was(scratch marks to show)
    Had fully planned on fighting this thing. Got back home and the bossman got me in touch with a dot officer friend of his because he’d never heard of that either.
    And the DOT official told me that a spread axle on a 53′ trailer has to be 5′ apart, I said where’s that written,is it some kind of “unwritten law”?? He says it’s being written and you’ll still have to pay for the ticket!!!

  7. Well, that should solve the CDL driver shortage we’ve been hearing about for the last 4yrs.
    Right.
    Right?

    Psst! There is no driver shortage, only a shortage of Class A jobs with a payscale that keeps pace with other trade jobs.
    Keep starving drivers out, that pendulum will swing back eventually. Probably after a total supply chain meltdown, but eventually.

Craig Fuller, CEO at FreightWaves

Craig Fuller is CEO and Founder of FreightWaves, the only freight-focused organization that delivers a complete and comprehensive view of the freight and logistics market. FreightWaves’ news, content, market data, insights, analytics, innovative engagement and risk management tools are unprecedented and unmatched in the industry. Prior to founding FreightWaves, Fuller was the founder and CEO of TransCard, a fleet payment processor that was sold to US Bank. He also is a trucking industry veteran, having founded and managed the Xpress Direct division of US Xpress Enterprises, the largest provider of on-demand trucking services in North America.