Celadon’s Will: Expect trucking “equilibrium” soon
PRINCETON, NJ. Offering an industry outlook “is much easier this year than last,” said Paul Will, vice chairman & CFO of the Celadon Group. Opening the annual ALK Transportation Technology Summit, Will told the assembled fleet IT professionals that a general recovery is clearly under way with manufacturing output growing again, housing starts beginning to trend upwards, and personal consumption of both durable and non-durable goods recovering from the lows of 2009, he said.
Slowing that recovery is persistent high unemployment, Will said, and it could take up to 48 months for employment to return to pre-recession levels.
Trucking, however, is quickly rebounding from the historic drops in both volume and freight in 2008 and 2009. In early 2009, the dry van sector had excess capacity in the range of 10 to 15%, and today that number is 1 to 2%, Will said. “I believe that equilibrium [in freight demand and truck capacity] will be here soon, if it isn’t already here,” he said. “In the last three or four weeks, we’ve seen load turn-downs increasing for shippers, and that’s a good sign.
As carriers responded to the recession by shrinking fleet sizes, truckload capacity is down 18.5% from its peak for large carriers and 9.8% for smaller ones, Will told the ALK conference. Tight credit and limited access to capital will prevent most fleets from adding new trucks in 2010, he said.
“We are heading into the tightest supply the industry has ever seen,” Will said. “We could be 300,000 units below what freight demand requires.”
Along with better freight conditions and rates, Will said trucking could well face a return of high driver turnover and shortages, as well as wage inflation.
The new CSA 2010 safety initiative could also have an impact on driver availability and customer service, he warned. With CSA 2010 maintaining individual records for drivers, “they will be more careful about [vehicle] violations and may shut down rather than risk being cited, and that could cause more on-time delivery issues,” Will said.
“Trucking seemed simple when I got into it 16 years ago, but it’s gotten so complex that today I feel like I know even less than when I started,” Will concluded.
