Asset operators: Son, never mind them brakes

Despite shippers’ attempts to improve routing guide compliance by repricing awarded freight higher, the spot market has outrun contract rates. That dynamic has kept tender rejection rates persistently elevated and allowed truckload carriers to push revenue per driver per week higher.

At the same time, carriers have been able to exercise a lot of optionality in choosing their freight and have taken the opportunity to refashion their networks, build density on missing lanes and run fewer miles empty. Empty-miles percentages for the carriers in the Truckload Profitability Program (TPP) consortium are at multiyear lows. In general, the business environment for asset operators is favorable.

There are headwinds working against truckload carriers, though. Rising insurance and recruiting costs and driver pay hikes are pushing operating expenses higher. Fleets are acquiring many trailers, which may or may not be efficiently utilized and turned appropriately when freight patterns eventually normalize. Diesel fuel spreads are fairly narrow, and fuel surcharges aren’t much of a benefit on carriers’ income statements.

We don’t think that normalizing consumer behavior next year crashes freight demand. If global consumers commute more and return to air travel, oil prices, for example, may recover enough to spark another production boom in the United States.