The current business environment for operators of asset-based trucking carriers is extremely challenging.
Apart from safety and insurance, fuel spreads, and used truck prices – the carrier-specific metrics covered in this report – loose capacity, low spot market volumes and low rates are the most important backdrop for carriers, and they’re all significant headwinds. Unpredictable and inconsistent shipper volumes are disrupting networks and hindering efficient asset utilization.
U.S. Department of Commerce/Census Bureau data indicates that total retail and food service sales in April were down 21.6% compared to April 2019; based on numerous high frequency data sources (which we will report on next week), we believe that April was the bottom. It certainly was for freight volumes.
Fuel spreads remain favorable but have compressed as retail prices fell on a lag and crude oil and wholesale diesel prices started to recover. Insurance expense as a percentage of revenue fell slightly, even as revenue per driver per week fell, which is either a temporary blip or an inflection toward a soft market in insurance in which insurers compete with each other by lowering premiums. Finally, used truck prices have ticked up, but are still quite low year-over-year, especially for five year-old models. The asset replacement cycle has been thoroughly disrupted and may be setting the industry up for a significant capacity crunch at the end of this year.
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