Trucking markets: Shippers capitulate ahead of Q4

Shippers are capitulating as we head into Q4, which by all accounts is expected to be extraordinarily volatile in terms of available trucking capacity and rates, if not retail sales. We heard in multiple conversations with private and public brokers this week that shippers as a whole are paying more to secure capacity, even awarding large cost-plus projects to get them through the final inventory replenishment cycle before peak season. Reefer capacity in particular is hard to come by, as tender rejections for temperature-controlled loads topped 42%, but the national average tender rejection rate for dry van is also above 25%, a very high level. While contract / spot optionality plays a role in tender rejections and will be moderated in the mid-term by shippers opening their wallets, the more fundamental problem is that carriers aren’t ordering new trucks because they can’t seat the ones they have. The driver pay inflation cycle has only just begun, and with truck driving schools at 50% capacity (and with classes more tilted toward local and regional driving than in the past), we feel that this inflationary cycle will take longer to rebuild trucking capacity than 2017-8. That sets us up for a hot, expensive, and frantic Q4, with or without the expedited national rollout of a COVID-19 vaccine.