By Cain Adams, Trinity Logistics/Longboard Logistics, Meridian, ID
Since mid-January we have seen record-setting fuel prices which normally would increase shipping costs in the spot market. Not this year. With China in a lockdown, port freight has dried up overnight.
Ninety-five percent of carriers have 20 trucks or less in their fleet. These are the companies that are feeling the pain right now, and it is getting dangerous. You see, these carriers work a lot on the spot market, and this year the squeeze is on.
Domestic freight can carry about 75 percent of the weight but the extra 25 percent is gone due to China shutting down. This means capacity is very loose, and the rates decline. Sure, they need to get pushed down over last year. But with fuel going the wrong way, the profit is gone and equipment will soon suffer negligence. Safety ratings will rise and some will just hang it up. These smaller companies went out and bought new trucks, last year, as well because used equipment had been tight and the money was flowing. More debt, higher fuel prices and lower rates is a disastrous mix.
What can happen, you ask? Well, we could see an easing in China and our docks fill back up. We could see hurricanes (hoping not), and capacity would tighten a bit. We could see great weather all over and more people getting out to restaurants to eat. Other than hurricanes, those are the positives. The negatives would be all the opposites along with a prolonged war in Ukraine.
Right now flatbeds are moving for more money per mile than reefers and vans. Interest rates are going up to slow down the economy. It is working for some items, but inflation is already in the water. Inflation for building products, a run on oil fields due to the war and produce brokers’ instinctive “it’s flatbed season” thought processes are keeping flatbed carrier’s rates higher per mile.
Remember this when you are trying to get a flatbed with 900 bags of onions on it. You may be paying a flatbed more per mile for those extra 60 bags. If you are running flats, do yourself a favor and ask your broker to look for flats, reefers and real vented vans. You may deliver better quality at the same rate per 50 on a reefer.
We are seeing Brawley, CA, shipping some great quality, and trucks are steady. New Mexico is starting, and Texas is still shipping. Georgia came on and is shipping up and down the East Coast.
The fuel costs are affecting them a bit. We are seeing higher prices per mile because trucks have to deadhead in a few hundred miles to get loads out of the Vidalia area.
Overall, we needed rates to come down. Carrier costs were extremely high and added to inflation. We really need fuel to come down to save some fleets or we may be in a world of hurt when the docks fill up and we have less trucks on the road to pick up the slack.
Pump that oil Texas. We need you.
