Mostly due to pandemic-related circumstances, the domestic trucking industry was wrought with hardships and conflict this past year. Increased rates, limited availability and lack of free time are expected to continue well into Q2.
The overly congested ports are the main contributor to the bottleneck of acquiring truckers, but other factors are coming to light which are yielding even more problems than initially anticipated.
Slower Circulation of Containers
The main factor driving port congestion is not that vessels lack space, but slow circulation of containers is disrupting the flow. Reduced labor productivity at warehouses is a key factor to the slow movement of containers. Until normal container flow can resume, delays and congestion are to be expected. The fact that volume is also increasing is moving the equilibrium timeline even farther into the future, as it is creating an upheaval that will takes months to balance. Just when the system needed more capacity, increased utilization and reduced circulation disrupted the process. The trucking industry plays a key role in helping to manage the container utilization process, as they are responsible for the movement in and out of ports. When there is a hiccup in this lane, it is felt throughout the shipping process. It is not a matter of creating more containers, rather waiting for the balance to return to normal.
At the start of the pandemic lanes shut down, ships slowed down, and cargo stopped moving. When everything started up again, it was assumed operations could return to normal, as the whole world was experiencing the same kind of lags. However, when shipping resumed, there were many new factors that created a ripple effect of problems, trucking being one of the hardest hit players. Less personnel, more volume, unprecedented rate requests and a mountain of backlog all impacted the world-wide logistics flow.
Loss of Jobs despite high demand
The U.S. department of labor reported a loss of nearly 2,500 jobs in December of the truck-for-hire business, despite the industry’s high demand. As well, truckers are especially hit with contracting COVID due to travel and multiple interactions made in a day. With the U.S’s necessary guidelines of quarantine, a further loss in personnel has had an especially adverse impact on the trucking field. Though in recent months the onboarding of truckers has risen, the impact of losing mass numbers is still affecting the logistics of delivery.
Spot Rate Market
Another reason trucking rates have been climbing is related to the increase in the frequency of spot-rate requests. Most trucking companies can contribute, at most, 30% of volume to the spot market. Because of this, there are less truckers allocated to this service. With U.S. imports of retail goods in high demand due to the pandemic, the shipping industry is being met with what appears to be fewer truckers than usual; but on deeper analysis truck numbers simply are nowhere near where they should be. There will be a push to have less contract rates and more spot rates to counteract this phenomenon, but until then trucks are not being utilized to optimal capacity, leading to high rates and few available bookings.
Despite the issues above, ports are still experiencing massive congestion with so much backlog that there is nowhere to put containers coming off the vessels. The trucks cannot come in to gather cargo, nor can they bring empty containers back. Ports such as Los Angeles and Long Beach are especially hard hit, as they have had one of the highest upticks in COVID cases, and their appointment policies makes timelines even more constrained. The Chinese New Year will create a small lull in imports, which will hopefully allow the ports to get a handle on the congestion, but the impact of this will not be seen for months to come.
Trucking companies are dealing with keeping their employees safe, while still delivering cargo across the U.S. With extended lead time in picking up cargo, the lack of truckers available to book, and the high demand seen nationally, rates will continue to rise until an adjustment has been made to offset some of the effects of COVID.
Our team at Eagle/EGL Maritime works directly with trucking companies and has built strong relationships, giving us an advantage in bookings.
Our team is dedicated to finding the lowest rates, while still guaranteeing availability.
Though many of the challenges faced are beyond our control, we are well suited to provide bespoke, flexible solutions.
If there is an issue securing a trucker, or if clarity is needed on rates, please contact an Eagle/EGL Maritime employee. Our team is here to help ensure seamless customer service and shed light on any issues.
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Thank you for your continued support and understanding.
The Entire Team at Eagle/EGL Maritime