Truckers leverage cost pressures to drive rate recovery

Freight rates strengthened in the third quarter as capacity constraints and rising costs gave the trucking industry greater pricing power despite soft demand, analysts said. The third-quarter results came amid a prolonged freight downcycle that started with the coronavirus pandemic. The resulting surge and correction in freight demand spurred an oversupply of capacity in the years since. But this year, a federal crackdown on noncompliant drivers, alongside ongoing market pressures, has led to a supply-driven recovery. “Heading into earnings season, we said we felt worse about costs, better about pricing and worse about demand for retail-centric truckload,” said Bascome Majors, managing director of transportation equity research at Stephens. “Exiting earning season, our views have only been reinforced, this remains a supply-side recovery for truckload.” Driver pay and inflationMajors expects contract rates to continue to rise along with driver pay and other inflationary costs. His team also views intermodal as being the best positioned to show meaningful growth with shippers continuing to convert truckloads to lower overall costs. “There’s no doubt in our view that this is a supply-driven recovery,” said Ken Hoexter, managing director at Bank of America. “You’ve taken out somewhere around 70,000 drivers of a pool of a million and a half.” Bob Toews, CEO of TruckDown, discusses winter readiness in the connected fleet era. Tune in above or by going to RoadSigns.ttnews.com. Hoexter noted that his investors have expressed concern over whether the peak of capacity reductions has passed. He expects the pressure on capacity will continue, it’s just not clear at what pace. They also are…

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