Blurry shipping truck going fast on a highway

COVID-19 Upends Trucking Market Dynamics

April 08, 2020
John Harms examines how COVID-19 has affected the U.S. trucking market in recent weeks and seeks to understand what that tells us about the future of the domestic economy.

America’s trucks move 10 billion tons of product each year, accounting for more than 70% of all domestic freight volume, and transport a disproportionate percentage of finished consumer goods compared with rail and barge. The pattern of U.S. commerce has shifted profoundly in recent weeks as ecommerce and grocery spending have spiked, particularly in cities most affected by COVID-19, and trucks have raced to keep up. On the demand side of the equation, consumers increasingly shut inside have been stocking up on ecommerce purchases, driving up online sales of everything from household staples like toilet paper to groceries. This deluge of online orders has caused web traffic jams at online giants like Amazon Pantry, which temporarily stopped taking new orders of household essential items like paper towels and groceries on March 19. Adobe Analytics, which monitors ecommerce transactions at 80 of the top 100 U.S. retailers, found that sales of canned goods and shelf stable items (such as pasta, rice and so forth) have increased 69% and 58%, respectively, since fears of the virus began. As one would expect, online sales of cold and flu medicine have spiked 198%, while toilet paper is up 186%. All this is leading to additional demand for truckload and the less-than-truckload (LTL) carriers that make last-mile deliveries.

Meanwhile, panic shopping at grocery stores has led to a need to aggressively restock shelves with products delivered via truck. Trucking industry data supports this unprecedented surge. The Outbound Tender Volume Index (OTVI) compiled by online data provider FreightWaves shows a 24% spike in trucking demand in mid-March vs. this same period last year. The OTVI tracks truckload volumes accepted by trucking companies in 15 major metropolitan areas and notes that existing activity is 10% above the peak experienced in 2018, one of the busiest years in recent history.

Chart showing Outbound tender volume index: spike in march compared to last year, as of March 21, 2020.

This increase in demand for freight transportation has put increasing strains on the LTL market in the most affected cities at the same time the nation’s more than 2 million truck drivers are increasingly unwilling to take those LTL jobs. LTL shipments typically involve multiple delivery stops and often require drivers to deliver goods into a store or building, which means increased human contact compared with full truckload shipments. Driver fears of COVID-19 have pushed trucking companies to reject a greater percentage of loads tendered to them by shippers in recent weeks. FreightWaves reported that markets such as Los Angeles, Houston and Philadelphia experienced a 20% rise in rejected shipments in recent weeks. The dry van shipping sector, which is heavily focused on last-mile deliveries, has seen a 10% surge in rates in Seattle and Los Angeles, two of the cities hit hardest by COVID-19, according to freight marketplace We expect the pricing anomalies we currently see in select cities to become the norm in coming weeks, as the coronavirus is expected to peak between May and November, based on a new study by the Imperial College London.

In an effort to ease this strain, the Federal Motor Carrier Safety Administration, a federal regulatory agency, temporarily waived its hours of service (HOS) requirements for certain drivers through at least April 12. The HOS waiver is expected to have a small but tangible effect on the supply of truck capacity. Adding to trucking supply concerns is the fact that orders for new Class 8 trucks are at their lowest since 2009. The trucking market continues to recover from its 2018 spending spree, when Class 8 truck orders hit a 20-year high and vehicle manufacturers faced a 10-month backlog. Orders of Class 8 trucks serve as a leading indicator of trucking capacity one to three months out, as manufacturers like Daimler, PACCAR and Volvo typically keep a backlog waiting to be filled.

Some economists predict that these new consumer behaviors, principally a shift toward more online sales, will remain an economic force long after virus worries subside. As a result, we should expect to see increased investment in last-mile logistics in the coming weeks as online merchants prepare for a new normal.

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