The trucking industry started 2020 off with great expectations.
Economists had forecast the economy would continue to grow at over 2% and that freight rates would firm up by about 2% as the year progressed due to truck availability being more constrained compared with 2019. January and February were strong months for economic growth.
However, no one could ever have guessed that an invisible, silent, runaway, malevolent and deadly contagion, called COVID-19, would bring the industry, the country and the world to a dead stop by mid-March.
In an effort to control the spread of the coronavirus, for which there is no immunization, most countries issued stay-at-home orders and forced the closure of non-essential businesses. These measures resulted in the almost immediate tanking of economies worldwide.
Only those businesses deemed essential to maintaining life, such as hospitals, grocery stores and transportation-related companies, continued in operation. Consumers sped to the grocery stores to snap up the necessities of life, including food, antibacterial soap and, for some unknown reason, toilet paper.
By mid-April, the outbreak had:
• raised the nation's unemployment rate to 14.7%, the highest since the Great Depression, with 41 million people out of work;
• closed many businesses, particularly small ones; and
• killed more than 25,000 people in the U.S. alone.
The trucking industry was swept into the maelstrom of the pandemic's economic ravages. Every segment of the industry, from all types of fleets including truckload, less-than-truckload, refrigerated, flatbed and final mile carriers to truck makers, truck dealers, repair shops, tire dealers, truck stops and all their customers felt the impact of COVID-19.
Many drivers and smaller fleets parked their trucks and elected to wait out the contagion in the safety of their own homes. Others risked their own health to keep the supply chain of essential materials filled and moving to wherever it was needed.
With so many businesses closed or operating at low capacity, truckload shipments plunged.
In April, truck tonnage declined 11.3% from April 2019, which was the steepest year-over-year decline since 2009 and the largest decline in 26 years, when there was a labor strike (April 1994).
On a month-to-month basis, April was down 12.2% from March. Some fleets that haul food for grocery stores and those involved in the online retail supply chain fared better than others, but most fleets saw their freight business dry up.
Flatbed freight was in collapse since housing starts plummeted 33.8% from a year ago with the onset of the coronavirus, as had other construction segments. Manufacturing also fell to an extremely low level.
While refrigerated freight was forecast to tick upward slightly, the forecast for that segment also trended negative.
Tank truck carriers' volumes dropped in half as demand for fuel and milk fell sharply during the nation's broad-based lockdown. Gasoline and diesel fuel consumption dropped 44% and 15%, respectively, in April.
Milk demand dropped as much as 15% as millions of daily cafeteria breakfasts and lunches that usually include a carton of milk were not served because schools were closed.
As a result there was an excess of 2.7 million to 3.7 million gallons of milk a day that was being produced over demand and much of it wasted. Economists are now forecasting a 9% overall decline for truck loadings this year from last.
The drop in freight tonnage has put downward pressure on freight rates. Rates have fallen to five-year lows for both refrigerated and flatbed freight.
Linehaul rates have fallen by nearly 25% since the start of the year. Spot rates are in dangerously low territory for owner-operators and small carriers, many of which parked their trucks to wait for better business conditions.
Despite this, there is still much more capacity than there is freight, which is keeping freight rates down. In April spot rates dropped 14% from March levels and were expected to drop more than 20% in May from March.