Trucking Market Shows Signs of Recovery After Long Downturn

PHOENIX — The trucking industry is emerging from a difficult market, and the headwinds that have plagued the industry are beginning to weaken as freight volumes improve and capacity leaves the market, experts said.

“I think we are going to get back to normal, and things are going to get better,” said Bob Costello, chief economist of American Trucking Associations, during the Truckload Carriers Association’s Truckload 2025 conference. “It’s not going to be the pandemic boom, but we are absolutely moving in the right direction.”

Costello said carriers describe the current operating environment as the most challenging they’ve ever experienced, with rates and volumes down but costs continuing to rise. “For the macro economy, that’s what we call stagflation. It is the worst place to be, but that’s exactly where you’ve been,” he said.

He noted that the sustained nature of the recent downturn has been especially draining, even though rates didn’t fall as far as they have in past downturns. “In the period we’ve just gone through, we didn’t even fall 10%, but it lasted 27 months,” Costello said. “That is just a slow, slow tearing off of the Band-Aid and why it felt so bad.”

RELATED: TCA Addresses ‘Challenging Times’ at Annual Conference

“I think we’re all flabbergasted with how long this has lasted,” added Dave Williams, senior vice president of equipment and government relations for Knight-Swift Transportation, during a panel discussion featuring large carriers. Knight-Swift ranks No. 7 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.

“Frustrated. Fatigued. There are a lot of different ways to describe how we feel,” said Mark Seymour, CEO of Kriska Transportation Group.

Part of that frustration stems from swings in consumer behavior. While pandemic-era spending on goods sent freight volumes soaring, the post-COVID shift to service-based spending on travel and events served as a stark correction on carriers’ businesses.

Image

Costello 

“Trucking freight for experiences on a dollar-per-dollar basis is less than when you would buy a good,” Costello said. “It is finally getting back to normal, and that is going to help us.” He estimates spending on goods in 2025 will increase 3.3% while spending on services will grow 2.2%. “That is not going to be like the boom of the pandemic, but it’s certainly much better, and I think that is absolutely going to help,” he said.

Inflation also should play a role, he said; rising inflation on services is outpacing inflation gains on goods, which he said will lift the likelihood consumers will boost spending on goods.

The housing market should also improve, with existing home sales recently posting a slight increase that could bode well for trucking.

“When people sell their homes or buy new ones, what do they do? They fix it up. They get new appliances and so forth. It generates a lot of freight,” Costello said. “But so does the construction side of this,” he added, noting that single-family housing starts should also generate a fair amount of freight activity.

RELATED: Shifting Tariff Policies, Uncertainty Keep Carriers on Edge

Costello projects that the economy could grow more than 1% this year and more than 2% next year, but believes the cumulative effect of the last few years will cause capacity to leave the market — especially among smaller fleets operating in the spot market. Plus, he said shippers that added for-hire capacity to their private fleets during the pandemic are second-guessing those boom-time expansions. “I don’t think they want to have these trucks…but you don’t just shed all these trucks overnight, especially in the used truck environment that we’ve been in,” he said. “It’s been slow to leave, but it’s been happening.”

Controlling Costs

For other carriers, cost-cutting is a focus. Amber Edmondson, president and CEO of Trailiner Corp., said during a panel discussion that her company is keeping equipment longer, reducing shop hours and looking for software that can help increase efficiency. She advised other operators to focus on expenses they can negotiate. “Shop around. You just have to find the right partners and vendors,” she said.

Brown Dog Carriers leases its equipment, which allows the fleet to have fixed costs — including maintenance, which is included. “We keep our overhead fairly low as best we can,” said Greg Morin, president of the fleet. As Brown Dog Carriers grows, the fleet rents trucks. “We’ll rent five or six and see how it works and make sure we get them all filled. It helps us pivot,” Morin said. “If a customer doesn’t need something for a week, we’ll bring a truck back.”

But Kriska’s Seymour noted that success requires more than financial austerity. “You can’t just singularly find your way to profitability by cutting costs,” he said. “Revenue is the other important part of your business.”

TFI International tracks metrics such as revenue per active driver and revenue per license plate to keep track of what its trucks are generating, said senior executive vice president Steve Brookshaw. “Asset utilization is key in our business,” he said. “We’re very capital intense.”

TFI ranks No. 4 on the for-hire TT100.

A disciplined approach to reviewing metrics is also essential, Knight-Swift’s Williams said. “One of the important things that drives us is that if you can’t make money with one truck, you can’t make money with 20,000 trucks,” he said. “We have to ask ourselves, ‘What are we really good at?’ At the end of the day, I think the important thing is to find ways to create value.”

That type of approach can help the entire industry emerge from the prolonged downturn, he added.

“From a trucking standpoint, I think you just need to be prepared for a potential recovery but also some prolonged pain here,” Williams said. “For us, it is a matter of watching the numbers, waiting for recovery, and understanding what we should do in the meantime.”