The JOC Truckload Capacity Index dropped to 79.8 in the fourth quarter — its second lowest reading — as several large truckload fleets continued to reduce their tractor count in late 2013. The index fell after climbing in the previous two quarters from an historic low of 79.7 to 81.9.
The index, based on actual tractor counts at a group of publicly owned large truckload carriers with more than $10 billion in combined revenue, confirms truckload capacity levels are still about 20 percent below their pre-recession peak in the fourth quarter of 2006 — at the least.
The index does not take into account the loss of capacity at mid-sized and smaller privately owned truckload carriers or the hundreds of trucking companies that went bankrupt in 2013. A total of 335 carriers operating 7,775 trucks went out of business in the fourth quarter, the highest number since the third quarter of 2010, according to Avondale Partners. Those 335 carriers were small companies, but the combined number of trucks is the equivalent of a fleet the size of Werner Enterprises, the third-largest truckload carrier, which operated 7,050 tractors as of Dec. 31.
“No one is rushing to add a lot of capacity,” American Trucking Associations President and CEO Bill Graves said in a recent interview. “Everywhere you turn there is a tightening in capacity, and there is pressure on cost.”
This winter’s severe weather, which began in late November and is still threatening supply chains with freezing temperatures and snow in March, helped tighten capacity in the second half of the fourth quarter, causing equipment shortages and freight backlogs across the U.S. and Canada, even in areas not hit by winter storms.
In mid-November, XPO Logistics Chairman and CEO Bradley S. Jacobs saw truckload supply and demand as “balanced” and “efficient." Three months later, he said, the landscape has changed. “Between strong demand, because the economy is coming back, and weather disruptions, capacity is super tight, and rates are up,” he said in a Feb. 24 interview, calling the spike in rates "significant."
Load-matching service DAT reported spot market dry van rates were unseasonably high in late February, with the DAT national average dry van rate peaking at $1.98 per mile for the week ending Feb. 22. “All the shippers have backlogs, some are one or two weeks or more,” Jacobs said.
“The RFPs (requests for contract proposals) from the fourth quarter are already being redone, and it's only February,” he said. The “million dollar question,” in Jacobs' view, is whether capacity constrictions will ease once warmer weather arrives, or whether rising freight demand will further tighten capacity. “I don't think we can answer that question until the end of March,” Jacobs said.