Trucking exits from the market continue to approach the inflow caused by the pandemic, but carriers are still yearning for better days.
Since July 2020, the trucking industry has seen a plethora of companies flood the market to land lucrative prices. Amid this wave, a hit with high recall levels helped balance the market, and recent months have shown further promise.
“It looks like the capacity exit may have worked to get it out of the market. And then we’re starting to see it come back to more normal levels,” DAT principal analyst Dean Croke told Trucking Dive in a February interview. Recalls slowed in January 2024 on an annualized basis.
Despite these increased changes, deviations from the market have not yet fully returned to pre-pandemic normals.
Top industry figures are closely watching how these inputs and outputs interact, and major carriers have repeatedly discussed the issue on earnings calls.
The traditional snapshot shows outputs that outweigh plugins
Monthly changes in recalls, restorations and grants to the operating authority.
But while the weekly, monthly and quarterly snapshots highlight this increase and outflow of trucking market capacity, they don’t show the full picture, industry leaders say. A Trucking Dive analysis further shows what the changes could mean and suggests that the size of the industry may be starting to change.
The prevailing narrative: Resilience of smaller companies confounds expectations
Trucking leaders have expressed both frustration and surprise at how slowly the market has corrected. Over the past few quarters, as demand has shrunk, C-suite executives have questioned how much longer the oversupplied market could last.
“We’ve all been talking about the stubborn outflow of capacity,” Schneider National President and CEO Mark Rourke said in a 4th quarter earnings call on Feb. 1, adding that executives “perhaps expected a larger outflow at a faster pace.”
Other carriers have also noticed the ability of smaller trucking companies to persist. Werner Enterprises CEO Derek Leathers has pointed out Interest rates peak in 2022, federal stimulus and lower fuel costs as factors that have helped bolster this resilience.
Additionally, Werner Enterprises has repeatedly noted how a weekly outing has stretched over a year. President Werner and Chief Legal Officer Nathan Meisgeier spoke on the matter during a Citi investor conference in February, noting how there has been a weekly outing for 72 consecutive weeks.
However, during a Q1 call in early February, the carrier also noted a recent trend of new activations they drop drastically.
I’m rethinking what these snapshots are saying
The data set is not perfect. Knight-Swift’s former CEO and President, David Jackson, said earnings call in January, the monthly snapshots can be especially annoying because of the volatility. He noted that there may be spikes in recalls at the end of the month due to the inability of some carriers to find insurance.
Jackson also said that a monthly change may not show observations that a company sees more broadly over time. “Not all data is created equal,” he said.
Similarly, the Federal Motor Safety Carrier Administration notes in its data that a business can have multiple operating principles, and analysts have further noted how the size of a fleet is not necessarily captured.
Current comparisons are not the only measure to consider. Even when a monthly snapshot turns from a net outflow to a net addition, it’s only part of a long-term trend.
Recalls over time are still approaching since the start of the pandemic
Monthly changes between grants, restorations and withdrawals, with emphasis on the ‘area under the curve’ to show total added capacity from January 2020 to February 2024.
Different lenses provide more information about capacitance changes
Another approach is looking at the rates of change occurring with grants and withdrawals, or how much overall capacity the industry has added or lost.
For example, looking at cumulative totals excluding reinstatements, the data show that revocations have indeed exceeded grants in 2024, a trend that continues.
“I would argue that if you’re not looking at cumulative changes, you’d be misinterpreting the data,” Avery Vise, vice president of trucking at FTR, said in an email. “For example, apart from February, the recent net declines are the highest on record. But if you don’t take into account the extraordinary period of new entry between mid-2020 and mid-2022, then you’re missing the scope of capacity growth. “
Cumulative withdrawals eclipse new grants, a balancing act
Total capacity additions from January 2020 to February 2024.
But one has to think about what’s also happening with payroll employment, Vise noted.
Jason Miller of Michigan State University did just that, noting that the payroll data help show a “slow, steady flow” of rebalancing. The supply chain professor and interim chair of his department noted his findings in a LinkedIn post in mid-March and said those government statistics are also more reliable in assessing capacity.
The demand isn’t there yet, industry leaders say
While the recall figures may suggest momentum for fleets looking to turn the market around, analysts caution that demand has yet to recover.
DAT’s Croke has noted that capacity leaving the industry has never changed the market cycle. “It’s always the demand side,” he said.
Looking at other capacity metrics, such as seasonally adjusted trucking payroll data and other employment data, Miller said in an email that supply has not declined that much overall.
Miller noted on Feb. 23 that an indicator of the spot market cycle is firmly in market territory for pricing, and there was no notable decline in adjusted truck-for-hire miles, suggesting “evidence of significant excess capacity remaining in the market.”
“We are not yet seeing an increase in demand for trucks,” he wrote.
Werner’s Meisgeier echoed a similar sentiment at the Citi conference, saying, “I feel like we still need a little last push to get to real balance on the supply and demand side of the equation.”
Managing Editor Edwin Lopez contributed to this story.