If you remember, during and right after the pandemic, the transportation industry flourished. As a matter of fact, it could not keep up with demand. The ports each had dozens of ships sitting offshore, often for weeks waiting for their turn to unload. And once unloaded, there were not enough trucks to get the freight and goods in the distribution systems and to consumers.
Well those days are over, and the pendulum has swung way the other way. The Drewry World Container Index, an index that tracks container movement on eight major shipping routes, reported that container traffic is down 75% from just one year ago. For example, the Port of Los Angles has seen a 23% decrease from one year ago in the number of containers coming into port.
Part of the reason for the downturn is that businesses stocked up on goods and products during the pandemic, and then once it was over, they had a surplus which reduced their need to order more until they had sold off the excess they already had. Another factor is the slowing of consumer purchasing.
Federal Reserve Effect
With the Federal Reserve slowing consumer buying by raising interest rate in an effort to curb inflation, people are buying less. The downturn in the amount of cargo coming into ports by ship has also affected other types of companies in the shipping industry. For example, because there wasn’t as much cargo coming in, it created less of a need for packaging. The Packing Corp. of America, the 3rd largest containerboard company in the U.S., saw their biggest six-month drop in container sales since 2009.
The other industry severely affected of course is the trucking industry. In 2021, there wasn’t enough commercial truck drivers to move all of the loads. At one point, there were over four loads waiting to be transported for every load on the move. Because of the high demand for trailer space, many bought semi-trucks and jumped into moving freight across the U.S.
At the peak, 8,000 trucking companies entered the market in a single month compared with a normal monthly average of around 700. Today, between lower freight hauling demands and increasing costs, the profit margin trucking companies and independents need to stay in business is eroding forcing many of them to sell their trucks and get into a different line of work.
David Jackson, Chief Executive Offer for Knight – Swift Transportation Holding described the situation when he recently told investors “I don’t know that we’ve ever seen freight demand fall this far, so fast and for so long, without an accompanying economic recession.”
The Cyclic Pattern of Trucking
The trucking industry has been on an 18 to 24-month cyclic pattern for a number of years swinging between not enough trucks to haul all the loads and having more trucks than what there are loads. So it will be interesting to watch and see if this is just part of that normal cycle or if this is an anomaly that will stick around for a longer period of time.
