Trucks and trains aren’t carrying as much as they did just a few months ago, and haulers are cutting back on orders for new trucks and rail cars. Despite this slump, Kansas City’s logistics industry is pushing ahead with an enormous expansion of warehouse space and other regional distribution hubs.
Rail traffic is down substantially from last year. Carloads are down by about 7%. Coal is down more than 14%, and metallic ores and metals are down even more.
“There’s a warning here,” says Railway Age economist Jim Blaze. “This is a freight recession. This could get worse. If it gets worse, this could have a domino effect on job creation, job loss and consumer confidence,” says Blaze.
A surge from trade
Tariffs are part of the problem. More than a third of U.S. rail traffic is tied to international trade. U.S. manufacturing is slumping, which means fewer shipments in and out of factories.
Blaze says corporate executives are anxious about loose ends, such as the unratified U.S.-Mexico-Canada Agreement and the trade war with China.
“They’re clearly nervous. They’re not making the investments that we saw them making in 2017, 2018,” says Blaze.
But then again, 2017 and 2018 were extremely good years for the economy and the freight industry in particular.
Companies rushed to place orders before tariffs forced prices up, and all those deliveries drove up shipping volume. Suddenly, there was more freight to move than there were trucks available to move it.
A bumpy road for trucking companies
Jerry Fritts, a long-haul trucker with more than 50 years behind the wheel (and a Memphis truck stop named in his honor) says the rates he could charge spiked 30%.
“I thought we’d finally gotten to the Promised Land—the day that the trucking industry would finally be in the driver’s seat,” says Fritts. “Well, too many thought that.”
American truckers ordered a record number of new semis in 2018. Then, the economy slowed, shipping orders tanked, and the rates truckers could charge tumbled.
Transportation economist Tim Denoyer says orders for new trucks are down a whopping 71% from October 2018.
Bob Costello, chief economist for the American Trucking Associations, says well over 600 trucking firms went under just in the first half of 2019. He says most of them were smaller firms, which often rely on bidding for cargo on the volatile “spot market” rather than locking in contracts with shippers.
Trucks and trains aren’t carrying as much as they did just a few months ago, and haulers are cutting back on orders for new trucks and rail cars. Despite this slump, Kansas City’s logistics industry is pushing ahead with an enormous expansion of warehouse space and other regional distribution hubs.
Rail traffic is down substantially from last year. Carloads are down by about 7%. Coal is down more than 14%, and metallic ores and metals are down even more.
“There’s a warning here,” says Railway Age economist Jim Blaze. “This is a freight recession. This could get worse. If it gets worse, this could have a domino effect on job creation, job loss and consumer confidence,” says Blaze.
A surge from trade
Tariffs are part of the problem. More than a third of U.S. rail traffic is tied to international trade. U.S. manufacturing is slumping, which means fewer shipments in and out of factories.
Blaze says corporate executives are anxious about loose ends, such as the unratified U.S.-Mexico-Canada Agreement and the trade war with China.
“They’re clearly nervous. They’re not making the investments that we saw them making in 2017, 2018,” says Blaze.
But then again, 2017 and 2018 were extremely good years for the economy and the freight industry in particular.
Companies rushed to place orders before tariffs forced prices up, and all those deliveries drove up shipping volume. Suddenly, there was more freight to move than there were trucks available to move it.
A bumpy road for trucking companies
Jerry Fritts, a long-haul trucker with more than 50 years behind the wheel (and a Memphis truck stop named in his honor) says the rates he could charge spiked 30%.
“I thought we’d finally gotten to the Promised Land—the day that the trucking industry would finally be in the driver’s seat,” says Fritts. “Well, too many thought that.”
American truckers ordered a record number of new semis in 2018. Then, the economy slowed, shipping orders tanked, and the rates truckers could charge tumbled.
Transportation economist Tim Denoyer says orders for new trucks are down a whopping 71% from October 2018.
Bob Costello, chief economist for the American Trucking Associations, says well over 600 trucking firms went under just in the first half of 2019. He says most of them were smaller firms, which often rely on bidding for cargo on the volatile “spot market” rather than locking in contracts with shippers.
(Kansas News Service)
www.kcur.org
