What do we think the over the road freight market will look like in 2017?

Based off of our research and observations we believe the US over the road freight market will do a complete 180 in 2017. Most economists and industry experts believe that, the near term will be more of the same: an anemic market where supply outweighs demand.

In an article published September 13th 2016 Dan Clark, Head of BMO’s Transportation Finance Division, states “the trucking industry continues to be challenged by excess capacity against a backdrop of tepid freight formation.” (BMO Transportation Finance 2016 Summer Update, September 13th, 2016 by Dan clark tdp.life/2lY6umt) We believe that this sentiment may be true for the first half of 2017. Traditionally freight volumes taper off in the first quarter then begin to slowly build in the second quarter. Despite the relatively strong economic numbers (Unemployment down, Dow Jones Industrial Average approaching record highs, etc.) the first quarter truckload demand numbers have fallen in line with a traditional “February Slump”.

However we believe that, beginning in the last half of the second quarter and first half of the third, the domestic freight market will heat up and continue to work in the “supply side” of the industry’s favor for the rest of the year. Businesses will need to replenish their inventories and consumer spending will come back in line. Additionally the nation’s fleet owners and independent drivers will be faced with the impending deadline for electronic log devices.

According to federal law the Federal Motor Carrier Safety Administration (FMCSA) mandates that, on December 1st 2017, all US trucks must have an approved electronic log device installed in the cab. As Richard H. Thompson, international director for Supply Chain & Logistics Solutions at JLL states “With new e-log regulations and other laws impacting the trucking industry coming into effect in 2017, we expect these regulations will have a significant impact on corporate supply chains,” (Area Development October 22nd 2016 by Mark Crawford tdp.life/2lkaV7U) The impact of Electronic Log Devices (ELDs or e-logs) has been highly studied and scrutinized. However all industry experts agree that the Federal Motor Carrier Safety Administration’s ELD mandate will add costs to trucking companies (ELDs can cost up to $600+/tractor to purchase and install: “ELD Facts” http://tdp.life/2lzGtth) and will decrease driver’s productivity. We believe that this will take capacity out of the market place and will help tip the domestic shipping market away from the nation’s shipper community.

In summary we believe that the combined effect of traditional seasonal upturns in the freight market (produce season, summer demand for food and beverage, import activity on the coasts etc.), a rebounding burst of post-election economic activity, and the FMCSA’s December 1st E-LOG mandate that the nation’s truck drivers have federally compliant e-log device installed in their cabs will lead to market conditions the domestic freight industry hasn’t seen for years. We believe that it may not be unreasonable to see conditions in the last half of 2017 that mirror the trucking industry’s ”boom times” of 2005, 2010, or 2014. Although no one has a crystal ball which can tell them what the market will be like, we suspect it will be a good time to be a trucker in the third and fourth quarter of 2017.