Recession in the freight transport industry: imbalance between supply and demand

The U.S. trucking sector is in a serious state, as reported by Fox News Digital. Following the pandemic, like many industries, freight transport was affected due to an excess of trucks and drivers compared to the low amount of cargo and demand available for transportation. Mike Kucharsk, vice president and co-owner of JKC Trucking, explained to the news outlet that with closing costs and the rising cost of living, truckers are competing for the same loads, leading to disputes and increased demand for work.

“Everyone is calling this the great recession of trucking, and it’s true because all trucking companies are currently in dark times,” added Kucharsk. In recent months, we have witnessed the downfall of major companies, such as Yellow Corp. and Convoy Inc., demonstrating that this recession has been unfolding in recent years, caused by the imbalance between supply and demand.

FreightWaves reports that according to the OTVI (Outbound Tender Volume Index) from SONAR, cargo volumes are currently 16% above 2019 levels. This explains that the volumes of available cargo in the industry are at the highest levels of the year to date.

To understand how this number affects the industry, FreightWaves developed an index known as the OTRI (Outbound Tender Rejection Index), a figure that determines the level of rejection in the industry. This index reveals the amount of merchandise and cargo rejected by companies and truckers for transportation. A figure that generally reaches up to 30% is currently recorded at 2.5%.

Taking the above information into account, it is concluded that although cargo levels are high, the low rejection levels indicate that the amount of merchandise is not sufficient compared to the number of available truckers to transport it. In other words, an excess of capacity.

To all of this, high prices in energy, food, and living costs are added, contributing to this recession in both directions: consumers buy less, and truckers compete for the freight that is their work and source of income. “It costs more to deliver products, and therefore, this cost is passed on to the consumer,” explained Mike Kucharsk to Fox News Digital.

Although the holiday season is often busy for the freight transport industry, there is a possibility that this holiday season will be in worse conditions than last year. Another indicator of how inflation affects consumers and carriers.