A recent report shows no positive readings in the Trucking Conditions Index until 2024.
However, the small gain was attributed solely to the “sharp drop in diesel prices during the month.”
The report further noted that “changes in all freight-related TCI components—freight volume, capacity utilization, and freight rates—were unfavorable for carriers in December,” adding that “the rates component was the most negative it had been since May 2020.”
Upon publication of the report, FTR Vice President of Trucking Avery Vise said, “the outlook for trucking conditions has changed little, and we still do not forecast any positive readings for the Trucking Conditions Index until late 2024.”
“I need to clarify that,” Vise told The Epoch Times, saying “the outlook is moderately negative until we get to early 2024. Then, it starts transitioning to more neutral and then it starts to turn positive.”
“The truth of the matter is, from a financial standpoint, the pandemic was quite the boon for the trucking industry,” Vise said, “and that is largely due to the supply chain disruptions that occurred, and the unprecedented levels of stimulus we saw in 2020 and 2021, which created an environment where consumers spent enormous sums of money on goods.”
This, Vise explained, created a big demand for freight movement.
Driver pay has gone up since COVID.
2019 to 2022
Unlike the “trucking bloodbath” of 2019, the industry didn’t see a run of larger companies filing bankruptcy in 2022.Still, Vise did concede that quite a large number of smaller trucking companies have gone out of business in the past six months.
“But you have to put that in perspective, too,” Vise said, noting how the industry also saw “an unprecedented surge in the number of new carriers” with drivers from larger companies buying their own trucks and starting their own businesses.
As Vise explained, most of these new trucking companies were one and two-truck operations, which capitalized on the opportunities presented in 2020 and 2021 during the disconnect between supply and demand.
“That was very lucrative, but it started fading away during the early part of last year. But the catalyst that really sent everything into a slide was Russia’s invasion of Ukraine, which sent crude and fuel prices through the roof and pushed a lot of these smaller operations out of business because they weren’t getting surcharges on fuel. Their compensation for fuel was basically their freight rate, which was going down.”
Vise also acknowledged the inflation rate challenges, which add to operations and equipment costs.
‘Costs Higher than Profits’
Challenges in the trucking industry are something Mike Kucharski understands all too well. Mike Kucharski, the co-owner and vice president of JKC Trucking, has spent the past 30 years in the industry. JKC—Chicago’s largest specialty contract carrier with a fleet of 350 53 foot and 48 foot trailers and 250 tractors—specializes in climate-controlled and dry freight load hauling with service to 11 west coast and southwest states, including northern and southern California and all points in Florida.“We’re still dealing with the repercussions of being shut down because of COVID,” Kucharski told The Epoch Times, explaining that, while half of JKC’s deliveries are to stores like Costco and Walmart, the other half of deliveries go directly to businesses in the food service industry.
“When they shut down everything, like restaurants, casinos, and convention centers, half of my business disappeared overnight,” Kucharski recalled.
“Easter of 2021 was my worst time. I was down 52 percent in my business, and when volumes go down the rates go down. Product was going to the lowest bidder and during that time, the rates were so low it was cheaper to just park my trucks than to send them somewhere because my costs were higher than my profits. I'd never make the money back.”
Then, there’s the cost of replacement vehicles.
“I’m trying to buy new trucks and trailers,” he said. “I try to do that every two years to update our equipment. But the dealer said he can take an order but he’s not sure what the price will be. When I finally found one it was 32 percent more than I paid pre-COVID. I know the price of things goes up, but 32 percent is ridiculous.
“Understand that I buy in bulk. I never buy less than 20 trailers at a time. I can’t afford that. What am I supposed to do, go to all of my customers and say I’m raising their prices 32 percent because the cost of trailers went up 32 percent? It’s a very frustrating thing.”
The supply chain issues were another matter.
For months, Kucharski was unable to get air filters for his refrigeration units. “All of those are manufactured in Japan,” he said, adding that he’s still not back to pre-COVID levels of his replacement parts inventory.
“Having a truck waiting for parts is expensive,” the report said, noting how “each day of downtime costs a fleet $800 to $1,000, according to industry estimates.”
Taxes and Insurance
Of the top 10 states with the highest state fuel tax, Florida ranks 10th, with a 45.05¢ per gallon tax on gasoline, and a 38.17¢ per gallon tax on diesel effective Jan. 1, 2023. California has the highest state fuel tax of any state in the nation, 70.95¢ per gallon of gasoline, and 102.01¢ per gallon of diesel.“That is going to be another cost on top of the skyrocketing costs I already have in the trucking industry, driver pay, fuel costs, insurance,” Kucharski said.
“Obviously, we’re going to have to work that into our cost of transporting goods. It’s bad. Every time California asks for more money we have to give it to them in order to operate there. It hits us right in the pocket, on top of inflation. And any time there’s a price increase it trickles down to the end user, the customer.”
Then there are the increasing costs of insurance.
“I’m having difficulty getting insurance because we are a long-distance hauler and there are a lot of risks with long-distance haulers. We’re being treated like the ugly duckling,” Kucharski said. “Just to give you an idea, I have to pay $1.2 million per year to get $1 million worth of insurance coverage. It’s crazy. But that’s how bad it is.”
“When my father first started in this business it was fun,” Kucharksi reflected. “Now it’s difficult to run a business with all of the taxes, the skyrocketing insurance rates, and the over-regulation, and they just keep adding and adding more and more costs. When are they going to stop? That’s my question. It’s frustrating. We’re just trying to stay off the ‘Out of Business’ list.”