By: Allen Smith
As the U. S. trucking industry braces to face its biggest changes in decades, important factors could still be in the making. The following are five major issues to watch out for in trucking 2011 :
- Increased Freight Rates – Since the beginning of 2008, 13% of the trucks on the road have disappeared. With current reports pointing at a higher demand of freight and the possible future effects on professional truck drivers from the CSA, the industry may have no choice but to raise freight rates. Trucking companies could face two options : (1) raise rates or (2) absorb additional losses through their corporate profit margins. The dilemma would be facing the inevitable outcry from consumers as analysts predict that consumer prices could rise between two and four percent. As businesses remain concerned with high unemployment, low profits, low consumer confidence, and uncertain tax laws awaiting truckers when they efile their tax return, motor carriers will have to choose: take the hit or raise rates. A tough decision, but one that will ultimately have to be made.
- Lower Supply of Drivers – Although I personally believe that it has been somewhat exaggerated, with the implementation of the CSA, many industry professionals are predicting the loss of 300,000 drivers. Still hanging in the equation is the final ruling for the hours of service (HOS) change, which could further lead to a smaller driver pool as both new and veteran drivers look elsewhere for work that is not riddled with government bureaucracy. Furthermore, often overlooked is the current generation of truck drivers reaching retirement age. Add to the problem that fewer young people are willing to consider truck driving as a career, and the industry could find itself with a shorter supply of drivers. On the positive side, this could lead to an increase in driver pay which is long overdue.
- $4.00 Diesel Price for National Average – The national average for diesel prices for the week of December 27th, 2010 was $3.294 per gallon, which beat the average price of $3.288 for October 27th, 2008. The recent rise in crude oil is following the same path for gains seen during the same time in 2008. Coupled with President Obama’s current permatorium on offshore drilling and the Oil Minister of Saudi Arabia embracing a $100 per barrel price, diesel could reach the $4.00 per gallon target nationally. If and when it does and how long it will last is anybody’s guess.
- NAFTA Negotiation – Leaked by CBS News, behind closed doors meetings between U. S. Secretary of State, Hillary Clinton and Canadian Prime Minister, Stephen Harper showed that secret talks are still underway for the re-negotiation of the NAFTA treaty. Laying out plans to build a NAFTA Superhighway that would connect Canada with Mexico and would divide the western and eastern United States with another North-South border, the new agreement is expected to be announced as early as January 2011. With the new NAFTA would come an expansion of two Mexican ports, financed by a joint venture between Wal-Mart and Hutchinson Whampoa. If it does go through, we could see a serious drop in U. S. port activity which could lead to severe job losses from both the east and west coast ports. Furthermore, imported goods would no longer be verified and controlled by U. S. Customs agents. Mexican officials would now be in control of inspecting the goods, leading to a greater concern to the content and quality of the products being imported and destined for distribution to the United States and Canada. Since the purpose of the new NAFTA is to cheaply transport the goods throughout the U. S. and Canada from the two ports in Mexico, Mexican trucking companies and their drivers would handle the majority of the transporting; this could lead to another big blow for the U. S. trucking industry and its drivers. The Chinese development company, Hutchinson Whampoa, has made it very clear that they are heavily interested in securing a new NAFTA deal and invest in Mexican ports instead of the ports in the United States. As we draw closer to the re-election bid for the U. S. Presidency, NAFTA could come back into play as one way to secure votes for the current administration, making the re-negotiation of NAFTA a key issue to watch out for in the coming months. See : United States Offers NAFTA Compromise to Mexico – 01.06.2011
- Higher Demand for Intermodal Operations – If the FMCSA goes forward with changing the HOS rules to 10 hours of driving and completing all work within a 13 hour period, estimates are that an additional three to five percent more trucks would have to be added on the road to cover the same amount of freight moved. With the high possibility of trucking companies not being able to keep up, railroads could have a major comeback in 2011. CSX National Gateway Intermodal plans to open a 185 acre facility in North Baltimore, Ohio in early 2011. Completed in September 2010, Norfolk Southern’s Heartland Corridor project increased intermodal freight capacity by raising the vertical clearances in 28 tunnels between the port of Hampton Roads, Virginia and Chicago, Illinois. By doing this, they are now able to cut off 200 miles and up to 24 hours in transit time between the East Coast and the Midwest. Crescent Corridor is a railroad expansion program that will run from the Mississippi Delta, along Interstate 81 through the state of Virginia and finally into New York. It will be a major intermodal corridor linking the state of Louisiana to the northeast. As the EPA pushes forward to cut fuel costs and greenhouse emissions, rail operators are already gearing up for what they are calling the “new age of transportation.”
Which factors will prevail and which ones will fall is yet to be seen. One thing that is certain is that truck drivers and the industry will continue this roller coaster ride well into 2011.
© 2010 – 2012, Allen Smith. All rights reserved.