In light of dampened expectations about volumes, the number of carriers that expect to add little or no capacity in the next 12 months has remained fairly constant around 70 to 74 per cent for the last five quarters.
According to Transport Capital Partners’ (TCP) Third Quarter 2012 Business Expectations survey, nearly one-third of carriers do not expect add capacity at all. The number expecting to add 6 to 10 per cent has decreased for the last three quarters.
“Carriers are not adding capacity as the economy remains relatively flat and used equipment prices go up and conservative equipment plans boost used demand. In fact, merger activity indicates the demand for drivers is a prime acquisition motive, and used equipment is attractive as well,” says Richard Mikes, TCP Partner and survey leader.
For those expecting to add capacity, the most popular means is through financed company equipment, a trend that has been increasing over the last several quarters. Fewer carriers expect to add capacity through independent contractors. In fact, those carriers expecting to grow with subcontactors have dropped 43 per cent, from 30 per cent in February of 2011 to 17 per cent in August of 2012.
“Long term dedicated equipment is a win-win as shippers assure capacity and carriers can pass through current low interests rates, and hedge future costs through adjustment provisions. Indeed longer term (five-year-plus) deals are replacing some annual negotiations as the national truck fleet is stagnant,” notes Mikes.
Carriers are also unwilling to add capacity when they can’t find drivers to fill the seats. Seventy-five per cent of the carriers surveyed are reporting unseated trucks. Sixty per cent of the larger fleets have between 1 and 5 per cent of the trucks unseated, while 36 per cent of the smaller fleets report 6 to 10 per cent of their trucks lack drivers.
“Drivers are clearly a controlling input in equipment plans. Long-term demographics still portend a shrinking driver pool, and current CSA and HOS regulations remove drivers and shorten effective hours (and paychecks) for existing drivers. (“CSA” stands for Compliance, Safety, Accountability and is a program of the U.S. Federal Motor Carrier Safety Administration. “HOS” refers to “hours of service” regulations). Some runs that were doable in a day are requiring a sleep break,” states Lana Batts, TCP Partner.
The above article was reprinted with kind permission from Canadian Trucking Alliance.