Are Trucking Freight Rates Stabilizing in 2022?
Here’s What You Need To Know
The world is currently experiencing a high demand for… well, everything. That, in conjunction with the harsh restrictions, limitations, and uncertainties that governments create, is a recipe for disaster for companies who need to transport products to the end consumer.
We’ve been seeing the results of that every day—and they’re not good.
Let’s take a look at what’s going on with trucking freight, how it’s affecting companies and consumers alike, and what are the predictions for 2022.
The current state of freight rates
Where did it all start?
The bottom line is that the demand in products sky-rocketed nearly overnight and it put a heavy strain on the supply chain.
In theory, it sounds pretty good, right? A high demand is good news. However, there’s the other side of the coin: the chaotic schedules or workers, restrictions in ports and customs, multiple-day delays etc. Almost 100,000 truck drivers had been laid off due to the economic crash in 2020, not necessarily by the employers’ choice as much as the need.
To be able to transport goods in due time – whether by sea or truck – became a luxury. Therefore, the prices started to reflect that. That’s how freight rates sky-rocketed, and they’ve been very high for almost 2 years.
How is it going?
The trucking industry is a crucial part of the supply chain—in the US and in the rest of the world.
Faced with high demand, companies were forced to find ways to move products in a more efficient and fast way. They changed strategies, hired truck drivers, and turned to technological improvements to track and manage the steps of the end-to-end supply chain.
However, the trucking freight rates – both spot and contact freight – are still extremely high, and they’re expected to go even higher until mid 2022.
Here’s an overview of the current trucking freight rates:
What issues are the most prevalent?
Increase in Fuel Prices
Not only are the companies struggling to keep afloat despite the premium trucking freight rates and the chaotic shortages they experience, but they also have to deal with the increased fuel prices.
In this table from TCI, you can see how the diesel fuel prices (Dec 2021 – Jan 2022) have increased compared to a year ago.
Lack of drivers
Between illness and restrictions, e-commerce companies found themselves at a loss of truckers.
Therefore, companies have been offering better work conditions, chosen lifestyle support, and other benefits truckers want in order to attract them.
Being a truck driver affects a lot of aspects of a trucker’s life, and the pandemic changed many mindsets that are related to relationships, life, and time. Companies had to adapt to that in order to get truck drivers.
Supply and Demand Imbalance
As mentioned above, a high demand is, in theory, a good thing—however, an extraordinary surge in demand during a global pandemic is a nightmare.
Manufacturers, especially smaller ones, are having an extremely hard time keeping up with the demand while battling delays and other shortages.
As a general advice, manufacturers and retailers should strive to keep a good relationship with the carriers. Working together, options can be created, but if you lose a carrier, you’re in for a very wild ride.
Increase in Consumer Goods Prices
We left this one for last because it’s basically the result of everything that’s going on for the manufacturers and retailers.
Given the fact that trucking freight rates increased, on top of the other types of expenses and investments companies have to make to keep afloat, manufacturers are having a hard time getting profits out of their companies. Therefore, consumer good prices have to go up.
According to the New York Times, food and furniture prices have increased tremendously. It’s not a surprise. Furniture and food manufacturers and retailers, especially smaller ones, have to make some tough decisions in order to make a profit.
Outlook in 2022
The trucking industry will experience a higher pressure in 2022 because it will become more and more important, getting ahead of rail and ocean freight. That also comes with a boom in expected revenue for the industry, and we’re talking up to 66 percent more than 2021 thanks to the expected increase in freight tonnage by 24 percent.
This calls for better road infrastructure, better compensation for drivers, and new technology to help with tracking and managing the different levels of the supply chain.
The fuel prices are expected to keep rising until the end of the year, but then good news is on the horizon: they should then start declining.
As for the truck drivers shortages, the problem still remains in 2022, but companies are on a constant hunt for them, which means they are willing to offer good benefits for truck drivers.
Final Thoughts
You could say it’s the best and worst of times for the trucking industry. It’s expected to boom by 66% in 2022, but companies will have a lot of hard work to do in order to take advantage of that.
Truck drivers are in for better job offers, consumers have to pay higher prices for furniture, food, and other goods, and companies have to deal with historical-high trucking freight rates, restrictions, and chaos.
The good news? We might just see the light at the end of the tunnel by the end of 2022.