- YRC Worldwide (YRCW), parent to YRC Freight and regional LTL carriers Holland, New Penn and Reddaway, announced the U.S. Treasury will provide a loan of $700 million under the CARES Act. The loan agreement calls for the U.S. Treasury to receive 29.6% equity ownership in YRCW.
- Class 8 retail truck sales fell 43.5% in June as compared to 2019. All truck manufacturers posted double digit declines in sales.
- U.S. imports from China were up 13.8% from May reported by PIERS. The increase still fell short of last June volume, but only down 3.7% as compared to May’s decline of 16.5% from May of 2019.
- According to Ari Ashe, Sr. Editor at JOC.com, BNSF has increased direct intermodal capacity from the West Coast to the Midwest by avoiding cross town drayage in Chicago, with direct connection from Seattle to CSX’s Ohio hub located an hour south of Toledo. The primary customers for the six to seven day transit are JB Hunt and Schneider National.
- The FMCSA has extended the hours of service waiver for drivers providing direct assistance in support of COVID-19 relief efforts. The exemption is now set to expire on August 14th.
- The Commercial Vehicle Safety Alliance (CVSA) has begun their Operation Safe Driver Week this week. The weeklong traffic enforcement safety initiative engages unsafe driving behavior.
- The United States-Mexico-Canada Agreement (USMCA) took effect on July 1 replacing the North American Free Trade Agreement (NAFTA).
- Gartner has named the University of Arkansas’s supply chain management undergraduate program No. 1 in North America for 2020.
It can be said that a crisis never met a regulation it didn’t like. The fact is, a crisis does not create regulations, the U.S. government agencies do through legislation enacted by Congress. During a crisis, legislation can come out of the woodwork and attach themselves to various bills that showcase Congress is actively responding to the crisis, good or bad. Two such potential pieces of legislation have the framework to impact the industry that we serve.
The first potential legislation is Boost Amendment 194 attached to the highway bill set to pass through the House and onto the Senate. The amendment increases the current minimum insurance requirement for commercial vehicle drivers from $750,000 to $2 million. Advocates for the amendment speak to the liability requirement not being changed since 1980 and not being adjusted for inflation. Opponents of the amendment speak to the additional expense smaller carriers will be burdened with, forcing some smaller carriers out of business.
The second piece of legislation working its way through the House is H.R. 7457. This legislation will require brokers and carriers that contract a carrier to transport a load to properly qualify the carrier by validating proper registration with the FMCSA. Secondly, the carrier must have the minimum required insurance and, lastly, determine if the carrier has ever been placed out of service at the carrier level for any reason.
Chris Burroughs, TIA’s Vice President of Government Affairs
praised the H.R. 7457 stating, “There is a huge safety gap
that currently exists in the motor carrier marketplace, with
85% of motor carriers having an unrated safety rating. This
legislation will drastically improve safety by requiring
entities that are selecting motor carriers to check certain
data points prior to tendering a load. There currently is no
standard or requirement for entities to check prior to
selecting a motor carrier.”
Though the full details of the bill are not yet available, the legislation does not appear to impact a shipper’s selection of a carrier which may lead to a higher level of so called “dispatch services” deployed by smaller carriers and owner-operators. The other current challenge are carriers being rated. Currently 85% of carriers are unrated carriers. Couple the lack of funding to rate carriers with the ease of entry to become a new carrier with authority within weeks, and you have a regulatory challenge in supporting future safety measures in the carrier industry.
The end of the 2nd quarter did not disappoint as the Rockfarm cost per mile rose from a low of $1.93 in May to $2.06 in June. June’s trend line illustrated the same capacity constraints seen in all the previous years since 2016. The question before us is will 2020 follow the 2017 trend of increased rates through the fall or take a softer approach as seen in 2018 and 2019.
Keeping all of us up at night is the X factor: COVID-19. The supply chain challenge is the recent infection trend and its impact on supply chains as we work to deliver some normalcy to our purchasing patterns or predict inventory needs based on sales projections. Both of which can be thrown out as the pandemic attempts to gain a hold over our daily lives once again.
On the fuel side, as reported by Stanley Reed of the NY Times, Saudi oil production has fallen to its lowest level in three decades. With the average cost of crude now above $30 a barrel, the hope is production can increase in August as economies begin to gain their footing. The looming question is the increased COVID-19 infection rate and its impact upon fuel consumption. Though the cost of diesel fell to a yearly low of $2.39 per gallon in May, fuel cost is increasing with July seeing $2.43 per gallon.
As we head into the 2nd half of 2020 what can we expect?
- We can expect midsize to large carriers to closely manage labor and trucks and trailer capacity. Carriers will sitequipment if the rates are not driving a break-even or profit.
- We can expect oil production quotas to continue as a collaborative effort among Russia and OPEC to mitigate production volatility.
- We can expect truckload price volatility in specific shipping lanes due to state restrictions being imposed which generate equipment imbalances and empty miles for carriers. The result is an increase in spot market rates as shippers look to keep product moving.
- We can expect the truckload spot market to increase in volatility as shippers work to secure capacity by paying higher costs.
- We can expect the public at large to shift even further to eCommerce as inventory levels at the store shelf show further signs of fatigue. Unlike the impact of COVID-19 on imports in February and March, purchasing teams are not having to deal with China being on Chinese New Year and the impact of pandemic pushing factory start ups out further. Today, orders are in and being produced creating shipments for import.
- We should expect the American consumer to be resilient with the new norm taking root in how and where the consumers spend their money. This is positive, but will require major transformation for companies pushing their goods into the market place. A recent article by Lauren Thomas of CNBC points to the online demand driving a need for an additional 1 billion square feet in industrial real estate by 2025, out with the mall and in with distribution center.