Trucking Market Could See 25% More Capacity Than Needed for most of 2023

Calculating trucking capacity for the U.S. economy has always been an imperfect science. Capitalist systems are often hard to predict. For example, in 2021, the shipping market was white hot, and capacity was tight. Today, not so much.

According to the Contract Load Accepted Volume Index (CLAV), which calculates accepted loads moving under contracted agreements, current volume is 25% lower than the highest level two years ago when many fleets expanded capacity to meet robust demand.

And, according to recent Federal Motor Carrier Safety Administration data, exits are just now starting to overtake entrants, meaning 25% is probably low. That number could linger for most of this year as the Federal Reserve continues to fight historically high inflation with interest rate hikes.

In fact, there are more reasons to expect weakening demand rather than strengthening as the year proceeds, which means trucking companies have to play a waiting game as to when some amount of pricing leverage will return.

Luckily, most companies or owneroperators are slow to react to capacity issues, most being very deliberate in increasing capacity or downsizing. Large fleets will take months to make these decisions. However, fleets that misjudge growth opportunities can be long term losers.

Considering the lengthy and costly process to expand, the decision is extended. For an owner-operator it can take years to make the decision to buy another truck. With the market only changing about 1% per month the decision to expand or contract is not without a good deal of speculation.

The market, of course, is cyclical, and trucking remains the most relied-upon freight transport mode in the U.S., with trucks moving about 12.5 billion tons of freight valued at more than $13.1 trillion in 2022.

“I think this year we will see a lot more normality in the market or a lot more seasonality,” said Dean Croke, principal analyst at DAT Freight and Analytics, a U.S. based transportation information service.

“From the time of the pandemic through the end of 2022, we saw little seasonality in the market. There were hints of seasonality, so you saw a little bit of a bump in rates because of the building season in the spring, but the whole peak season never materialized,” concluded Croke

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