Fleet Management News & Business Info | Commercial Carrier Journal
Issue link: http://read.dmtmag.com/i/795447
commercial carrier journal | march 2017 59 BUSINESS | ECONOMIC OUTLOOK cess now and invest and give themselves some time to learn," says Starks. "But if [small fleets] wait until December, they put themselves at significant risk. One thing that may save them is if enough people wait and capacity tightens and rates go up, they can give themselves a buffer and figure out how to get their drivers used to them." Starks thinks most small fleets will survive the transition. "It will be painful," he says. "If there is excess capacity as the ELD mandate goes into effect, then people will have to shut their doors. We should limp enough people through be- cause of the tight capacity environment." FRACKING RESURGENCE A 'DOUBLE-EDGED SWORD' When crude oil prices fell from $100 per barrel in mid-2014 to less than $30 per barrel at the start of last year, the domes- tic fracking industry seemingly vanished almost overnight. When prices rose to $50 per barrel in the fourth quarter of 2016, oilfield activity began to pick up. "We are starting to see increased pres- sure in the flatbed market and frack sand railcars pulled out of storage and being put back into service," says Starks. But resurgence in fracking is a dou- ble-edged sword for trucking. As one survey respondent from a for-hire carrier said, "With that comes the intense driver shortage and higher freight rates. It's a frustratingly good place to be if you are in the trucking business." "Fracking compounds trucking capacity by a factor of two," says Donald Broughton, chief market strategist for Avondale Partners. "When those people come out of fracking operations and into over-the-road trucking, it adds capacity and lowers demand because we're no longer shipping pipe and sand and parts and pieces – there is less to ship and more people to ship it. When the gate swings the other direction like it started to in October, people said it felt like a surge, but the reality is that we lost capacity and drivers and had a pickup in the industrial sector." E-COMMERCE THREATENS STATUS QUO According to new U.S. Census Bureau data, e-commerce sales accounted for 8.1 percent of all retail sales in 2016, up from 7.3 percent in 2015. Total e-commerce sales in 2016 (estimated at $394.9 billion) increased 15.1 percent, while total retail sales increased only 2.9 percent. "Online sales have grown 500 percent [since 1995], and total retail sales have increased 140 percent," says Costello. "It certainly changes how freight moves for the trucking industry, but not by going to another mode." e steady growth in e-commerce is changing in the way retail freight is moved, creating new opportunities for carriers that are nimble enough to ser- vice customers in the online retail sector. "Growth in 'e-tailing' results in more dry van truckload to get to distribution centers, shipping in a format that isn't cube-friendly," says Broughton. "When I order via Amazon, it is going to the local Amazon distribution center packed in a box by itself surrounded by air pillows. It moves through the distribution center 0% 5% 10% 15% 20% 25% 30% 35% Fuel Healthcare (including health insurance) Tires Tractors Liability insurance premiums Driver pay Driver recruiting costs Truck parts Cargo insurance premiums Physical damage insurance Trailers Financing costs Lubricants Other Don't know 2017 2016 WHAT COMPANY EXPENSE ITEM WILL INCREASE THE MOST IN 2017? Driver pay and recruiting costs are anticipated to be down year-over-year as the big- gest expense increase, while healthcare and fuel will jump, fleet respondents believe. ABOUT THE 2017 CCJ ECONOMIC OUTLOOK SURVEY The 2017 CCJ Economic Outlook survey was conducted in Janu- ary 2017. The final results include responses from 361 fleet repre- sentatives, including 193 from fleets with 10 to 100 power units and 168 from fleets with more than 100 power units. Respondent breakdown by type of trucking operation: 263 from for-hire carri- ers, 74 from private fleets, 13 from government fleets and 11 from other fleet types.