Truck lines can be signals of how well the economy is doing. When truck lines are busy, that means retailers and manufacturers are doing a lot of shipping because customers are buying. When demand slows – like it has this year – truck lines struggle to stay in business. 

A slow economy usually hurts small truck lines and owner-operators the most; however, 11 major carriers have also closed this year. Roughly 3,000 truck drivers have lost their jobs as a result of 640 companies closing.  

Truck lines are closing largely due to pricing pressure. Low shipping rates mean that companies are charging less to stay competitive. Truck lines need cash to operate and low pricing hurts. 

Pricing isn’t the only reason truck lines close. There are other factors impacting why truck lines are struggling to stay in business.  

A Slowing Economy 

Shipping volumes fell in 2019 after a strong 2018. Truck volume fell by half and spot market rates dropped by 18.5 percent. Consumer spending has remained fairly flat, meaning retailers and manufacturers aren’t growing their shipping. This year has been the worst for trucking in more than five years. The average trucking line has operated at breakeven or at a loss during each month in 2019.  

Decreased Demand 

When shipping was doing well, more companies needed help shipping all their goods. Carriers buy more trucks and hire more drivers – drivers who can ask for higher wages because they are in-demand. When shipping volumes fall, companies are left with an excess of trucks and drivers. Shipping rates go down as companies try to meet capacity.  

Bad Weather 

Many parts of the United States and Canada have experienced terrible winters for the last few years. Record-breaking lows, blizzards and cold weather that stayed well into spring make it harder for truck lines to operate. Conditions are often especially bad in the Midwest and East Coast. Poor weather causes canceled deliveries, delayed deliveries and extra costs. It also causes disruptions beyond the areas experiencing bad weather.  

Tariffs and Trade Wars 

There has been much uncertainty about a trade war with China. Taxing imports means that companies are buying less from China, so trucking companies aren’t transporting that freight. Volume on the West Coast has decreased as companies braced for tariffs on Chinese imports.  

Freight Brokers Closing 

Because retailers and manufacturers are shipping fewer goods, freight brokers are earning fewer contracts. Freight brokers can connect small truck lines with shippers, but their goal is to find shippers the lowest option while also keeping the margins high on their own profits. This can lead truck lines to accept less than they need to continue operating. If freight brokers go out of business, it could leave truck companies scrambling to recover any payments they were owed. 

A tough economy for the trucking industry means that companies need to be careful about who they trust with their business. Planning for long-term success includes paying attention to credit scores – both for your company and your partners. Let TransCredit help you with your credit needs. Contact us today.