Investigative Report: 2018 Trucking Industry Forecast and Expectations

Nearly 70 percent of the freight shipped throughout the United States travels by truck at some point in its journey.  Understanding how the trucking industry is performing and where it is forecast to go can make a big difference for trucking companies and those who use them for their shipping needs.  Planning is vital for the industry's continued success and it is also valuable to be able to anticipate changes and challenges so strategies to address and combat them can be developed.  In order to better understand the trucking industry forecast and expectations for 2018, information and opinions from experts have been consolidated here.  That provides a breakdown of what to expect in the coming months and throughout the next year.

Trends in Both Truckload and LTL Freight

According to the American Trucking Associations (ATA), goods hauled by truck are expected to grow at a three percent rate per year over the next five years.  Beginning in 2017, the growth was expected to be 2.8 percent, which would increase to 3.4 percent in 2018 and remain at that level through 2023, at which time there would be another slowdown.  This percentage of growth is expected for both truckload and LTL freight.  Trucks will continue to remain the dominant carrier for freight, with more than 10.5 billion tons of freight moved per year, on average.  Still, other methods of moving freight, such as planes, ships, and trains, are also seeing increased numbers.

The US economy is growing and so is the population, both of which are leading freight companies of all types to see increased growth in the number and weight of goods shipped around the country.  Truckload freight is trending higher, but LTL freight is even slightly above that as companies look for ways to send and receive smaller shipments more conveniently than ever before. With the right combination of manufacturing and packaging, and the right trucking company working with them, US companies know that they can go far.  That benefits them, but it also spells big revenue for the trucking industry and all it has to offer as a shipping partner for companies around the US.

Diesel Fuel Cost Expectations

The Kiplinger Energy Prices Forecast from November of 2017 shows that oil prices are heating up.  The turmoil taking place in Saudi Arabia has been a significant catalyst for the rise in oil prices, and as oil prices rise, it causes gasoline and diesel prices to do the same.  One of the reasons that Saudi turmoil drives up oil prices is because speculators and businesspeople in the US and around the world are left wondering whether that turmoil means an interrupted oil supply.  Trading sent West Texas Intermediate to nearly $56 dollars per barrel in the early days of November, for example, and that was a higher level than had been seen in the previous two years.  But what does all that really mean for the trucking industry?  It could mean significantly higher prices into 2018 and beyond.

A stressful political climate in the US and around the world is making trade with other countries less certain.  Coupled with the Saudi difficulties and a lack of ability to clearly predict when they might ease, is a recipe for higher oil - and therefore higher fuel - prices.  Diesel is up slightly from week to week after a long period of decline, and trends show that it will likely continue to slowly rise for the next few months.  But some experts are not convinced that there is any real staying power to this oil price rally.  If they are correct, prices will fall in a few months and leave most of 2018 with reasonable diesel prices.

The Change in Trucking Rates

Trucking rates are rising in many cases, including a 4.9% rate increase by FedEx and similar moves from other carriers.  The forecast is for these rates to continue to rise, as demand for services also increases.  Trucking is expensive and moving freight can be a difficult process that often comes with tight deadlines and other difficulties.  Because of the issues the trucking industry faces, they charge higher rates in an effort to reduce concerns over being able to make a profit and sustain their companies.  Drivers expect a fair wage and trucks have to be maintained and replaced at regular intervals.  The cost of doing business is rising and that cost has to be passed on to the consumer.  FTR's Trucking Conditions Index is trending higher, which is good news for companies and indicates a higher level of opportunity for them to increase rates and serve more customers.

Concerns Over Driver Shortages

According to a high-ranking member of the ATA, the trucking industry is currently short by 30,000 to 35,000 drivers and is only projected to get worse.  By 2022, there may be a driver shortage of 245,000.  That could lead to serious and long-lasting problems in the industry, and those problems could reach out and impact customers of the trucking industry, as well. Consumers may have to find some other ways to get their goods shipped to them and they could see delays and shortages.  Stores and retail locations, as well as online companies, could also see issues with deliveries because of the industry shortage.  Bob Costello, the chief economist for the ATA, says "On average, trucking will need to recruit nearly 100,000 new drivers every year to keep up with the demand for drivers, with nearly two-thirds of the need coming from industry growth and retirements.” 

In the short-term, when considering 2018, the impact is by far the highest on truckload companies.  LTL carriers and private carriers are not seeing shortages, and they are not worried about having shortages in the future.  But the other carriers are struggling, and the difficulties with driver shortages are only going to continue to get worse if the issue is not corrected quickly.  Over-the-road, long-haul truckload carriers are the ones who are so badly needed and that is a segment of the trucking industry in which fewer and fewer people want to work.  Being away from home for long periods of time and low pay are big factors, but Costello feels that things will change.  Salaries for the drivers will have to rise, though, before more people sign on as long-haul drivers.

Adjustments to Capacity

Another serious concern for the industry is the capacity it has.  There are only so many trucks and drivers, even without a shortage.  Keeping that in mind, what happens when companies need things shipped but there simply are not enough trucks and drivers to handle the requests?  There are certainly other ways to get goods across the country, with planes and freight rail being by far the most common, but these items are generally offloaded at end points that may not take the goods exactly where they need to go.  For a rail shipment offloaded in Seattle, for example, trucks may be needed to take some of the goods in that shipment to Tacoma, Tukwila, Olympia, or even Aberdeen.  If there is a shortage of trucks and a lack of capacity, consumers will see a shortage of goods on their shelves as well.

How Revenue Will Be Affected

Trucking industry revenue is changing as 2018 approaches and will continue to adjust throughout that year. Revenues will rise in the sense that there are more people who need trucking companies for shipping their goods, but revenue will also be affected by new restrictions on drivers' hours, rising diesel costs for at least the first few months of the year, and a need for long-haul carriers to raise their salaries if they want to attract more drivers.  Overall, though, the trucking industry should expect rising revenue in 2018.

Understanding the Forecasts for Tonnage

Tonnage is expected to fluctuate throughout 2018, as it generally does every year.  This is caused by the typical ebb and flow of consumer demand, especially with changing seasons and holidays occurring.  Certain times of the year will show a higher level of hauled tonnage than other times, allowing trucking companies to make more revenue during those periods and slightly less during times of the year that are quieter and less likely to be a big part of consumer demand.  But overall the tonnage numbers should stay similar to, or rise slightly from, previous years.

Final Thoughts and Anticipated Results

The trucking industry is changing in a couple of important ways.  First, there is simply a bigger need for it as consumer demand continues to rise and grow.  More people wanting more things from companies means more work for those who ship those things.  But there is a caveat to that and it comes in the form of increased expenses for the trucking industry in the form of higher diesel costs and a driver shortage which will likely have to be mitigated by long-haul companies increasing drivers' salaries.  While the overall forecast and expectations for the 2018 trucking industry are positive, careful watching and needed adjustments are also important.