After a tumultuous 2020, the trucking market may be setting up for a bit more stability in the 12 months ahead.
It was a tale of two freight markets during the past year due to the global pandemic that reshuffled consumption and commerce.
We saw historic freight lows in the winter and early spring, followed by landmark highs in the summer and the remainder of the year.
The spike in freight volume and subsequent demand raised prices for shippers who had been enjoying historically low rates for the better part of a year.
And although trucking has been booming for much of 2020, conditions show little signs of drastically waning in the coming few quarters. We likely will see current conditions as a baseline comparison for the freight market as business and consumption adapt to the “new normal.”
Expectations for the Trucking Market in 2021
Capacity will likely remain tight for the start of the new year. Typically, freight volumes fall off substantially after the holiday peak season.
Q1 is historically a slow trucking period, but that may not be the case this year as online ordering, and the shift into consumer goods has buoyed freight volume. That will not likely retreat as COVID-19 remains a prevalent force in the country.
Moreover, it is estimated that the industry is about 50,000 jobs short of its peak last February, which has left a smaller supply-side market scrambling to keep up with increased demand.
That pressure will likely only be exacerbated by produce season and some slight demand fluctuations from the vaccine’s shipment.
Following the first quarter, we also may see a similar summer demand boost to 2020. This could come as more of the population is vaccinated, and COVID-19 becomes a less dominant focus in everyday life, which could have another upward effect on the trucking market.
However, there is a possibility that this scenario would have the opposite effect on consumption as some analysts predict consumers shift their dollars back toward experiential and service purchases.
According to an article published in the Commerce Carrier Journal, “Current consumer trends are likely to hold in the first half of the year, but as vaccine distribution becomes more widespread and service and entertainment opportunities become more available, consumers could begin to divert their dollars away from goods and back to services by mid-year, said analysts from FTR last week.”
A shift in purchasing trends could flip the market mid-year—similar to years past. How it shapes up depends on a few factors. But most likely, we will see the start of 2021 closely resembling the back half of 2020.
Buying Trends Could Shape 2021 Freight Outlook
As alluded to above, changing consumption patterns are predominantly responsible for adding ample freight volume to the marketplace, driving up tender rejections and freight rates as a result.
Consumers, primarily forced to forgo service and experience spending due to the pandemic, reallocated their dollars elsewhere. This money went to consumer goods, household items, and other items tailored to a more home-based lifestyle in 2020. Spending even outpaced previous, non-pandemic years.
According to research from Deloitte, “Real personal consumer expenditure (PCE) grew by 8.9% in the third quarter compared to the previous one, a strong revival after two consecutive quarters of decline.”
“The nature of consumer spending too has changed in the pandemic compared to 2019—many consumers are buying relatively more goods than services this year. A likely reason for this is that people are still wary of the virus, and hence, are avoiding spending at places where the possibility of contracting COVID-19 is higher.”
That type of buying is likely to continue well into the new year as the country still grapples with a widespread virus outbreak. Those goods need truck transport and will continue to add freight to the market, likely flatlining current rate trends.
Industrial Economy Rebound
Additionally, we could see another substantial source of added freight volume to the market in the industrial sector. Analysts from Deutsche Bank predict a year-over-year growth rate of 7.8% in quarters two through four.
Suppose there is any drop off in purchasing of goods and a shift into service-based buying. In that case, this industrial sector growth could supplement a freight volume decline, leaving rates unaffected or only slightly declining.
Housing Market Boom
The housing market has experienced a healthy 2020, and experts are expecting more of the same in 2021.
“We expect (home) sales to grow 7 percent and prices to rise another 5.7 percent on top of 2020’s already high levels,” said chief realtor.com economist Danielle Halle said in an interview with Forbes.
“While we expect mortgage rates to tick up gradually, sales and price growth will be propelled by still strong demand, a recovering economy, and still low mortgage rates.”
Home sales have also been contributing to increased freight volumes. The home buying cycle often involves several improvement projects from both buyers and sellers.
All these factors likely will contribute to rates mirroring what we saw in the back-half of 2020 for a chunk of 2021. How things change as the economy continues to recover, and COVID-19 is less of an issue remains to be seen.
Vaccine Distribution and Its Effects on the 2021 Freight Market
With a massive vaccine rollout underway in the US, most might naturally wonder how this will affect capacity in the coming year, especially in a market that is tight throughout.
Hundreds of millions of vaccines, syringes, and other medical supplies need to be distributed to facilities throughout the country. While that might sound like an overwhelming task, most CPG shippers will not be severely affected by the distribution process.
Many logistics experts and analysts do not anticipate large scale disruptions for consumer brand shippers, certainly not on the scale of what we saw with COVID-19.
Things could be more of a challenge for those in the pharmaceutical sector or those who ship high volume refrigerated orders because the vaccine will take priority over other less critical freight. Those who heavily rely on air-cargo transport can expect the same.
Choose Logistics Partnership to Navigate Freight Market in 2021
Trucking market conditions can change quickly. Regardless of how the market shapes up in the coming year, vendors focused on partnerships stand to win in 2021.
Finding a logistics partner that is centered on partnership will prove to be an effective choice irrespective of market conditions.
Working with a 3PL on a strategic level can unlock previously untapped profit, offer more visibility, and streamline overall operations.
It is critical in current market conditions not to chase rates. Lower prices do not translate to less logistics overall spend and often are accompanied by poor service,
With cheaper trucks, you can expect dropped orders, late deliveries, rate hikes, additional fines, fees, and headaches that don’t move your supply chain forward towards its goals.
Instead of chasing rates, work with Zipline to find a competitively priced carrier that best suits your delivery needs.
Stay Up to Date with the 2021 Freight Market
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